CSR in the shipping industry

By María Dixon
International Maritime Consultant

One of the few topics on which there is not much documentation is that of Corporate Social Responsibility [CSR) in the maritime industry. However, if we take a good look, we will realize that there are principles that demand a high sense of corporate responsibility.

One such case is the tanker Prestige which caused a large oil spill in Spain. The Prestige was flagged in Bahamas and had a Greek captain in command, The huge tanker split in half polluting the Galician coast in northern Spain.

This event brought back a series of dilemmas to the frontline as well as the voice of critics against the so called “flags of convenience.” In this case it was Bahamas, but let us remember that Panama is also classified by some sectors in the world maritime community, not as an open registry, but as a flag of convenience.

After the accident, and as a result of the treatment of the tanker’s captain, the maritime community joined forces.

The Captain was arrested and has spent more than a year in a Spanish prison. According to experts, if Spain had given refuge to the ship which urgently needed it in the midst of a huge storm, the outcome would have been less catastrophic.

In the process, there came to light the different responsibilities of cargo brokers, the nature of the cargo and its owner, the shipowner, the members of the rescue operation, the crew and their families, the classification society that represented the flag State, the communications and investigations of the country where the accident occurred. In fact, all and each aspect of the accident has pointed to various degrees of responsibility.

It is at this time when CSR has a logic explanation to exist, In this analysis, we will try to place the concept of CSR within the maritime industry.

This responsibility covers not only all the facets of the unfortunate event mentioned above, but points to the social aspects of the environment in which the maritime company evolves.

What is Corporate Social Responsibility?

The definition of Corporate Social Responsibility shows that it is about a concept where organizations and corporations have the obligation to take account of all aspects of their operations, the interest of clients, employees, shareholders, communities and the environment. Those interests extend to suppliers, regulatory entities, interest groups and society in general.

CSR is linked to the principles of sustainable development, which indicate that companies should make decisions, not only on the basis of financial factors such as benefits or dividends, but on the basis of the medium and long term consequences to the environment.

Let us say that sustainable development is the sum of all methods aimed at creating and sustaining the development that seeks to diminish poverty, create equitable standards of living, meet the basic needs of everyone and establish sustainable practices and policies, while steps are taken to avoid irreversible damage to the natural capital in exchange for short term benefits. Sustainable development covers four areas: the environment and the economic, social and political aspects.

When we speak of responsibility over the natural capital, we refer to the protection that companies practicing CSR should provide to the earth’s mineral, vegetable or animal origins, looking at them from the viewpoint that they are the means to produce oxygen, water and prevention of erosion, or are providers of services to ecosystems.

Regrettably, right on the 21st century, the majority of companies continue to operate with the idea that the world has not changed since the industrial revolution. During that time natural resources were abundant and labour was limited. Presently, the situation has been reversed. There is abundant labour while natural resources are scarce and expensive.

Industrial Capitalism, the new Revolution?

It has been said that the new industrial revolution will be driven by the growing scarcities. Some studious minds estimate that this will create a big revolution accompanied by many opportunities and the companies that succeed will be those that adjust to the new realities.

Many innovative companies are already adjusting to the new structural method. They are deriving benefits, while acquiring decisive competitive advantages. Their leaders and workers feel good at what they do and how they do it since they are leaders in a new model of company known as Natural Capitalism. These are companies committed to CSR principles.

The companies committed to CSR principles should perform with social and environmental responsibility based on certain basic criteria:

• The fundamental criterion, known as philanthropic policy, where by the company seeks to have a more harmonious and cooperative policy in regard to the community.
• Ethics in business that includes values not only for shareholders, executives and the workforce, but the interests of stakeholders.
• Direct relationship with company policies that include social and environmental responsibility. This criterion has become very important at the international level.
• Accountability on all company activities, transparency, and monitoring to establish if there is an adequate socially and environmentally responsible performance by the company.
• Acceptance of the labour principles universally accepted such as, 1) Freedom of association and effective recognition of the right to collective bargaining, 2) Elimination of all types of forced or obligatory labour, 3) The abolition of child labour, and 4) The elimination of discriminatory practices.
• Interest in the product cycle, from suppliers of raw materials to consumers through the design of systems to monitor compliance with standards (environmental and social).
• The application of norms guaranteeing the attainment of CSR objectives. A very important factor here is the transparency of relevant information provided by the company within its market and implementation of good business practices.
• Providing true and transparent information about the results and achievements obtained in environmental and social matters.

Are parameters available to measure CSR?

The International Standard Organization (ISO) is working since March 2005 to create an ISO 26000 standard to be published in the year 2008. Currently, a tool known as the FTSE4Good Index has been created to evaluate a group known as Socially Responsible Investors. The index measures and calculates a series of factors required by the members of this new group. Those factors are:

• Investing exclusively in companies showing high standards in the area of corporate responsibility.
• Minimizing social, ethical and environmental risks in an investment portfolio.
• Avoiding investment sectors that have traditionally been excluded, such as tobacco, defence, nuclear force, etc.

The indices are regionally or globally based and are used to select worldwide the companies on which they can invest.

CSR comes to IMO

Lately the concept of CSR has emerged in the shipping language, IMO Secretary General Efthimios E. Mitropoulos mentioned the concept for the first time in a speech given over two years ago, and Dr. Dale Neef, one of CRS pioneers in the maritime sector in the United Kingdom and Scandinavia, also spoke about the need to include this concept in industry.

When he was the United Kingdom’s Chancellor, Gordon Brown, the new British Prime Minister, said that CSR was no longer the old philanthropy of the past-donating money to good causes-but instead an all year-round responsibility that companies accept for the environment around them, for the best working practices, for their engagement in their local communities and for their recognition that brand names depend not only on quality, price and uniqueness but on the general behaviour that makes a difference in the world we live in and contributes to reduce poverty.

The shipping industry has more than enough reasons to embrace CSR principles. A study on C02 emissions in the shipping industry has revealed information so important that IMO has included this alarming problem in its agenda. The principal areas and conclusions identified are the following:

• C02 emissions of the shipping industry are twice those produced by the airlines.
• The emissions by shipping are not covered by the Kyoto Agreement or any other European agreement.
• Studies suggest that emissions will increase 75% in 15 years due to the growth of the sector, causing serious impact on global warming.
• According to a study by the Physics and Atmosphere Institute in Wessling, Germany, ship emissions produce 600 to 800 million tons of dioxide annually, which is equivalent to 5% of the total worldwide.

The treatment given to this problem globally by the shipping community will give the shipping industry an opportunity to assume its responsibility, giving CSR the importance it deserves.

Is CSR something new in the maritime industry?

Who has not heard of the Onassis group or the Niarchos group, Greek magnates who constructed international commercial empires? Or the contributions provided by Asian companies to their communities and to industry itself? Or the schemes of assistance and scholarships of large American corporations, or the assistance provided by European companies?

Large companies worldwide have emphasized CSR and this contributes to their surroundings as well as to the company itself. Studies made on medium and small size companies, however, have established that many have done nothing. This is probably due to the fact that they have no knowledge about the subject, which indicates that not much information is available, or they believe that CSR is only something for large companies that have a lot of resources, which is totally false.

In the shipping industry, the list of companies that practice CSR principles is extensive, and while it is impossible to identify all those companies, we present some examples:

CSR in Europe

The pioneers of CSR in Europe have undoubtedly been two well known shipping groups. The first one is the Onassis Foundation whose motto is to link quality in the shipping sector to projects for the public benefit. Among its main contributions are:

• The Onassis Cardiac Surgery Center in Athens (US$75 million and a total of more than half a million since it was opened)
• The Athens House of Letters and Art [To be inaugurated at the end of 2007).
• Scholarship programs for graduate students worldwide.
• Benefit Foundations established in the U.S.
• Financial support to universities and Hellenic study programs.
• Cultural and educational programs in the U.S.
• Construction in Athens of a replica of the San Photini de Izmir Church’s bell tower.
• International cultural awards (theatre, choreography, music and painting)
• Summer sessions in Crete for graduates in exact sciences (biology, technological information, chemistry and physics),
• Donation of educational equipment to elementary schools.
• The Hellenic and Roman art library for the Museum of Modern Art in New York
• Renovation and restoration of the neoclassical building in Nafplion to establish a branch of the Greek National Gallery

The other Greek group, the Niarchos Group, founded a Stravros S. Niarchos Foundation, a philanthropic entity supporting activities in four areas: art and culture, education, health & medicine and social welfare with emphasis on children and the elderly. In addition to helping social type entities all over the world, the foundation maintains support programs in Greece through a local advisory committee to preserve Hellenic culture and traditions.

Its commitment is to work in Greece and other countries. The mission is derived from the wish of the Greek shipowner, Stavros S. Nicarchas, to provide access to opportunities in the fields of education, social welfare, health, arts and culture.

Since it was established in 1996, the Stavros S. Niarchos Foundation has made donations in the amount of $275.0 million to non-profit charitable organizations.

In 1995, the European Union introduced the concept of CSR. Currently there is a network of more than 60 multinational corporations that are members of the movement. The mission of the European Union is to assist companies in adopting each day CSR as a way of making business.

The European Commission has launched the European Alliance for CSR as part of a strategy to promote support for sustainable development in matters of growth and employment, Presently, there is a group of national organizations in Europe that shares a commitment to this initiative. During the European Multilateral Forum on CSR that was recently held, it was made clear that the voluntary commitment of European companies has allowed considerable progress.

In Norway, the classification society Det Norske Veritas is very much involved in the CSR subject. Since the Autumn of 2003, Det Norske Veritas has worked in cooperation with The Norwegian Shipping Association and two other companies, Jebsens and Eidesvik, on a project to define how shipping companies can adopt CSR from a social and sustainable growth perspective.

Eidesvik carried out an extensive survey among employees and their families, the local community and company suppliers. The results indicated that the company is perceived as a cornerstone and that it should involve itself with the community, not only in Norway, but in Africa, where they have operations.

On the other hand, Jebsens, which has operations in Philippines since the 1980s, has shown that through dialogue and actions within the maritime cluster in Philippines, it has been able to strengthen the name of the company with good commercial results. Additionally, the company has achieved other advantages –

• The investment in personnel training has not only increased productivity but has served as a shield to defend the rights of its seamen and officers.
• The training provided by Jebsens has made its seamen and officers attractive to other companies, but their loyalty towards Jebsens has prevented an exodus to other companies, while diminishing labour complaints and lawsuits.
• Loyalty is developed by practicing social responsibility, properly handling crises and complaints, proactively assisting families and involving agents and managers of the group in the effort to retain qualified crews for reasons that go beyond salary.

As to the United Kingdom, its maritime sector is still behind other countries; nevertheless, the Associated British Ports (ABP) is a model industry in matters of CSR. More than 3,000 of their satisfied employees attest to that, according to audits made by independent external consultants. Last year they ranked among the top companies with an ethical index of FTSE4Good, and it is expected that they will retain their rank in 2007.

The positive work that ABP provides British ports in the area of social responsibility was pointed out in a report prepared by the English journalist David Osier.

• Reutilization of material dredged to benefit the environment.
• Measurement of waste generated by their own operations indicates it is different from waste generated by ships
• Improvement of energy consumption and C02 emissions; nevertheless, water consumption was greater than the volume desired
• Five ports south of Gales were certified under the EcoPorts Foundation’s Port Environmental Review System and certifications are in line for another five ports.
• Completion of a study in techniques to suppress dust emitted by the loading/unloading of grains, chemicals and coal.
• A ship’s captain was tried because the ship spilled 1.5 tons of oil in the Orwell River and was found guilty and fined $200,000.
• ABP this year has invested $840,000 in the community and in the prior year $540,000, sponsoring various events and activities. These amounts are equivalent to 0.2% of the group’s gross profit.
• A safety campaign took place last summer to protect children and youngsters 8 to 14 years old from playing and swimming in port areas.
• Donations amounted to $246,000 distributed among charity projects such as the British Heart Foundation, Cancer Research and National Society for the Prevention of Cruelty against children.
• Additionally, they donated $60,000 to Asian tsunami victims; $10,000 to victims of terrorist bombs in London and $6,000 to UNICEF and children affected by the South Asian earthquake.
• The arts have also received donations. The Gales National Opera received $288,000 through a four-year sponsorship agreement

The Asian experience

Japanese companies recognize that CSR plays an important role in the growth of their activities and their annual reports cover their policies on this matter.

For example, Mitsui O.S.K Lines (MOL) was among the first companies to promote a more effective corporate governance, stronger compliance, safe navigation and protection of the environment. In 2004, MOL adopted CSR and the Environment Committee. MOL was the first shipping company to participate in the United Nations Global Pact program and continues to reinforce activities aimed at contributing to society.

MOL is included in the world’s CSR investment index lists, in the Dow Jones Stability Index and in the FTSE4Good Global Index, which reflect the great support this group provides to company efforts, MOL’s CSR is based on a social program where they promote global prosperity, care for employees, social contributions and protection of the environment.

An Asian shipping line that has emphasized CSR since 1977 is Nippon Yusen Kaisha (NYK). They have created programs and support this policy. Other companies are beginning to measure and monitor social, environmental, safety and governance aspects as part of a strategy based on CSR.

Although the maritime industry has a number of obligatory measurements, experts believe in the need to report strategies and achievements. An analysis on CSR strategies indicates that this provides clients, investors, regulators and community activists the following valuable information:

• Better risk management. Provides a comprehensive image of efforts by the organization and risk control.
• Better communications. More effective communication channels to inform the values and good work of the organization.
• Better operational compliance, In measuring and reporting results beyond financial outcomes, the performance of the company is improved.

In Panama

Panama is not behind in matters of CSR. In fact large companies in the maritime sector are not only practicing CSR, but are reporting it as a means for better image and support from stakeholders.

In that regard, the efforts of the Panama Canal Authority (PCA) and two major port companies, Manzanillo International Terminal [MIT) and Panama Ports Company (PPC) stand out. Some of their work and actions are described below:

Panama Canal Authority (PCA) – The Panama Canal Authority is undoubtedly the most notable Panamanian company in the Republic involved in projects and activities under the principles of CSR, As part of the Global Pact that promotes CSR principles, the PCA includes in their annual budget millions of dollars to execute sustainable development projects for the benefit of communities located in the Canal watershed and to protect the safety and the physical and mental health of its 9,000 employees. The company also supports multiple activities that its employees perform under those principles.

The work and activities directly executed by the PCA are directed to both its 9,000 employees and communities living in the Canal watershed and throughout the country.

Based on CSR principles, the PCA also provides in a direct manner high amounts of resources to activities and projects. In fact, under Decree Law No. 1 of January 9, 2006, the government created a Community Development Program (PRODEC) aimed at using $50 million annually of the surplus money contributed by the PCA during the next ten years beginning in 2006 for the implementation of social type projects. Identification and priority of the work are based on consultations with the respective communities.

Manzanillo International Terminal – Under a cooperative agreement with the Government, this company allocated $2.0 million in 2005 for the execution of ten projects, including the following:

• Financing of Health Centre Dr. Juan Antonio Nuñez to provide medical and hospital care to 75,000 residents in the north and south areas of Costa Abajo, Colon.
• Construction of Family and Community Education Centres (CEFACEI) in Residential Los Lagos, Villa del Caribe.
• Expansion of a computer classroom and English laboratory at Gatuncillo to cover the needs of 2,900 students.
• Construction of new classrooms and expansion of a dining hall of the EI Laguito School.
• Construction of new classrooms in the Abel Bravo High School and in schools at Rio Gatun and Desmond Bryan.

Panama Ports Company (PPC) – As a member of the Hutchison Port Holdings Group which handles 44 ports in 22 countries in Asia, Europe, Middle East and the Americas, Panama Ports has developed an aggressive program based on CSR according to the parameters of the Group, Some of main programs developed in Panama include the following:

• Support to the Foundation of Children with Leukaemia and Cancer. PPC financed a modern 16-room residence to accommodate children arriving at the capital city to receive treatment. Originally, the building was a house with three rooms with limited comfort.
• Under the Port School program developed by HPH all over the world since 1992, Panama Ports enrolled its support to a School Program promoted by the office of the First Lady by financing a modern school for the community of Quebrada Grancle in Chiguiri Arriba, Cocle.
• Sponsorship of a diversity of cultural, social and sport activities by its employees in association with the Panama Ports Labour Union.

In conclusion, we must carefully consider the efforts being made by organizations, companies and individuals under CSR principles, It is not inconceivable to see this trend gaining followers and having in the very near future a maritime industry showing its full identification with the interests of society.

©©María Dixon/ISM Shipping Solutions Ltd. – 2007
This article was published in Panama Maritime Handbook, with the permission of the author