Is end-of-life ship recycling policy catalyst or threat to ESG? 

Do corporations really make efforts on achieving ESG as they say? Is ESG merely a rubber stamp? How does the maritime industry perform? Let’s get a glimpse at the end-of-life ship recycling policy of shipping companies in Taiwan.

What is ESG?

ESG is the shortened form of “Environment, Social and Governance” which is a set of non-financial factors to assess a company for risk and growth opportunities. It first appeared in the report “Who Cares Wins” released by the United Nations Global Compact in 2004. 

A corporate’s value is no longer only determined by financial conditions but also other non-financial factors like impacts on the environment by supply chains, training for employees and working conditions offered, etc. This explains why ESG has become so popular worldwide, and corporations struggle to go green these days.

Is end-of-life ship recycling policy ESG enough? 

Whenever there is shipbuilding, there must be shipbreaking. Once the vessels reach the end of their operational lives, they will be dismantled and will become waste. 

But this is not the end of the story. Shipbreaking requires a lot of techniques and hard work. Either it can be a contribution to recycling or a nightmare to the environment. Ship vessels contain many hazardous substances and materials that threaten people’s health and the environment. Therefore, how the vessels are dismantled matters a lot. Moreover, scrapped ships have always been a big business. 

The NGO Shipbreaking Platform, based in Brussels, Belgium, monitors the environmental harm and human rights abuses caused by current shipbreaking practices worldwide for many years, working to ensure safe and environmentally sound end-of-life ship recycling.

In addition to taking a huge toll on the health and lives of workers, shipbreaking is a highly polluting industry. For example, 440 deaths have been recorded in the South Asian shipbreaking yards since 2009.

In the face of new energy efficiency and carbon regulations and the depreciation of fleets in recent years, a record number of shipping companies are dealing with the disposal of old vessels. But does the disposal comply with the value of ESG? 

The end-of-life ship recycling policy of Taiwan’s shipping companies 

Wan Hai Lines, the 11th-largest liner operator in the world and one of the three largest shipping companies in Taiwan, was the first to largely reduce its old fleets. 

In December 2022, industry media Shipping Digest and The Loadstar stated that Wan Hai sold its 10 oldest vessels which would be disassembled and scrapped. These vessels, WANHAI 215, 216, 221, 222, 223 and 225 built in 1994 with capacity 1,368 TEU, coupled with WANHAI 161, 162, 163 and 165, built in 1996 and 1998 with capacity 1,088 TEU, accounted for an estimated 10 percent of the company’s fleet. 

With the implementation of the new Energy Efficiency Existing Ship Index (EEXI) and the annual operational carbon intensity indicator (CII) on January 1 2023, Wan Hai stated that phasing out old vessels and replacing them with new energy-saving ones would speed up the company’s environmental protection policy and lower their operation costs, contributing to higher competitiveness. 

According to Wan Hai’s company webpage, its ship recycling standard “based on a strict interpretation of the 2009 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ship was adopted in 2017 by the company”.

Yet the Hong Kong Convention has been strongly criticized by NGOs globally for not banning beaching and for not setting requirements on management of hazardous wastes once the parties leave the gate of the recycling facility.

According to the information tracked on Live Map of Marine Traffic by NGO Shipbreaking Platform, the old vessels including WANHAI 161, 162, 163, 215, 216 and 223 have been sent to Indonesia in April and to be scrapped in a yard in Batam operated by the Singaporean company PaxOcean. 

Yet Batam, the largest city in the province of Riau Islands in Indonesia, is notorious for scrap yard accidents. Two serious incidents have occurred earlier this year, which raised concerns from the local labor union. 

At PT PaxOcean Nanindah Mutiara Shipyard, two subcontractors from PT Ganda Samudra were suspected to have died due to poisoning while at PT Alusteel, two subcontractors from PT GMC were killed by heavy equipment. 

Wan Hai replied earlier this year that the company will not make its ship recycling information public as it was a “private deal”, as reported by Taiwan’s local media ETToday, even though it affects public interests. 

Benedetta Mantoan, policy officer of NGO Shipbreaking Platform, told Maritime Fairtrade that their organization is engaging actively with Wan Hai’s ESG team regarding its shipbreaking policy. 

There is a glimmer of hope as one of its old vessels, WANHAI 165, finally arrived in Bahrain at the shipyard operated by Arab Shipbuilding and Repair Yard Company (ASRY), working with Elegant Exit Company (EEC), a Dutch company which is a pioneer in sustainable and responsible ship recycling. 

The largest Taiwan’s shipping company, Evergreen Marine Corporation, was also reported to have scrapped several vessels on the beaches of Alang, India in 2020, which is a hot spot for not-up-to-standard shipbreaking.

ESG should not just be a slogan. It has to involve firm and transparent action. Shipping companies and regulators should not allow old vessels to go to destinations that are not able to recycle and dispose them in a safe and environmentally sound manner, as the upcoming scrapping wave continues.

Photo credit: iStock/ WANAN YOSSINGKUM

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