A digital ecosystem accessible to all stakeholders is emerging to enable the transition to a circular economy in shipping, but new global regulations are needed to drive the shift as the industry lags other sectors in realising huge value creation potential, according to Varuna Sentinels.
“There is a growing awareness among shipowners of the need to adopt circularity in their business by taking a lifecycle approach to assets as they realise this is important for their ESG profile, given the heightened focus on sustainability across the shipping value chain,” says Varuna Sentinels director Rakesh Bhargava.
“While ESG is a big commercial driver for circularity, a major barrier to adoption is the lack of clearly defined global requirements and standards. This means there are no criteria for benchmarking to measure performance in this area in order to determine a company’s ESG score, which is needed for stakeholders to make the right investment decisions.”
The circular economy is based on principles of reuse and recycling to increase the circular flow of existing materials and use fewer natural resources, thereby curbing waste and pollution from carbon-intensive manufacturing processes, as opposed to the linear model of buy, use and waste.
In the case of shipping, this means incorporating circularity throughout a ship’s lifecycle from design, construction and operation to end-of-life recycling to promote reuse, repair, refurbishment and repurposing of materials to extend the lifetime of the vessel and its components.
This will require lifecycle assessments of newbuilds to determine their carbon footprint from sourcing of raw materials such as steel, through design, manufacturing, operations, logistics and end-of-life management.
Bhargava explains this would demand a new cradle-to-grave approach based on extending the lifespan of the vessel to maximise revenue while cutting operational costs, versus the current business model in which the ship is seen as a financial asset to be disposed of for maximum profit.
The Sustainable Shipping Initiative’s (SSI) executive director Andrew Stephens believes the industry shift to alternative fuels for decarbonisation presents an opportunity to build new zero-emission vessels with resource optimisation in mind.
“There is an opportunity now to design for circularity and flexibility. This could maximise the potential value of the ship at end of life both in terms of dollars and potential for reuse or refurbishment of materials,” Stephens said in a recent Lloyd’s List podcast.
This could entail modular ship designs and standardisation of components to make it easier to carry out reuse and refurbishment of parts during maintenance and recycling, as well as retrofits to adapt to new fuel technologies and keep the vessel in operation, leading to cost savings.
Such changes, he says, would improve circular material flows to reduce CO2 emissions associated with the ship itself in manufacture of ship materials and components, shipbuilding and recycling that account for around 5% of the shipping industry’s emissions, with the other 95% from operations.
According to the Global Maritime Forum (GMF), remanufacturing of used maritime components reduces energy, water and material use by up to 90% and, when remanufactured to the same level of reliability as new components, may lower overall component costs by 50% to 80%.
“By rethinking current ship design and operational models, new circular economy business models can present opportunities to increase revenue, reduce costs and improve risk management,” the GMF states in a report.
“Moving towards circularity within the shipping sector requires the involvement of the whole ecosystem to create transparency, set common goals and objectives, and establish the right financial incentives and structures for commercial viability. Data availability will need to improve to enable transparency and traceability of materials, with partnerships across the value chain,” the forum states.
Digital technology will be a vital tool for tracing and tracking of ship materials and components, with “product passports” indicating the carbon footprint of each element, according to Varuna Sentinels.
And it states this will require an interactive digital ecosystem connecting multiple stakeholders, including shipyards, suppliers, shipowners, charterers, regulatory authorities and NGOs, that will enable them to source equipment data.
Varuna Sentinels, a Netherlands-based fleet management, IHM and sustainable ship recycling consultancy, already has such a system in place with its so-called VSIMS software platform that is presently used to track hazardous materials throughout a vessel’s lifetime, in line with the IHM Maintenance requirements of the Hong Kong Convention and EU Ship Recycling Regulation.
Enabling technology for circularity
Varuna Sentinels director Sanjeev Weweinke-Singh believes this platform could serve as an enabler for the maritime circular economy as it can easily be expanded to track all product inputs and outputs on a vessel across its lifecycle.
The software’s blockchain technology can map the origin and journey of each ship component to provide transparent sustainability data for product benchmarking from cradle to grave, offering a global database of compliant products and suppliers for multiple stakeholders able to access the system via a unique user ID.
“This can be a model for the rest of the supply chain to include circularity by design in every single product used during the build and operation phase of the ship’s lifecycle,” Weweinke-Singh says.
The company is pursuing an open-source project based on its proprietary software, which he says could ultimately be hosted by a neutral party such as an NGO given the complexity of such an ecosystem with a diversity of stakeholders as “this is too big for any one party to handle alone”.
Varuna Sentinels is already working with several shipowners seeking to go beyond current ESG requirements by incorporating circularity in their businesses.
“This is not only good for the environment but also provides a better return on investment as compared to a linear economy. Companies can start building in circularity now to prepare for compliance with regulations expected to come in future,” he says.
Shipping still has a long way to go to emulate the value creation achieved from circularity in other industries, with respective turnover of EUR 12.4 billion and EUR 7.4 billion from remanufacturing in the aerospace and automotive sectors, versus only EUR 100 million from marine, according to Varuna Sentinels.
In a recent study, the SSI highlighted multi-stakeholder collaboration, both within and beyond the industry, along with global regulation as essential to realise the transition to a circular economy in shipping – and stated the existing IHM Maintenance regime is a potential building block to facilitate this shift.
Weweinke-Singh concludes, “There is a lot of public pressure for circularity and the enabling technology is available to pursue this path. First-movers in the industry are increasingly realising the need and opportunity to move to circular models and this can be further consolidated by forming a regulatory framework by the likes of IMO that will consolidate and reinforce the circular maritime economy.”