Data has become fundamental to the end-of-life recycling process. What was once simply scrappage is now a precise, data-driven process demanding transparency to ensure environmental, financial and reputational concerns are appropriately managed
Ship recycling, like so many other areas of the industry, is moving into the digital age. Environmental concerns are driving new regulations where compliance requires comprehensive lifecycle information on each vessel, which can only be properly achieved through transparent, data-driven processes.
The world of finance, so critical to maritime investment, is becoming ever-more wary of investing in sectors that cannot demonstrate adequate corporate social responsibility. If shipping wants to retain its backing, it must adhere to the same rigorous standards as other sectors to demonstrate its social conscience.
Part of this process involves raising awareness of the potential risks – environmental and reputational – that a shipping company must address when recycling its vessels.
Formed in 2018, the Ship Recycling Transparency Initiative (SRTI) uses transparency to drive progress on responsible ship recycling. It offers a one-stop-shop online platform to report information on policies and practices against a set of predefined disclosure criteria.
Sustainable Shipping Initiative (SSI)/Ship Recycling Transparency Initiative (SRTI) executive director Andrew Stephens explains that in the absence of global regulation, the group – which counts numerous leading brands as signatories – is leading the way towards responsible and safe ship recycling. “We are working beyond regulation,” he says. “Transparency is the key; improving transparency on data and increasing disclosure through shipowners’ recycling policies and practices is our first phase and it is encouraging that many ship recycling facilities are keen to disclose their policies and practices too.”
But the SRTI does not only focus on the final few months of a vessel’s life. “Our focus is on the recycling, but we consider the whole lifecycle of a ship,” says Mr Stephens. “We know that ship recycling can be contentious, but through transparency, the industry can improve and progressively raise the bar.”
Indeed, ship recycling is an invisible industry to almost everyone not directly involved in the process. Which is why transparency of data collected is so important, to highlight the good work being achieved across the sector, and to encourage those lagging behind to raise their game.
“The finance and insurance sectors are very much focused on the reputational aspects and the supply chain risks,” says Mr Stephens. “They see ship recycling as an integral part of a ship’s lifecycle and value chain, and they require clear and transparent data to demonstrate that their investments are environmentally and socially responsible. The rating agencies are also making judgments and they are starting to use data from SRTI, among others, to go beyond simple CO2 emission metrics.”
A major change soon to impact ship recycling will be the requirement for any ship over 500 gt, regardless of flag, to hold a valid, certified Inventory of Hazardous Materials (IHM) on board if calling at an EU port or anchorage. Non-EU flagged vessels can also be certified against the EU Ship Recycling Regulation by complying with the Hong Kong Convention (HKC) IHM requirements. The IHM provides a structured system to identify and document hazardous materials on board ships and by this, achieves compliance with the EU SRR and HKC for the Safe and Environmentally Sound Recycling of Ships.
“The IHM is the key point, without this there is no green safe recycling,” says Global Marketing Systems (GMS) head, research and development, lead coordinator responsible ship recycling Dr Anand Hiremath. “Without an IHM you will not be able to say that the recycling has been conducted in a ‘green’ manner.”
“When we try and recycle but do not know exactly what a part contains, we face a problem”
However, Dr Hiremath points to the variance in terms of quality of existing IHMs as a source of concern. “We are the end receiver of these items because we monitor the vessels at the ground on behalf of shipowners and we see various qualities of IHMs. This presents a lot of issues when it comes to recycling, especially when it comes to PCHM*. When we try and recycle but do not know exactly what a part contains, we face a problem.”
It is an opinion shared by GSR Services chief executive Henning Gramann, who notes that IHMs are highly ship-specific. “Even sisterships are not coming out with identical IHMs,” he says. “This is because we have the building stage where we see some variations, followed by the operational phase, with what can be completely different supply chains all delivering all sorts of materials. Over the years, the ships become more and more unique.”
A potential solution to this problem has been suggested in the form of the blockchain concept, which Mr Stephens cautiously advocates. “There is rarely a silver bullet in any solution [but] I think blockchain is probably one of the tools in the box, although that depends on the parties involved through the life of a vessel, which can be many or few. It is one of the tools, but it is certainly not the only or definitive solution.”
Mr Gramann is somewhat less optimistic of the blockchain approach, largely due to the multitude of factors that can influence the IHM. “There are hundreds of IHMs prepared and so many factors influence the quality of the resulting IHM that a blockchain could potentially lead to misjudgements. I do not believe a blockchain that gathered this data and associated it with a specific ship can be accurate,” he says.
In many ways, this reiterates the importance of achieving strong and transparent data across the ship’s lifecycle, to avoid the kind of problems that recycling yards and owners face due to PCHMs or low-quality IHMs.
The risk of disclosure
Another concern for owners when disclosing data is that it might ultimately paint them in a negative light, even if they are doing so to improve the ultimate safety of the recycling process. There are reports of owners delaying disclosures and hampering the IHM process for this very reason, partly due to the absence of standardisation in the process. “There are a lot of interpretations around about what is right and what is wrong,” says Mr Gramann. “It is a highly political game and even if you believe what you are doing is correct, you might still be questioned publicly by very powerful voices and inadvertently place your brand name in a bad light. There is no common understanding of what is good corporate social responsibility, so any public disclosure represents a risk for owners, especially stock-listed owners.”
Mr Gramann continues, “We need to understand that for the financially driven shipowner, we are generating information that nobody is interested in. The IHM only lists negative things and that impacts the asset value. If the opportunity is there to acquire a more convenient IHM, that might help from a busines point of view, but in terms of reducing risks and responsible behaviour this is absolutely the wrong way to go.”
Mr Gramann’s point is well made; if there is an opportunity to circumnavigate the less palatable elements of an IHM, undoubtedly some owners will take that route, no matter the environmental or safety consequences of doing so.
Clearly then the data must be sound, it must be transparent, and it requires a standardised approach to ensure all parties are prepared to commit to the process. As Dr Hiremath explains “Data reporting is the key. It is time that shipowners understand the role ship recycling plays in their operations because now we must focus on ESG to ensure a sustainable shipping industry.”
That data must cover the entire lifecycle of a vessel if it is to enable the recycling process to proceed in a responsible manner that adheres to current and future guidance.
“We see clearly the emerging discourse around not just the end-of-life, but the responsibility at the start in the design and the build phase for how the materials are chosen and provisions recorded to enable a safer and more responsible end-of-life recycling process,” explains Mr Stephens. “It is not just the last owner’s responsibility; it goes back to the design and build phase and making sure that the ownership of data passes between owners across the 25 or 30 years of a vessel’s working life.”
This article is based on comments made during Riviera Maritime Media’s webinar How data reporting is transforming ship recycling
* Any item categorised as ‘unknown’ in the VSCP preparation phase can be classed as ‘Potentially containing hazardous material’ (PCHM)
India’s commitment to sustainable recycling
As home to many of the world’s largest ship recycling yards, India is playing a leading role in ensuring new standards are met. Over the last five years, ship recycling in India has experienced significant change. Indian yards have raised their game, focusing on achieving compliance with the requirements of the Hong Kong Convention (HKC) and demonstrating their environmentally friendly credentials.
Global Marketing Systems (GMS) head, research and development, lead coordinator responsible ship recycling Dr Anand Hiremath emphasises how much investment has gone into the sector in this time, as it pushes ahead to raise standards.
“As of today, we have 153 registered ship recycling yards in India, with 120 yards currently in operation,” he says. “Of these 120 working ship recycling yards, 86 have achieved compliance with the HKC from various classification societies.”
That translates in 72% of ship recycling yards in India being HKC compliant, and Dr Hiremath says a further 10 yards are in the process of achieving this compliance. “We fully expect 100% of Indian yards to be HKC compliant by the end of 2021,” he says. Demonstrating the commitment of India’s ship recycling community to raising the bar, Dr Hiremath also notes that 20 ship recycling yards have applied to join the European Union ship recycling regulations list; five yards have been audited for this process, but as yet no Indian yard has been approved.