October 19, 2021
In October, nine of the world’s largest retail companies pledged a commitment to zero-emission shipping by 2040. The consortium is made up of Amazon, Ikea, Unilever, Inditex (owner of Zara), Michelin, Patagonia, Brooks Running, Frog Bikes and Tchibo. We explore what this means in our Commercial Awareness Update.

Why Make The Pledge Now?

The pledge to only move cargo on ships using zero-carbon fuel comes as part of a wider industry effort to ‘decarbonise’ ocean shipping. It produces one billion tonnes of climate pollution each year and is responsible for 3% of annual global greenhouse gas emissions. It’s an increasing area of focus because the environment is a key factor for ESG.

Many industry critics have pointed out that current corporate environmental initiatives fall short of the standards set in the Paris Agreement. Given 90% of world trade moves by maritime shipping, contribution to global emissions could account for more than 10% by 2050 if change is not made now.

Under the Paris Agreement goals, the shipping industry must use zero-carbon fuels at scale by 2030, and be fully decarbonised by 2050. The nine companies involved in October’s announcement have therefore accelerated this goal of full decarbonisation to 2030.

Another motivating factor for the change is rising shipping costs. Since the start of the pandemic, container shipping costs have increased ten-fold due to turmoil in global supply chains. Global exports remain unbalanced with some countries already exporting pre-pandemic levels, whilst others lag behind in a slower Covid-19 recovery.

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Potential Complications

In order to achieve the zero-emission goal, the companies will need to plough huge sums of investment into redesigning fleets, and producing new fuels such as green ammonia, methanol and hydrogen at scale. Industry experts believe that the investment required could exceed £1.45trn.

As a result, the consortium have pleaded with industry governing bodies for greater regulatory and policy support. The key request is the introduction of market-based measures to make zero-carbon fuels competitive with fossil fuels, which are currently estimated to be three times more expensive.

The companies, alongside environment groups such as Pacific Environment and Stand.earth have stated that they hope other companies will follow suit in adopting cleaner shipping, in turn meeting the goals of the Paris Climate Accord.

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