Shipping & Logistics Industry needs to embrace a well-defined ESG strategy to drive sustainable business expansion


Why the Shipping & Logistics Industry needs to embrace a well-defined ESG strategy to drive sustainable business expansion.

Accounting for nearly one seventh of the country’s GDP, the Indian Shipping & Logistics industry ought to embrace sustainable business practices to fast-track growth and unlock its full potential in the coming decades

With 95% of the India’s trade by volume being transported by sea, the continued success of the domestic Shipping & Logistics industry is critical to the country’s ambition of becoming a global trading hub. Contributing ~14% of the country’s gross domestic product (GDP), this industry plays a key role in reducing transportation costs for businesses in India and remains vital to the sustained growth of the Indian economy. However, with the Shipping & Logistics industry accounting for roughly 10% of the transportation sector’s overall greenhouse gas (GHG) emissions in addition to other forms of pollution, there is an urgent need for leading shipping and maritime companies to implement green initiatives that are aimed at protecting the environment. Supplementing these efforts with diversity, equity and inclusion (DEI) initiatives that are designed to improve the quality of social life for underrepresented groups can also address social concerns arising due to maritime activities. This underscores the importance of aligning business practices with environmental, social and governance (ESG) principles, presenting a more robust and inclusive future roadmap for India’s Shipping & Logistics industry.

The need to adopt an ESG reporting framework

Despite its valuable contribution towards nation building, maritime operations can often have a number of negative environmental impacts, especially in terms of air, water and noise pollution.

In a bid to measure this impact and work towards reducing environmental concerns, there is an urgent need for industry players to implement green shipping practices (GSPs) and embrace international standards for ESG reporting. Considered to be a preliminary step in the ESG journey, adopting standards such as the Sustainability Accounting Standards Board (SASB) standards can support companies in identifying improvement areas and standardize disclosure for the most relevant sustainability issues.

Comprising of material topics such as GHG emissions, Air Quality, Ecological Impact, Employee Health Safety, Business Ethics and Accident Management, the SASB standards consolidate all important reports and indicators to provide an accurate understanding of a business’ impact on the environment and society at large. This awareness can encourage companies to create ESG-focused strategies that can mitigate key business risks and capitalize on business opportunities that may crop up in the long term. Obviously, it is vital that companies ensure stringent incident reporting standards, follow transparent disclosure practices and maintain high governance standards in the process.

Future growth potential and potential fallouts from an ESG perspective

With the Indian economy expected to surpass the $26trillion mark by FY48, the domestic transportation and logistics sector will witness significant expansion and grow at ~4.5% CAGR in this period. What’s more, with 12 major ports and holding a 30% share in the global ship recycling market, India has set its sight on becoming the ‘Global Hub for Green Ship’ building by 2030. Not only will this provide a major fillip to domestic ship manufacturers and other allied industries, this mission will also see the introduction of green hybrid propulsion systems and non-fossil fuel solutions like methanol, hydrogen and ammonia to considerably reduce emissions from the shipping & logistics industry.

To develop the necessary regulatory framework and roadmap for alternative technology adoption, the National Centre of Excellence in Green Port & Shipping (NCoEGPS) has envisaged further initiatives that will sustainably manage and protect marine & coastal ecosystems from pollution, conservation & sustainable use of ocean-based resources. However, for this governmental push to yield desired results, it is critical for sector participants to adopt sustainable practices to keep pace with international regulatory customers’ and investors’ requirements. The goal is to identify and prioritize areas such as pursuing decarbonization measures, driving social initiatives that benefit local communities and tapping into developed markets as a result of this sustainability focus. It is therefore imperative that the shipping & logistics industry at large adopt internationally recognized ESG criteria, align their business practices with ESG principles and pave the way for sustainable business expansion.

Key initiatives to positively impact society and facilitate sustainable business growth

For a country like India where the shipping and logistics industry contributes significantly towards employment generation, taking actionable steps to promote diversity, equity and inclusion (DEI) at the workplace is the need of the hour. Supporting women employees with facilities such as nursing/lactation rooms, providing extended maternity leave benefits and adopting more relaxed work policies for those with additional familial responsibilities can spur higher women workforce participation in the immediate term. In the same vein, grooming high-potential women employees for leadership roles and conducting dedicated training programs for promising candidates are advanced initiatives that could help achieve gender balance across all employment groups in the longer term. What’s more, undertaking CSR initiatives such as educating local communities on sustainable fishing practices and motivating them to undertake alternate fishery activities such as seaweed farming can help in combating the environmental problems caused by overfishing and climate change.

From an environmental perspective, shipping and logistics businesses need to record and reduce GHG emissions, install efficient waste management systems, and focus on transparent disclosure of progress being made. Setting up an ESG task force comprising of ESG champions who can support ESG strategy implementation and an ESG committee to drive synergies across the board is highly recommended. Supported by ESG mentors, this task force should be entrusted with tracking key ESG indicators and targets while executing initiatives to build a sustainable ecosystem. The aim should be to achieve carbon-neutral status, motivate and support supply chain as well as other stakeholders to embrace the same vision.  

The time is ripe for the Indian shipping & logistics industry to embrace sustainability as the core guiding principle that governs all business decisions. In that context, adopting a clear ESG-focused strategy to address top environmental and social concerns will be as important as building upon initiatives that can facilitate continuous social development and sustainable business expansion.

Note: This article is written by Mr. Ritesh Ramakrishnan, Managing Director, Transworld Group

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