LR: Shipping's ESG Progress Varies by Sector

ESG performance remains as variable in shipping as the industry itself, a new report from Lloyds Register's Advisory branch suggests. For most firms, there is value to be gained in making a commitment to ESG, and the report - presented during Posidonia - highlights how that commitment can help a firm unlock growth.

"ESG maturity in maritime now determines access to capital, the cost of that capital, tender qualification with large charterers, and regulatory compliance status. It is no longer a voluntary or reputational consideration," LR advises.

To benchmark performance across the industry, LR Advisory designed a new index methodology specific to maritime, with evaluation questions that reflect the real concerns of the industry. The list is weighted towards environmental issues, where most of the current regulatory pressure and market scrutiny are found, and it incorporates a review of firms' fuel efficiency and green-fuel measures. Governance comes next, as it underpins ESG success, followed by social impacts (seafarer rights) and value chain (like ship recycling choices).

With this framework in hand, LR reviewed data on ESG maturity at 48 firms and found a wide breadth: high achievers in cruise and container shipping, and a more variable level of commitment elsewhere, ranging from 96/100 down to 3/100.

That 93-point spread reflects the very different needs of different sectors, LR says. Container shipping companies had the highest average score (75), as they are most exposed to ESG pressure from their customers and have led the way on alternative-fuel investments. Bulker operators had the lowest average (49.5), a function of "lower commercial ESG incentive" and fragmented ownership in the sector.

In general, companies performed best on the governance and social impact categories. Average environmental scores were somewhat lower as "maritime-specific environmental questions drag the mean down," LR Advisory determined.

The consultancy says that the results reflect broader trends seen in LR's energy transition tracking "barometer," which describes the industry's current level of progress on maritime decarbonization as "uneven, fragmented, and well short of what is needed."

"ESG is no longer a compliance exercise, it is a critical lever for optimizing cost structures, improving asset efficiency, and maintaining commercial competitiveness. The IMO’s proposed Net Zero Framework is expected to further accelerate this shift through additional regulatory pressure should it come into force," LR observed.