Launched by the European Commission in 2019, the European Green Deal is a roadmap to Europe becoming carbon neutral by 2050. Building on international agreements like the Paris Climate Agreement, UN Sustainable Development Goals and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, it is designed to achieve behavioural change for sustainability.
The EU Green Deal marked the first time these voluntary agreements were systematically translated into law. The European Union’s Taxonomy Regulation and European Sustainability Reporting Standards, as part of the Corporate Sustainability Reporting Directive, define meticulously what is considered sustainable in Europe. This simultaneously introduced a common language to communicate about sustainability efforts, improving transparency and comparability.
The EU Green Deal describes the absolute minimum to achieve, focusing on balancing economic growth within planetary boundaries whilst respecting social values. Intrinsically, we are looking at a different economic system than the one we’ve been operating in for more than a century.
To achieve its objectives, the European Commission handed the financial sector and civil society instruments to exert pressure on undertakings alongside regulators. As a result, maintaining current linear business models, based on free market mechanisms, is increasingly disincentivised, by making it costly. Integrating environmental, social and governance (ESG) practices is therefore not a ‘nice to have’. In Europe, it is your license to operate.
Inspired by the push from the FuelEU Maritime Regulation, the cruise industry has effectively anticipated fuel consumption innovations and is integrating onshore power supply. But that only allows decarbonisation to a certain extent. Apart from emissions, the EU Green Deal equally focuses on resources and due diligence (see diagram on next page).
Even though designers are highly conscious and motivated to design more sustainably, their reality is having to work on tight budgets and deadlines. The EU Green Deal context, however, is shifting their role substantially. The big potential for further decarbonisation lies in the vessel’s design, leveraging energy efficiency and embedded carbon (through reuse, repair-refurbishing-remanufacturing and recycled content) to obtain resource efficiency.
Components of sustainability, the European way: The main pillars of the EU Green Deal, along which all legislative and regulatory initiatives (a non-exhaustive sample of which are included below) can be classified, are: resources, emissions and due diligence
If these factors are not being weighed in from the start of conceptualisation of a ship build, efficiencies in sustainability will be extremely hard to achieve, rendering the execution by default more expensive. Sustainability key performance indicators like resources and energy efficiency should be part of initial design requirements and need to be of equal importance to weight and fire safety.
As we are dealing with a new economic system, we are also facing a lot of ‘known unknown’ variables, underdeveloped or non-existing infrastructures, and technologies and materials in the beginning of their innovation curve. The challenge is therefore to de-risk capital expenditures whilst keeping viable profitability.
To reach minimal EU Green Deal thresholds, it is not a question of whether to make investments. It is when. Following their deadlines and alongside the minimum regulatory and legislative requirements applicable to your reality, you can strategically plan the necessary investments in time.
Inefficiencies and a lack of scale in volume, reverse logistics, infrastructure and processing capacities are the main reasons why sustainable and circular solutions are more costly and underperforming.
Scenario comparison and active collaboration with your value chain partners, aligning the operational realities of designers, suppliers and processing industries allow this to be mitigated. A single company will never be able to tackle challenges regarding scale and inefficiencies on its own. Making the business case for sustainability is an ecosystem effort.
Access to liquidity
Banks, investors and insurers need to align their portfolios with the Taxonomy Regulation and the objectives of the Paris Climate Agreement, and comply to the Sustainable Finance Disclosure Regulation. They de-risk their portfolios and avoid stranded assets through selecting companies that allocate green capital expenditures whilst following a decarbonisation path. For cruise operators, this can be a ticket to affordable European liquidity.
The European Green Deal, which was launched by the European Commission in 2019, is a roadmap to Europe becoming carbon neutral by 2050
Adding sustainability to existing design requirements
Learning from the built environment, balancing functional design and material choice for improved energy performance and resources efficiency is an effective way to decrease environmental footprint and costs.
When integrating sustainability in design, start with asking basic questions using the R-strategies. What happens after the product’s useful life? Is there an infrastructure in place to take it back and to reuse/repair/refurbish/remanufacture/recycle it? Who’s responsible for it?
An inability to answer these questions indicates that a solution is inapt and has inherent inefficiencies. Questioning clarifies the circular potential and actual output, facilitating purchasing decisions.
Following the European Sustainability Reporting Standards structure, categories to consider are: climate change; pollution to air, water and soil; resources use and circular economy; biodiversity and ecosystems; marine resources and water. Using these as a direction for selection, the asset is actively being de-risked as a contributor to an undertaking’s environmental footprint, increasing its attractiveness to investors.
A total-cost-of-ownership approach is necessary when comparing existing solutions with sustainable alternatives. This ensures a solution’s actual costs and impacts over the full life span (use, maintenance and end-of-life) are calculated – costs which are usually overlooked, creating inefficiencies and rendering sustainable solutions seemingly more expensive.
Siu Lie Tan advises independently and in partnership with various consultancies, including Exsulting.com (integrated sustainability), Innoboost.nl (business model innovations) and pyramide.nl (leadership training)
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