Pension Fund Report Questions Ship Breaking Advances

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By MarEx 2016-06-01 21:28:37

A report on the human rights and environmental risks related to ship breaking on the Indian sub-continent was released last week that highlights on-going controversy regarding Statements of Compliance with the Hong Kong Convention and limitations of the E.U. Ship Recycling Regulation.

The report entitled Shipbreaking practices in Bangladesh, India and Pakistan. An investor perspective on the human rights and environmental impacts of beaching was commissioned by KLP, Norway’s largest pension fund, and produced by the International Law and Policy Institute. It examines the shipbreaking practices in Bangladesh, India and Pakistan. 

Since September 2015, the Japanese classification society ClassNK has issued Statements of Compliance (SOC) to four shipbreaking yards in Alang, India. ClassNK issues a SOC to ship recycling facilities which verifies that they are in compliance with the Hong Kong Convention. 

However, the report states that the certifications have caused debate over which criteria ClassNK uses to meet certifications and how they interpret the Hong Kong Convention. The environmental organization Bellona has stated that even at yards that have built some permanent structures, the waste is still dumped in the tidal zone and the organization queries why media and NGOs are denied access to the yards to ascertain whether the requirements of the Hong Kong Convention are indeed fulfilled. 

ClassNK lists impermeable flooring as a key criterion for compliance certification, but the NGO Shipbreaking Platform points out that the yards certified do not all have impermeable flooring where ship-cutting is conducted.

Additionally, the report states: Whilst there is clearly a development for the better at some shipbreaking yards in India, it remains an open question to what extent the human rights and environmental concerns are addressed. Leading NGOs and media were hoping to join the delegation that visited shipyards in Alang in April 2016, but were in the end denied access.

The report states that the new E.U. Ship Recycling Regulation can easily be circumvented by shipowners reflagging their vessels. The regulation aims to direct ships flying the flag of a Member State to E.U.-approved ship recycling facilities that practice safe and environmentally sound methods of dismantling ships 

“Weak enforcement systems will continue to challenge implementation of international standards in the states that are home to the shipbreaking yards. Hence to a large degree addressing the environmental and human rights issues related to shipbreaking on the beaches in South Asia is, and will continue to be, a matter of how the shipping companies respond to the calls for sustainable and safe ship recycling practices.”

The report argues that the responsibility of companies operating in the global market place does not stop at its own doorstep, but extends to adverse human rights impacts in the entire value chain. International standards by which corporate responsibility can be measured include the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles for Business and Human Rights (UNGP). Companies are required to carry out a risk-based due diligence with respect to the human rights as well as environmental impact of their business activities, including their value chain. For shipping companies, this would entail taking responsibility of their ships from cradle to grave, as recommended by the Norwegian Shipowners’ Association, states the report.

In the report’s foreword, CEO of KLP, Håvard Gulbrandsen, states: “We hope that the report can help raise awareness of the severe human and environmental risks beaching can entail for shipping industry companies, their customers, and also for other investors. […] KLP hopes to encourage investors to work together to engage with companies on improving labor and environmental conditions. The shipping industry is and will be an important part of Norwegian investors' portfolios for the foreseeable future. KLP's goal is to work towards a future where responsible shipbreaking is the industry standard.”     

The report is available here.