Few Nordic shipping companies make ‘A’ grades ahead of ‘avalanche’ of sustainability rules

Just three shipowners and operators scored an “A” grade in Position Green’s annual report card for Nordic-listed companies’ sustainability disclosures.

The report from the software and advisory focused on an ESG framework of environment, social and governance matters comes as executive chairman Joachim Nahem warned that shipping still faces gaps as it gears up to comply with upcoming disclosure rules from the European Union.

The ESG100 scorecard, which measures the ESG disclosures of major companies listed on key Scandinavian stock exchanges, gave Wilh Wilhelmsen Holding the lone “A+” in the shipping industry. The Oslo-listed maritime conglomerate’s Wallenius Wilhelmsen joint venture also scored a “B+” on the ranking.

“A” grades also went to car carrier operator Hoegh Autoliners and container shipping giant AP Moller-Maersk.

The lowest grade of “E” when to Oslo-listed but Athens-based shipowner Okeanis Eco Tankers, as well as the Olsen family’s Bonheur, which controls Fred Olsen Windcarrier, Fred Olsen Cruise Lines and TradeWinds publisher DN Media Group.

The scorecard grades 300 companies listed in Norway, Sweden and Denmark based not on how green they are but on how complete their 2022 sustainability disclosures were, and that is meaningful at a time when the European Union is gearing up to begin applying new ESG reporting requirements.

As part of what Position Green described as an “avalanche” of disclosure rules, the European Sustainability Reporting Standards (ESRS) and the related Corporate Sustainability Reporting Directive (CSRD) both hit the ground in January.

Position Green found that the disclosures by shipping companies in the ESG100 showed 66% readiness for the new regulations, which puts the sector tied with energy for the second most prepared industry, behind only basic materials.

But that still leaves a gap to overcome, especially since Scandinavian companies tend to lead the way on ESG matters compared to other parts of the world.

Nahem told TradeWinds that many shipping outfits are still not aware that they fall within the scope of new EU regulations, which apply to an estimated 49,000 companies operating within the 27-nation bloc and an estimated 10,000 outside.

“There is a knowledge gap in terms of exactly what this is and what the purpose is, and it’s a pretty big task to fill this gap,” he said. “It’s the most ambitious ESG reporting regulation that we’ve seen in any market.”

In some areas, shipping is doing better than other industries.

With a growing focus on carbon, all of the cargo shipping companies in the ESG100 disclosed their direct greenhouse gas emissions. Some 72% reported their Scope 3 emissions, which refers to the indirect carbon footprint of their supply chains.

“They need to get a better grip on exactly sort of what in Scope 3 is material,” he said, noting that companies need to have a better understanding of their supply chain. “I think that sometimes it’s not fully understood what data points they need to be following — what makes up their Scope 3.”

And 72% of shipping had a climate change transition plan. That is better than the 41% average across all companies on the ESG100 report.

However, only 17% of those shipping companies had a climate target that was verified by the Science Based Targets initiative, a private effort to align corporate goals with a pathway that caps global warming at 1.5C, compared to 33% across all the companies listed in Scandinavia.

Among the areas where shipping lags the most is in the social corner of ESG.

Only 17% of companies reported on their gender pay gap, making the industry one of the least likely to disclose the data point.

The industry was the worst performer on disclosing discrimination and harassment incidents, with just 22% including this in their sustainability disclosures.

“That indicates either that there is a lack of whistleblowing or reporting channels with integrity, or that there’s a culture problem here,” Nahem said.

The sustainability expert said that getting better at sustainability disclosures should not be seen as a burden, but rather as an opportunity.

“And being good at this will also, not just make you compliant but it can actually give you some potential rewards from a business perspective in terms of winning contracts access with better terms to capital markets,” he said.