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Maersk’s reinvention puts decarbonization at forefront    05/11/2019
Maersk in June set a goal of achieving zero carbon emissions from its fleet by 2050, doubling the International Maritime Organization

Looking across the container shipping industry, there is one place where players are taking real risks: Copenhagen.

It’s one thing to risk countless millions on unproven startups, as many venture capitalists are doing, knowing the risk is spread across many investments and with the expectation that many if not most of them will fail. All it takes is for one to hit it big.

It’s quite another for the world’s largest container shipping company and the largest company in Denmark to embark on a radical departure from its traditional business model and simultaneously lead the shipping industry in a historic quest to decarbonize shipping. It’s a level of risk-taking and ambition without equal in today’s industry.

Maersk Line is boldly reinventing itself, having shed its energy units and concentrating its strategy wholly on creating the UPS or FedEx equivalent in ocean containers. The envisioned end-to-end “integrated” carrier challenges both precedent and conventional wisdom that tonnage and logistics services can’t be seamlessly merged within a single brand.

If that weren’t enough, Maersk is so far out in front on the paramount environmental challenge of the era — decarbonization — that it has also been challenging other long-held assumptions, among them that shippers will penalize carriers that tell them that costs are going up. But that’s exactly what Maersk is doing in arguing that the fuels of the future, those that will enable ships to operate carbon-free, will come at a steep price that shippers will have to accept to take responsibility along with carriers for addressing climate change.

“The cost of transport will rise … because new fuels are projected to be significantly more expensive than existing fossil solutions, which will lead to increased operating costs,” said an Oct. 24 press release announcing the results of a joint Maersk–Lloyd’s Register study assessing the viability of zero-carbon fuels.

That was the latest instance of leadership from Maersk on climate change that is hard to link to the profit motives usually ascribed to publicly traded companies, especially one whose stock price and quarterly earnings are scrutinized as a bellwether for global trade. 

In June, the company announced a goal of achieving zero carbon operations, including in its fleet, by 2050, doubling the goal of the International Maritime Organization. Achieving its 2050 goal means the first commercially viable zero carbon ship must be on the water by 2030, a goal that led to the formation of the “Getting to Zero 2030” coalition, which despite broad support from the public and private sectors has only two other carriers as signatories, Ocean Network Express (ONE) and Zim Integrated Shipping Services.

From a purely business angle, carriers want to ensure through proactive action that they don’t end up being on the receiving end of a hostile response from the public and policymakers who might seek to impose objectionable solutions on the industry.

On why Maersk is so out in front on decarbonization, some executives say it comes from Maersk’s history in the energy business, a history that has made the company acutely aware of the environmental consequences of pumping oil out of seabeds. It also comes from its role as the flagship company in Denmark, a country on the leading edge of decarbonization, whose government earlier this year pledged to reduce emissions by 70 percent versus 1990, up from a prior goal of 40 percent — a goal that goes far beyond most countries.

But Maersk’s being out ahead on decarbonization, which some accuse of being for public relations benefits, could prove prophetic. The climate change debate is growing sharper, driven by a youth activist movement and mounting evidence that the planet is falling behind the goals spelled out in the 2015 Paris Agreement to cap global average temperature well below 2 degrees Celsius above pre-industrial levels; and to pursue efforts to limit the increase to 1.5 degrees Celsius.

In leading the charge, Maersk has positioned itself as helping to solve the problem, rather than waiting for the outside world to make key decisions on the industry’s behalf, or worse, perpetuating or ignoring the issue.

But though the company may appear to be on its own relative to most of its peers, it is heavily influencing efforts to involve the wider maritime industry in the effort. Maersk is behind the creation of the Global Maritime Forum, an annual industry event and think tank most recently held in Singapore in late October that is emerging as the leading voice on decarbonization. 

Palle Brødsgaard Laursen, chief technical officer and senior vice president at Maersk, is a member of the Advisory Council, and the original Danish Maritime Authority received backing from an AP Moller–Maersk foundation, among other sources. Former Maersk oil and gas head Claus Hemmingsen played a key role as well, underscoring the carrier’s history in working to reduce its environmental impact.

“We will invest significant resources in innovation and fleet technology to improve the technical and financial viability of decarbonized solutions,” Soren Toft, Maersk’s executive vice president, said earlier this year. “Going forward, we cannot do this alone.”

 




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