An overview of the recent ESG-related developments in the maritime sector, with particular focus on South Africa

Andre October

Webber Wentzel, Cape Town

andre.october@webberwentzel.com

Sheena Dias

Webber Wentzel, Cape Town

sheena.dias@webberwentzel.com

Sharmila Naidoo

Webber Wentzel, Johannesburg

sharmila.naidoo@webberwentzel.com

Lesiba Legodi

Webber Wentzel, Cape Town

lesiba.legodi@webberwentzel.com

Introduction: What is Environmental, Social and Governance (ESG)?

ESG comprises of a framework that assists stakeholders and entities to understand how an organisation is expected to manage risks and opportunities in relation to the environmental, social and governance criteria. Its primary focus is to make a positive, meaningful impact and difference for businesses and the world at large, with the aim of creating sustainable outcomes that drive value and fuel growth, while strengthening the world's environment and societies.[1]

The Johannesburg Stock Exchange (JSE) recently launched its Sustainability and Climate Disclosure Guidance documents, of which all JSE-listed companies will need to be aware. The Sustainability Disclosure Guidance and Climate Disclosure Guidance was launched in June 2022 to inform JSE-listed companies about best practice in ESG and climate disclosures.

ESG in the maritime sector[2]

In the maritime sector, ESG and its reporting is important in the context of inter alia greenhouse gas emissions and emissions of other air pollutants, recycling, ecological impacts, business ethics, employee health and safety, as well as accident and safety management. An estimated 90 per cent of global trade is transported by sea and the shipping industry accounts for nearly three per cent of the world's carbon dioxide (CO₂) emissions. The industry is therefore under immense pressure to become cleaner and greener. We have also seen this pressure build at the UN Climate Change Conference 2021 (COP26), as nations rally together to find a greener shipping future. A further conference (COP27) will be held in Sharm el-Sheikh, Egypt this year.[3]

Emergent from the ESG principles in the maritime sector is a concept known as Corporate Social Responsibility (CSR),[4] which has been adopted by numerous shipping companies and maritime service providers.

CSR can be best described as a code of conduct through which an organisation achieves its business goals by maintaining the decorum of law, ethical and international standards for the safety of people involved in the organisation, and protection of the environment.

When it comes to the maritime sector, ESG and CSR allow: (i) the growth of the organisation and an increase in its reputation; and (ii) environmental protection that will save marine species and the future of humankind.

In terms of the international maritime initiatives, the International Maritime Organisation(IMO), as the international governing body for shipping, sets out several regulations for protection of the environment, through the International Convention for the Prevention of Pollution from Ships (MARPOL), safety of workers through the Safety of Life at Sea Convention (SOLAS) and the welfare of shipping professionals through the International Labour Conference-Maritime Labour Convention (ILO-MLC).

CSR is not imposed on entities but rather adopted by them and when such an initiative is taken, the company or organisation will set a standard for itself, its employees and other players in the industry. Without a carrot and/or stick approach, it is difficult to police the implementation of such IMO conventions. 

The mandatory requirement for CSR compliance in the maritime sector would help the shipping industry with developing green ships right from building and operation to scrapping; the welfare of ships’ crews in terms of safety, security, health and communication; and going a step further than IMO and other international regulations in ensuring their basic rights. 

ESG in the South African maritime sector

Some of the environmental aspects of concern in South Africa include climate change, energy supply, water scarcity and usage, biodiversity, destruction of natural habitats, pollution and waste management.[5] To this end, the South African Maritime Safety Authority (SAMSA) has published drafts of the Bunkering Code of Practice and the Ship-to-Ship Code of Practice for Cargo Transfers (the Codes).

In September 2022, SAMSA published Marine Information Notice 10-22,[6] indicating that SAMSA, in collaboration with South Africa's Department of Transport and National Ports Authority, had updated the Codes because of several oil spills along the South African coastline (more specifically in Algoa Bay) during bunkering activities between 2016 and 2019. This led to a decision being taken by the South African government to review all policies, procedures and processes for the application, approval and management of these activities.

The stated purpose of the Codes is to ensure that bunkering/STS transfer operations are conducted with zero harm to the marine environment. The code details the requirements for accomplishing safe bunkering/STS transfer operations and in turn support commercial marine activity.

• The Codes are underpinned by principles of: Consistency, Fairness, Objectivity and Timeliness in each application for bunkering/ STS transfer approval;
• Transparency and Disclosure through which SAMSA will ensure that all applications for bunkering licences are dealt with in a transparent manner, within three months from the date a full and complete submission is made and that the applicant is advised of the outcome of the application within the stated period;
• Cooperation between the various role players in ensuring that bunkering/STS transfer operations are conducted in an environmentally safe and efficient manner. Entities involved in bunkering operations are encouraged to advise SAMSA regarding challenges and proposals to promote safe operations, considering new technologies available and the benefit of applying such; and
• Continual improvement by encouraging all entities involved to propose changes to better the Codes in terms of operational aspects and risks identified to ensure bunkering/STS transfer operations are conducted is a safe and environmentally friendly manner.

As of the date of publication of this article, SAMSA moved to a final round of public comments with the aim of releasing both Codes as soon as possible.

A further development in the Maritime Sector is the Marine Pollution (Prevention of Pollution from Ships) Amendment Bill (B5-2022) (the MPPPSA Bill).[7]

The MPPPSA Bill aims to amend the Marine Pollution (Prevention of Pollution from Ships) Act, 1986, to give effect to Annex IV of the International Convention for the Prevention of Pollution from Ships (MARPOL), to incorporate the 1997 Protocol to give effect to Annex VI of MARPOL; and to provide for matters connected therewith.

Annexing MARPOL to the Bill, means that it will be incorporated into South African law and will be given legal force in the Republic.

In addition, the MPPPSA Bill empowers SAMSA to issue technical standards for dealing with marine pollution from ships on such matters as may be prescribed by regulation, which will have the force of law.

The Bill also seeks to expand on the Minister's powers to make regulations to include the following:

‘(e) To make regulations relating to the prevention of air pollution from ships;

(f) relating to the prevention of pollution by sewage from ships;

(g) relating to the removal of endocrine disrupting substances from sewage streams before it is treated and released;

(h) relating to the permitted types of emission abatement equipment;

(i) relating to the requirements for the disposal of waste generated by the mitigation equipment;

(j) relating to accredited laboratories eligible to test the fuel samples and the costs;

(k) relating to the designation of Emission Control Areas (ECA);

(l) relating to the enforcement of protective measures in particularly sensitive sea areas and other special areas; and

(m) on generally any other ancillary or incidental administrative or procedural matters that are necessary for the proper implementation or administration of this Act.’

Opportunities for the future

ESG is gaining global momentum and is gaining traction in various sectors, including the maritime sector. It is clear that much still needs to be done and engagements such as the upcoming COP27 are a starting point for a figuring out a sustainable way forward.

COP 27 will be convened in Sharm el-Sheikh, Egypt between 6–18 November 2022, returning to Africa for the first time since COP17 (Durban, South Africa) and offering a window of opportunity to not only address the shortfalls of COP 26 but also help shape policies of African countries and draw attention to the plight of Africa.

 Notes