a.p. moller - maersk sustainability

A.P. Moller - Maersk Sustainability Case Study EN00001-003/Published 12/2010

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ENERGY & SUSTAINABILITY CASE STUDY SERIES

A.P. Moller - Maersk Sustainability Case StudyHow is A.P. Moller - Maersk responding to the challenges of sustainability?

Reference Code: EN00001-003

Publication Date: December 2010

DATAMONITOR VIEW

Catalyst

Environmental performance is fast becoming an important factor in customer behavior regarding the shipment of

documents and packages from one location to another. With the availability of a variety of possible ways – cars, trucks,

planes, trains, and ships – to get a shipment from one point to another, transport firms in the logistics and express industry

are under pressure from their clients, which are demanding choice in terms of price, speed, security, and environmental

impact and the use of natural resources. Recent research and initiatives covering sustainability issues suggest that

manufacturers and retailers are becoming more pro-active and express firms are increasingly demonstrating leadership in

sustainability in order to play their part in the drive towards achieving greener supply chains. Sustainable development is an

increasingly important facet of the modern transportation and logistics industry, and in order for a company in the industry

to be viewed favorably among customers and consumers, it needs to be seen as operating in ways that are socially,

environmentally, and economically responsible.

Datamonitor View



Scope of the report

Sustainability in logistics has been the focus in the decision-making and conducting business for most of the players in this

industry. This report provides an in-depth analysis and assessment of how Maersk has been responding to the challenges

of sustainable development in the transportation and logistics industry. The report provides you with:

An introduction to the overall logistics industry and challenges facing the industry, sustainability in logistics and the

underlying regulations

An overview of Maersk in terms of business operations, evolution of the company and sustainability practices adopted

A snapshot of performance ratings, awards and recognitions won by Maersk with respect to its sustainability efforts

and performance

Assessment of sustainability programs adopted by Maersk and SWOT analysis from a sustainability perspective

Summary

The logistics industry, being a key enabler in the supply chain, is under constant pressure from players in the industries it

serves to help mitigate their carbon emissions. Over the last few years, this has resulted in increased efforts by major

logistics firms like DHL, Maersk, TNT, and so on to incorporate sustainable practices into their operations.

Maersk, a $48.5bn company, is one of the world’s largest shipping companies and also has activities in a variety of

business sectors including energy, logistics, retail, and manufacturing. The group's global network consisted of 531 owned

and chartered container vessels with a total capacity of 2.1 million twenty-foot equivalent unit containers as of December

31, 2009. As it is the largest container shipping company in the world, the business activities of Maersk have the potential

to make a great impact on the environment on the global, national, and local levels.

Ship recycling, waste handling, and the use of a voyage efficiency system are some of the measures the group has

undertaken in its attempt to become a sustainable player. The introduction of slow steaming in ships has not only reduced

emissions but also lowered fuel consumption costs for the company. The Green Passport scheme is another initiative

undertaken by the group, involving the safe dismantling of ships once they are no longer fit for purpose. Due to the efforts

undertaken by the group, its greenhouse gas emissions fell by about 7% of carbon dioxide (CO�2) equivalent in 2009

compared to 2008. The group, in addition to adopting sustainable measures to reduce its environmental impact, also

partnered with educational institutions, government agencies, non-governmental organizations (NGOs), to provide solutions

to the environmental challenges. Various initiatives like Green Ship of the Future and a new propeller design are in the

experimental stage; if effective, they might further strengthen Maersk’s position in its attempt to reduce its emissions.

Introduction



INTRODUCTION

Logistics is an arm of supply-chain management services that focuses on reducing operational costs, improving delivery

standards, and increasing flexibility to improve the competitiveness of a business across the value chain. The importance of

logistics and supply-chain management continues to increase due to globalization as a greater number of firms globally

continue to source, manufacture, and distribute on a global scale, making their supply chains very complex to manage. The

key market players in the logistics industry for the year 2010 with respect to business structure, operations, and profitability

are UPS, FedEx, DHL, Maersk, Nippon Express, Ryder, TNT Post Group, and Expeditors. In 2009, the global

transportation market size was about $2.6 trillion. According to Datamonitor, the global transportation sector is expected to

grow at a CAGR of 0.59% during the period of 2009–2014 to reach a value of $3.5 trillion by 2014. Figure 1 below shows

the total revenue growth in the transportation industry as projected by Datamonitor.

Figure 1: Transportation industry distribution by mode, 2009–14

71% 70% 71% 71% 71% 71%

7% 7% 7% 6% 6% 6%

4% 5% 5% 5% 5% 5%

13% 13% 13% 13% 13% 13%

5% 5% 5% 5% 5% 5%

0%

20%

40%

60%

80%

100%

2009 2010 2011 2012 2013 2014

Mar

ket S

hare

Road Rail Air Sea Inlandwaterways

Source: Datamonitor D A T A M O N I T O R

Sustainability in logistics

Introduction



As a key enabler in the supply chain, the logistics industry is under pressure from players in the industries it serves to help

mitigate their carbon emissions. Regulatory pressure has also increased in recent times due to the large role of vehicular

and air transport in the industry. What this has resulted in over the last few years is that major logistics firms like DHL,

Maersk, and TNT have increased efforts to incorporate sustainable practices into their operations. These firms see

sustainability as being more than compliance. They see it as the only way forward, where cost savings and client

satisfaction as a result of sustainability measures will help them stay one step ahead of the competition. Practices such as

network optimization, carbon emissions tracking, modal shifts, and the use of alternative propulsion technologies and fuels

have become increasingly common in the sector. The increase focus on the sector from governments and its own

customers over the next few years will only serve to fuel this trend. Figure 2 gives an overview of major sustainability

practices in the logistics industry.

Figure 2: Key sustainability practices: logistics

Sustainability in logistics

Alternative fuels

Route optimization

Modal shifts

Onsite generation or adoption of renewable

energy

Optimization of loading techniques

Improved flight paths

and precision

Emissions tracking


The industry will have to overcome challenges posed by supply-chain risk management and the reduction of fuel

consumption, among others. In order to meet them, companies are actively collaborating with governments, clients, and

independent organizations to develop new strategies and technologies.

Increasingly stringent regulations are also pushing companies towards sustainability. With the EU Emission Trading

System (ETS) now covering aviation, and several ‘greening transport’ initiatives by the European Commission (EC),

logistics firms now have to rework their transport networks, balancing compliance and profitability.

Overview of Maersk

Introduction



Maersk is a Danish business conglomerate operating in 130 countries with nearly 115,000 employees. Other than being

one of the world’s largest shipping companies, Maersk also has activities in a variety of business sectors including energy,

logistics, retail, and manufacturing. Maersk operates in the following areas: container- and shipping-related, tankers,

offshore and related, terminal activities, oil and gas activities, retail and other, and technology-related activities. It is the

world’s largest container ship operator and supply vessel operator.

The revenue for Maersk was $48.5bn, which was 21% lower in 2009 than in 2008 due to lower freight rates for shipping

and lower average oil prices. The group’s container shipping activities were hard hit due to the tough market conditions.

Similarly, most of the other business areas of the group experienced a negative impacted due to the low business activity.

For 2010, Maersk is expecting to report a nominal profit. Cash flow from operating activities is expected to be considerably

higher, while cash flow used for investments is expected to be much lower than in 2009.

Table 1: Maersk: key facts

Head office Copenhagen

Revenue (2009) $48.5bn (DKK260.0bn)

Revenue (2008) $61.2bn (DKK311.8bn)

Growth (2008–2009) (-) 21%

Employees 115,000

CO2 emissions (2009) 45 million tons

Financial year end December

Primary stock exchange (ticket) Denmark OTC (MASRKS B)


Distribution of revenue for different business units in the group is given in Figure 3

Introduction



Figure 3: Maersk: revenue distribution, 2009

Others2%APM Terminals

6%

Tankers, offshore & other shipping

activities11%

Oil & gas activity18%

Retail activity21%

Container shipping & related activities

42%

Note: the figure above does not include eliminations, which constitute about $1.7bn


It can be seen from the above figure that container- and shipping-related activities is the largest business area for Maersk,

accounting for almost two fifths of the group’s revenue during 2009.

History of Maersk

Arnold Peter Moller and Captain Peter Maersk Moller established Dampskibsselskabet Svendborg in 1904. In 1912, the

company established Dampskibsselskabet, based in Copenhagen. Arnold Moller went on to establish Odense Steel

Shipyard in 1918. The group established a cargo liner service, linking the US and the Far East in 1928, under the name of

Maersk Line. In the same year, the group started its tanker business. In 1953 the A.P. Moller and Chastine Mc-Kinney

Moller Foundation was established to support Danish culture and heritage. The foundation also supports medical sciences

and Danish shipping. The group acquired a controlling interest in Dansk Industri Syndikat in 1959.

The company got a concession for oil and gas exploration and production in Denmark in 1962 and work was commenced

under the name of Dansk Undergrounds Consortium (DUC). Two years later, the group expanded into the retail business

segment by establishing Dansk Supermarked in partnership with F. Salling . In 1977, Maersk Logistics was established with

branches in Taiwan, Hong Kong, and Singapore.

Introduction



The group’s expansion process continued with the acquisition of Norfolk Line, a shipping company, in 1985. The group

established Maersk Container Industri to produce reefer containers in 1991. In 1999, the group acquired Safmarine

Container Lines and the international container business of Sea-Land Service.

Due to adverse financial conditions, Maersk Container Industries ceased production of reefers at its Tinglev plant in 2006.

In the same year, Maersk Line acquired P&O Nedlloyd to become the largest container shipping line in the world, to the

extent that it was then twice the size of its nearest competitor. During the same year, APM Terminals, the terminal arm of

Maersk, started a joint venture with Aqaba Development to manage, operate, and expand the Aqaba Container Terminal. In

2007, Maersk Line, Hamburg Sud, and NYK Line entered into a partnership to operate jointly in the trade between Asia,

South Africa, and South America.

Overview of sustainability practices at Maersk

In an effort to communicate the sustainable practices undertaken by the group, Maersk published its first sustainability

report in 2010, although the practice is not novel. It has been practicing sustainability under four broad focus areas—health,

safety, security, and the environment.

As such, the group increased its efforts related to climate and the environment in 2009. Maersk Line introduced slow

steaming during the economic downturn for reasons that were economic rather than environmental, but there has been a

position environmental effect. Due to the process being slowed down, fuel consumption is considerably reduced, and since

fuel costs are high there has been a significant cost benefit. Maersk Line, the firm's largest business group, has set a goal

of reducing 20% of CO2 emissions per container transported by 2017.

The group, in addition to adopting sustainable measures to reduce its environmental impact, also partnered with

educational institutions, government agencies, NGOs, and so on to provide solutions to these environmental challenges.

Given below in Table 2 is the list of all such organizations.

Table 2: Maersk: key collaborations

Name of organization Collaboration details

Beyond MonitoringMaersk joined this group to create an innovative approach to sustainable supply chain management that will make a concrete impact.

Clean Cargo Working GroupMaersk Line partnered with this group to incorporate social and environmental business principles into transportation management

Energy Efficient Transport Planning

This is a joint project involving Maersk Line, the Technical University of Denmark, and the IT University of Copenhagen to reduce energy consumption and CO2 emissions in the transportation sector through new IT tools and mathematical optimization.

Massachusetts Institute of Technology

Damco has joined MIT Supply Chain Exchange program to develop methods to measure and reduce carbon footprint and also to promote global standards in this area.

Port of Rotterdam

This partnership should help APM Terminals improve productivity, efficiency, land utilization, environmental sensitivity and public awareness in container terminal industry. Some projects will also focus on environmental best practices, sustainability, cost reduction, security and so on.

International Tankers Owners Pollution Federation

This organization aids and assists all parties when a spill occurs, with services ranging from providing response and containment equipment to motoring clean-up operations.

Green Ship of the Future

The group has joined Green Ship of the Future, a collaboration of companies in the Danish maritime industry that have come together to develop strategies to reduce CO2 emissions by 30%, sulfur oxide by 90%, and nitrogen oxide by 90%.


Perception of Maersk’s Sustainability Efforts



PERCEPTION OF MAERSK’S SUSTAINABILITY EFFORTS

The way in which Maersk’s sustainability efforts and practices are communicated is essential to determining how its clients,

NGOs, and rating agencies recognize the company. Maersk can communicate its sustainability efforts through various

sources such as sustainability reports, annual company reports, its website, and so on. However, the group has little control

over how external institutions choose to perceive its sustainability efforts and in turn rate the company.

Performance in independent ratings and rankings

The Carbon Disclosure Project (CDP) is an independent not-for-profit organization holding the largest database of primary

corporate climate change information in the world. Organizations across the world’s major economies measure and

disclose their greenhouse gas emissions and climate change strategies through the CDP. In 2010, the CDP requested the

world’s largest 500 public companies in the FTSE Global Equity Index Series (Global 500) to demonstrate the action they

are taking on climate change. CDP’s global advisor PricewaterhouseCoopers analyzed the responses of these

corporations. Maersk was rated based on this analysis.

For the year 2010, the carbon disclosure score of Maersk was 66 and its carbon performance score was B. A detailed

explanation of the methodology used for the carbon disclosure score and carbon performance score is given in the

APPENDIX section. This score is moderate when compared to the rest of the companies in the same sector. Sector

leaders like Siemens and Deutsche Post have carbon disclosure scores of more than 95 and carbon performance scores of

A.

In November 2010, Maersk Line was the only shipping line to have received an independent assessment of its CO2�

emissions. Starbucks Coffee Company, one of its customers, has applauded this initiative taken by the group as it provides

transparency regarding the emissions. This step taken by the group also helps Starbucks to lower its carbon footprint,

improve, and monitor the emissions of their supply chain. Carbon War Room, an NGO, also has said it appreciated the

move.

“Being a good environmental steward is important to Starbucks Coffee Company. Our global logistics providers can aid us

in lowering the carbon footprint of our supply chain by improving their CO2 emissions data. Quantified measurement and

verification is a step in the right direction. Together, we continue to strive to better the world in which we do business.”

John Bauer, director of global transportation, Starbucks Coffee Company

“Maersk has set a precedent for the shipping industry by making available this credible and detailed environmental data to

their customers. We would like to see effective comparisons across the entire fleet with ubiquitous indexing. Maersk has

laid down an important challenge today, underlining that progress in efficiency can be made economically, and without

industry-wide consensus.”

Peter Boyd, COO, Carbon War Room

In 2008, the group’s board approved a group-wide environmental strategy, Eco-Efficiency. This strategy, if implemented, is

expected to result in substantial benefits like meeting customer requirements at a higher and better level, improving the

group’s resource productivity, and lowering the environmental costs of the group. This strategy would also encourage the

Perception of Maersk’s Sustainability Efforts



efficient use of the natural resources to have a minimal effect on the environment. It would also improve the group’s

relationship with governments and various other regulatory agencies and would help it to better manage environment-

related risks.

Awards

Due to the effort displayed by Maersk in its attempt to become a sustainable organization, various prestigious organizations

have lauded and recognized its work. Given below in Table 3 is a list of all the awards presented to different business units

of the group.

Table 3: Maersk: sustainability awards and recognitions, 2009–10

Awards Description Year

Environmental Protection Award

Maersk Ship Recycling won this award for its achievement in green ship recycling at Lloyd's List Asia Awards

2010

Safety at Sea International award

APM Terminals received this award for management and operations based on its "safety culture" initiative

2010

Green Innovator Award Maersk Shipping Hong Kong received this award for demonstrating leadership and cutting down on greenhouse gas emissions and introducing solutions like super-slow steaming.

2010

Safety honors both on East and West coast

New York Shipping Association recognized APM Terminals for its outstanding achievements in workplace safety.

2010

Sustainability Carrier of the Year

Maersk Line (ML) received this award from Wal-Mart Canada for its achievement in providing a software solution (a joint venture project between ML and Wageningen University) called Quest. Quest saves up to 50% of energy by ensuring that cooling units are used more sparingly.

2010

Safety at Work Moroccan Terminal won this award for its safety measures at workplaces. 2010

Terminal of the Year Award

Gateway Terminals India won the Lloyd's Terminal of the Year Award based on safe, reliable, cost-efficient, and environmentally friendly services.

2009

Clean Seas and Environment

Maersk Line won the Lloyd's List Middle East and Indian Subcontinent Award for their efforts to protect the environment.

2009

Best Environmental or Energy Efficiency Program Award

UK Plastic Industry awarded Rosti Plastics (then part of Maersk) its Best Environmental or Energy Efficiency Program Award.

2009

Green Award Maersk Rosyth, one of Maersk's tankers, received this award for being extra safe and extra clean.

2009

2 Year Goal Zero Days Award

Maersk Supply Service received this award from Sarawak Shell for reaching a period of two years without lost time accidents on its ships Maersk Seeker and Maersk Supplier.

2009

Safety at Sea Lloyd's List Global awarded Maersk Line this award for its efforts to safeguard employees and to create awareness about safety.

2009

Sustainable Shipping Operator of the Year

Maersk Line won this award for its efforts to reduce energy consumption and emissions. 2009

Corporate Social Responsibility (CSR) Award

The Group won this award at the Seatrade Asia awards in Shanghai. 2009

Best Green Service Provider–Shipping Line

Maersk Line won three awards – Best Global Shipping line, Best Line (Asia to Europe) and Best Green Service Provider (Shipping Line) at the 23rd Asian Freight and Supply Chain Awards.

2009


Sustainability Challenges in Transport and Logistics



SUSTAINABILITY CHALLENGES IN TRANSPORT AND LOGISTICS

Main sustainability challenges facing the logistics industry

The ubiquitous nature of the transportation and logistics sector means that any efforts it undertakes will have a cascading

effect on most other industries. Therefore, industry participants from various sectors are always on the lookout for

developments in sustainability practices within the logistics industry. However, for the sector to bring about significant

changes, it needs to overcome significant challenges like regulatory compliance, implementation of sustainability in new

markets, etc. A list of these challenges is presented in Figure 4.

Figure 4: Sustainability challenges in the industry

the home of Business IntelligenceTNT© Datamonitor

Implementing sustainability

practices in new markets

Lax environmental legislation in

developing markets makes it difficult to

implement sustainability

practices there

Compensate outside these countries and

gradually introduce sustainability

practices within these countries

Accommodating e-commerce in

operations

E-commerce is a threat to the

express business which depends on document delivery.

Expansion into this sector in order to maintain revenue

flows

Influencing third parties to adopt

sustainability practices

Logistics firms are dependent on

external parties and need to

influence them to adhere to

sustainability practices.

Integrate suppliers and

subcontractors into sustainability activities and operations.

Complying with regulation

Firms need to ensure regulatory

compliance through a wide variety of

mechanisms.

Partner with third parties, clients,

governments etc. to ensure

compliance.

3

Challenge

Description

Industry response


The logistics and express market is fast growing in developing economies like India, China and Brazil. As a result,

companies are expanding into these largely untapped territories. However, implementing sustainability practices in these

new markets will be a difficult task considering the minimal levels of legislative support that is available when compared to

developed countries. For the most part, companies will have to compensate excessive emissions in developing countries

with its operations outside initially, and gradually initiate their sustainability practices in their operations in developing

countries over the next few years.

A large part of express business comes from the delivery of documents like bills etc. However, the advent and growing

popularity of e-commerce among consumers means that express companies will have to integrate e-commerce services

into their offerings in order to stay competitive and offset the loss of revenues. This could also prove a more sustainable

option due to reduction of transport emissions.




Subcontracted operations and suppliers play a large part in the activities of logistics firms. As a result, for a logistics

company to truly reduce emissions, they have to take into account these operations as well. Influencing these third parties

is therefore a large challenge for logistics firms, as a lot of them may not share the same values, especially when there is

no direct regulatory pressure. Thus, most logistics firms have begun to integrate suppliers and subcontractors into their

sustainability programs. Ensuring compliance will be a long road ahead with considerable cooperation and negotiations

needed to move forward with the same.

Increasing regulatory pressure, both direct and indirect, on logistics firms to reduce emissions has meant that compliance

has become a major challenge for the industry. Practices such as participation in emission trading schemes and use of high

efficiency and low emissions transport mechanisms have become more commonplace among logistics firms. However,

implementation of some of these measures gives unique challenges within themselves. For example, while it is easier to

convert a road fleet to electric or other alternative propulsion technologies, there are no such options when it comes to air

or marine fleets. However, meeting both emissions targets and customer expectations on timely delivery is a significant

hurdle that logistics companies and their partners will have to deal with. Companies in the logistics sector are partnering

with governments, industry organizations, and players across various industries to help meet these sustainability

challenges.

Regulatory framework impacting sustainability in logistics

While there are few regulations aimed directly at sustainability in the logistics industry, the broad scope of most transport

and emissions regulations has meant that the logistics industry has been indirectly impacted by such legislations. Of

particular importance are the EU schemes on road vehicle emissions and emission targets for the aviation sector, both of

which have forced logistics firms to rethink their transport network strategy.

When it comes to sustainability regulation in aviation, both the International Civil Aviation Organization and International Air

Transport Association have been looking to create a common approach and set targets to reduce emissions in the industry.

While this has not gone much beyond the planning state, the EU has already jumped ahead and set up emission targets for

the sector in 2009, at 10% below 2005 levels by 2020. These will be further reviewed and strengthened in 2013. The

consequence of this is that logistics firms have to try to increase the efficiency of air freight as well as reduce the use of the

same.

The EC has also released a set of strategic objectives for the maritime transport sector until 2018. The objectives call for

increase efficiency and research into environmentally sound marine transport. There are also a slew of measures underway

to standardize road transport pricing in the EU. The objective is to create more even balance between road and rail by

providing incentives for rail transport. Developments in rail and maritime transport due to such legislation could help

logistics firms restructure their transport network, use a greater amount of less carbon intensive technologies in rail and

marine transport, and a use a smaller amount of road and air transport.

The EC has also implemented several "greening transport" initiatives to promote sustainability within transport and to make

sure costs reflect integral cost to the society. There have also been many localized laws passed across the globe that put

additional taxes on high-polluting vehicles, increase tolls for heavy goods vehicles and so on. Countries have also created

financial incentives like grants, subsidies, and low taxes and low-interest loans for low emission vehicles, as well as

lowering duties on alternative fuels.




Schemes similar to the EU ETS and cap and trade schemes are also coming into effect across the globe.

The EU ETS is a scheme for greenhouse gas emission allowance trading. While the first phase of the scheme, running

from 2005 to 2007, looked at heavy industries and service providers like utilities, the second phase, which runs from 2008

to 2013, includes the aviation sector. This means that logistics firms have to monitor and report data on their aircraft

regularly.

There have not been many comprehensive national-level schemes; however, the UK became the first country in the world

to introduce a climate change act in 2008. In order to help organizations meet the set targets, the Carbon Reduction

Commitment (CRC) was set up. The CRC is a carbon emissions trading scheme for large non-energy-intensive

organizations. Large logistics firms therefore fall squarely within the purview of the scheme. Companies are ranked in a

performance league table along three metrics—relative change in absolute emissions, emissions change relative to

revenue and voluntary actions prior to the CRC.

Assessment of Maersk's Sustainability Efforts



ASSESSMENT OF MAERSK'S SUSTAINABILITY EFFORTS

Scope and main programs

Being the largest container shipping company in the world, the business activities of Maersk tend to impact the environment

on global, national, and local levels. Among the various other pollutants that can affect the environment, greenhouse gases

are the most important environmental issue. Due to the growing importance of these issues, the group has allocated

resources to understanding and minimizing the environmental impact of its activities. The following section highlights the

various measures taken by the group to portray the sustainability initiatives and the impact felt by the group due to these

measures.

Emission control strategy

Dealing with emissions is a priority for any logistics and transportation organization and a company on the scale of Maersk

needs to have a strategy map to deal with this issue. Despite the fact that ships emit the CO2 shipping is one of the most

climate friendly ways to transport goods. About 90% of the goods are transported via ships. According to a recent study by

the UN’s international Maritime Organization (IMO) regarding fuel consumption and CO2 emissions, it has been noticed that

about 4% of global energy related emissions are from ships.

Despite ships being the lowest emitter of greenhouse gases compared to other modes of transport, Maersk has started

slow steaming to further reduce emissions from ships. Although, this practice was introduced to reduce costs during tough

economic times, it helped the group in the reduction of emissions. It has been noticed that with a reduction of speed by

about 5–10%, CO2 emissions and fuel consumption reduce by 15%. This initiative has been introduced on a number of

Maersk Line and Safmarine routes.

Maersk has also initiated a process to introduce a new propeller design to be installed on its ships. According to Sistemar,

the designer of this propeller, this allows reduced tip vortex, reduced cavitations, and improved maneuvering, and most

critically of all, increases efficiency by 5–8% compared to conventional propellers, in turn reducing emissions by 5–8%.

This new propeller has been installed on one of Maersk's ships and the new propeller design has proved to be more

efficient than conventional propellers in terms of reduced fuel consumption and emissions in addition to reduced vibrations

onboard.

Aside from slow steaming, a few other initiatives have been taken by Maersk to reduce greenhouse gas emissions. Table

4 lists other measures undertaken by the group to achieve high standards to reduce emissions.

Table 4: Maersk: other sustainability measures

Program Description

Waste heat recovery system This system saves fuel by about 8–10% at optimum conditions and has been implemented on 32 ships in total, of which six were fitted along with the system in 2008, making Maersk the world’s leading shipping company in this area.

Quest project This involves installing software in containers to reduce consumption of cooling, and has been very effective in reducing CO2 emissions.

Voyage efficiency system This program was developed by Maersk to plan voyages and is used on most ships to identify the most fuel-efficient route, and a “just in time” strategy is used to minimize the engine load.


Maersk previously carried out a strategic climate change initiative, which is a program that is focused on developing

responses to the emerging environmental agenda. The outcome of this was the introduction of a strategy call Eco-




Efficiency to improve efficiency through innovation and technological advances without affecting the environment. This

involves three phases. In phase 1, the objective is to identify and assess the vital activities and environmental impacts of

each business unit. After the identifying the impact, comparing it with the concerns of each stakeholder in each business

unit forms the next step, and lastly these issues are classified as “high,” “medium,” and “low” levels of concern. In phase 2

the objective is to identify different scenarios that could help the group develop long-term strategic solutions. This involved

three main issues—critical drivers linked to environmental issues (energy, supply and demand, policies and regulations,

energy prices and so on), identifying major sources of uncertainty, and developing various circumstances as combinations

of drivers. Lastly, in phase 3 the purpose is to develop a number of long-term strategies to deal with the future scenarios

that have been identified in phase 2.

This initiative involves communication with stakeholders, due to which confidence in the organization tends to improve

among stakeholders. These strategies also help in identifying both threats and opportunities connected to environmental

concerns and help the group to plan its programs in accordance with these concerns.

With the introduction of all the above efforts to reduce the amount of greenhouse gases emitted by different business units,

it was noticed that the firm's total greenhouse gas emissions for 2009 were close to 45 million tons CO2 equivalent. This is

a decrease of about three million tons from 2008. Greenhouse gas emissions were reduced by about 7% in 2009 from

2008. Considering the size of the operations for Maersk as a group, this reduction is moderate and is commendable.

Ship recycling and waste handling

Ship recycling provides an opportunity to reuse or recycle a considerable amount of the equipment of a ship. Roughly two

thirds of processing energy can be saved or reduced by recycling old steel to produce new steel. Copper cables and

aluminum can be used in a similar pattern. Although the concept of ship recycling is positive, the working practices and

environmental standards in some yards may be dangerous.

New international regulations will require ship owners to equip their new and existing fleet with a list of the hazardous

materials they contain. Maersk began to equip ships with these inventories since 2007, starting with new ships. In the past

Maersk has sold ships before the end of their service life, due to which recycling of ships has not been essential.

Regardless of this practice, ships in the facility have been designed and built to ensure a high recycling ratio. A state-of-the-

art recycling facility in China with ISO 14001 and OHSMS 18001 certifications is being used for all the ship recycling in

Maersk.

A Green Passport is a document containing an inventory of all materials potentially hazardous to human health or the

environment that is used in the construction of a ship. Though not authorized yet, this is a must for all green ship owners. In

2007, Maersk listed all the hazardous materials used in shipbuilding. Currently, two liquefied natural gas ships and four

Maersk Line Limited (US) ships have received a Green Passport. The Green Passport is displayed in the ship throughout

its life and ensures that dismantling of a ship can be conduced in an environmentally friendly manner. Maersk has taken

this initiative to prove that it is a step ahead of most of the other industry players in supporting sustainability.

This approach of disclosing the inventory of hazardous material used in shipbuilding reduces environmental impact (for

example, no discharge of toxic waste, proper dealing with asbestos, no oil spills, recycling of all recyclable materials, and

so on), and also ensures a safe and secure working environment for shipyard recycling staff.

Apart from the sound recycling of ships, Maersk also addresses the concern of waste handling on ships. Ships produce

different kinds of waste, like oil waste, sludge, and various other hazardous substances. The group has implemented a




waste management program to handle the waste stream in an environmentally friendly manner. It has also reduced the

waste generated and improved the waste handling procedure. A new sludge and waste management system has been

introduced to comply with ISO 14001 environmental standards. With this system, stakeholders can access information in

major ports and these ports are rated depending on their service level and ability to handle sludge and garbage in an

environmentally friendly manner.

Approximately, a total of about 6,400 tons of waste has been collected in 2008 from DUC’s offshore operations. All waste

collected offshore is segregated and taken onshore for additional sorting, and then it is recycled, incinerated, or disposed

off at landfills. About 62% of waste collected was recycled and 37% was incinerated. The waste that was transferred to the

landfills was about 1%, consisting of welding slag, treated wood, gypsum boards, and so on, for which currently there are

no other treatment options. In 2008, Maersk Drilling and Maersk FPSOs generated a total of about 2,700 tons of hazardous

waste and 2,400 tons of non-hazardous waste. About 1,500 tons of waste is recycled a year, corresponding to a recycling

factor of 29%.

All Maersk ships have a garbage management plan on board, and segregation of garbage is carried out on each ship.

Since 2007, all of the containers have adopted a zero dumping policy onboard, which prohibits the disposal of any

unprocessed non-biodegradable solid waste into the ocean. Residue from ships that are equipped with waste incinerators

is disposed off on land. Additionally, a large number of ships have implemented a garbage recycling program onboard.

Sewage is kept in holding tanks until it can be disposed off in an environmentally friendly manner or processed at a

treatment plant. Some container ships are equipped with a three-phase biological sewage treatment system that ensures

effective treatment of sewage prior to its discharge. The introduction of a garbage management plan ensures that

recyclable waste is not disposed of but instead reused.




Other sustainability initiatives and CSR programs

Generally, ships carry ballast water to provide momentum to resist lateral forces. Often ballast water is collected in from the

coastal waters in one region and is discharged at the next port, where the cargo is unloaded. During this process a variety

of marine life, like plants, animals, various microorganisms, are displaced, causing extensive damage to the aquatic

ecosystem. To assure safe handling of ballast water, the group has established ballast water management plans and

ballast water logs on all their ships. The group also tries to reduce the use of ballast water and perform internal and mid-

ocean ballast exchange wherever necessary.

Health

To assess, register, and monitor the health-related risks associated with chemical, physical, ergonomic, and biological

issues at the workplace, the Group Health Manual, has been created to be implemented in 2009. All business units of the

group are required to be in compliance with this manual by 2010. This could improve working conditions, noise, exposure to

potentially hazardous substances, and air quality. The group’s policy also necessitates them to be in accordance with the

national statutory requirements in health management.

Safety

Since the group’s major business unit is container shipping, the working conditions on board ships, port terminals, and so

on are quite harsh. The group therefore, to protect the safety of employees at the workplace, finalized the implementation

of the Group Health, Safety, Security and Environmental Manual in 2009. Due to constant effort to reduce deaths at the

workplace, there was a decline in the number of fatalities in 2009. This represented a 25% improvement in 2009 compared

to 2008. Work-related injuries came down by about 6% in 2009 compared to 2008. Despite these measures, the group had

15 work-related deaths in 2009 and is now heavily focusing to reduce such accidents.

Apart from work-related injuries and deaths, the crew also faces significant threats from piracy. In 2009, five of the group’s

ships were attacked, and one of the ships' captains was briefly taken hostage. Now, as a precaution, most of the ships that

sail through the Gulf of Aden (the five attacks were on this route) use a convoy system.

Anticorruption

Maersk’s legal department has established a set of policies, known as the Group Anti-Corruption Compliance Program,

through which employees can handle any situation where a business opportunity poses extreme external pressure. These

policies include detailed guidelines, training sessions, and feedback collected on any required improvement.

Maersk CSR activities

Building container schools after Chinese earthquake

After the earthquake in Sichuan, China, Maersk helped to rebuild the region. It donated 52 Maersk Line containers to

rebuild a school. This enabled around a thousand local school students to resume their studies almost immediately. For its

commitment to helping the earthquake-stricken place, it received the Best CSR Initiator for Chengdu award at the first

Corporate Social Responsibility Annual Conference of China at Chengdu.

Containers in the Community, South Africa




Since the 1990s, Safmarine has provided containers in South Africa through its Containers in the Community program.

Safmarine provides recycled second-hand or end of life containers to provide for the infrastructure at schools, clinics, and

so on. Almost 7,000 containers have been donated so far through this program and about 1,800 projects were undertaken.

Habitat for Humanity

In 2006 Habitat for Humanity and Maersk’s US organization have collaborated to help low-income families to possess their

own homes. Since the inception of the partnership, the group has provided logistics and transportation help to build over a

hundred homes.

SWOT Analysis



SWOT ANALYSIS

The SWOT analysis of Maersk is given in Table 5 below.

Table 5: Maersk: SWOT analysis

Strengths Weaknesses

World’s largest container industry

High employee productivity (per industry standards)

Adoption of Green Passport

Implementation of voyage efficiency system

Poor performance of major business divisions

Sluggish cash flow

Opportunities Threats

Diversifying into other business areas

Green Ship of the Future project

Long-term CO2 emissions target

New propeller design

Dependency on container shipping industry

Piracy threat to maritime shipping

Negative impact on the environment

Regulatory pressure on the industry to reduce emissions


Strengths

World’s largest container shipping industry

Maersk group operates a large and balanced fleet. The group's global network comprised 531 owned and chartered

container vessels with a total capacity of 2.1 million twenty-foot equivalent unit containers as of December 31, 2009. In

FY2009, the container shipping and related activities division operated through 253 owned container vessels and 17

multipurpose vessels. Maersk Tankers operated through 102 owned vessels, of which 10 were large oil and gas carriers,

81 product vessels, and 11 gas vessels. It also operated through 62 chartered vessels.

High employee productivity

The company’s total revenues were about $48.5bn for the year of 2009. For the same year, the workforce was about

115,000 strong. Compared to the other players in the industry, Maersk has the advantage of having greater revenue per

employee ratio, which translates into greater productivity on the part of its staff.

Adoption of Green Passport

The Green Passport is a document containing an inventory of all materials potentially hazardous to human health or the

environment used in the construction of a ship. Since 2007, Maersk has listed the inventory of all the hazardous materials

used in its ships. Two of the firm's liquefied natural gas ships and four Maersk Line Limited (US) ships have already

received a Green Passport.

SWOT Analysis



Voyage efficiency system

This program was developed to plan voyages and is used on most of the firm's ships to identify the most fuel-efficient

routes, with a “just in time” strategy used to minimize engine load.

Weaknesses

Poor performance of major business units

Maersk has witnessed a decline in the sales of its major business divisions. Out of six business divisions, three witnessed a

decline in their 2009 sales. Container shipping and related activities, the largest business division of the group, reported a

24.4% decline in its sales in 2009 from 2008. Retail, which is the second largest division of the group, witnessed a 1.7%

decline in its sales for the same period. Similarly, the oil and gas department reported a 29.6% decline in its sales in 2009.

The decrease in sales across these business divisions was due to lower freight rates for container shipping and lower

average oil prices. As a result, the group generated revenues of $48.8bn during 2009, a decrease of 21% compared to

2008. Therefore, the poor performance of major business divisions affected Maersk's financial performance.

Sluggish cash flows

Maersk witnessed a decline in its cash flows in 2009. The cash and cash equivalents of the group declined by 38.9% in

2009 compared to 2008, to reach $1.6bn. This was mainly attributed to net cash provided by operating activities decreasing

by 42.2% to reach $4,460m in 2009. The net cash provided by operating activities decreased as a result of lower earnings.

A sluggish cash position implies inefficient cost management. A continuation of this trend could reduce the availability of

resources for the group to pursue growth plans

Opportunities

Diversifying into other business areas

To capture the full potential of the logistics industry and to reduce its dependency on container shipping business, Maersk

could explore the opportunity of expanding into the mail and express arms of the logistics industry. Since they are among

the biggest shipping industries, expanding into these areas would not be a difficult task. With this expansion, it could offer

customers point-to-point delivery options, which are currently not among the company's strengths.

Green Ship of the Future project

Maersk, along with Odense Steel Shipyard, MAN Diesel, and Aalborg Industries, was involved in initiating the Green Ship

of the Future project in Denmark in 2007. The Green Ship of the Future forum has since then grown to about 20

participants and is coordinated by Force Technology and Technical University of Denmark. The partners strive to create

innovative solutions to reduce the impact on the environment of ocean freight. This initiative could help Maersk reduce its

emissions to a great extent and become an industry leader in sustainable innovation.

SWOT Analysis



Long-term CO2 emissions target

Aside from the initiatives that the group is taking to reduce emissions, it has also set a target of reducing emissions by 10%

in 2012. Additionally, Maersk Line has set a target to lower emissions by 20% during the period 2007–2017. The group’s

current emission reduction programs allow it to achieve this target.

New propeller design

A new propeller design by Sistemar, contracted loaded tip (CTL), is being tested on Maersk ships. This new CTL propeller

could reduce air emissions and fuel consumption by up to 8%. It has been tested on one ship so far, and successful results

could encourage the group to install this on all of its ships, which could reduce their emissions significantly.

Threats

Dependency on container shipping

In 2009, the container shipping industry delivered almost 42% of the group's revenues. Due to the highly volatile nature of

the economy, this high dependency on the container shipping industry might be a problem in the future for the group.

Piracy threat to maritime shipping

According to the International Maritime Bureau (IMB), piracy incidents on the high seas saw an annual increase of nearly

40% in 2009. Pirate activities off the coast of Somalia accounted for more than half of all attacks worldwide. The number of

attacks off the coast of Somalia increased from 111 in 2008 to 217 in 2009 of which 47 were successfully hijacked.

According to IMB figures, Somali pirates have successfully hijacked seven vessels since January 2010, after attacking 32

ships. Maersk has also been affected by piracy attacks. The group's Maersk Alabama was seized in the Indian Ocean in

April 2009. The vessel was deployed in Maersk Line's East Africa service network and was en route to Mombasa, when it

was attacked. Somali pirates again attacked the vessel in November 2009. Shipping companies are faced with the risk of

paying a ransom of around $75–100m for pirates to return a ship. Therefore, the repetition of such attacks could have a

negative impact on the group's business.

Negative impact on the environment

As the transportation and logistics industry contributes almost 13% of global emissions, it will always be a target of drives to

reduce pollution. Due to the continuous pressure on these firms by the government, NGOs, and their supply chain, this

industry has to strive towards reducing emissions, which could potentially translate into higher costs for the company.

Regulatory pressure on the industry to reduce emissions

As a firm that is involved in multiple industries, including retail, oil, and drilling activities, Maersk is subject to many

regulations from both national and international agencies. This includes emissions reductions mandated by local and

international law for their vessels and oil and drilling activities. For the most part, such regulations and obligations will

increase the operating costs of the company and adversely affect profitability.

Conclusion



CONCLUSION

Maersk, being the largest container shipping industry in the world, has committed itself to helping and building a safe

environment for the future by responding to environmental concerns in an effective manner. The group has started

programs such as Green Ship of the Future, slow steaming, and Quest in order to reduce the emissions significantly.

In actual emissions, the group has reduced greenhouse gas emissions by about 7% of CO2 equivalent in 2009, and is

trying to achieve reduction targets of 10% by 2020. The waste heat recovery system that is being used has helped reduce

fuel consumption by about 8–10% at optimum conditions. Since 2008, this system has been used on 32 ships.

Ship recycling is another initiative undertaken by the group, which involves making the use of metals in ships more efficient.

All Maersk ships are built with a high recycling ratio. Due to sound waste management practice on board, about 1,500 tons

of waste is recycled a year, which corresponds to a recycling factor of 29%. Green Passport is another initiative that is

being followed by the group, involving safely dismantling ships in an environmentally friendly way.

A zero-dumping policy and garbage management plan ensures that the recyclable waste that is produced on ships is not

dumped, but reused.

Appendix



APPENDIX

Carbon Disclosure Project (CDP)

Launched in 2000, CDP is an independent, non-profit venture that tracks the climate change information of corporations

around the world. Organizations from across major economies around the world voluntarily measure and disclose their

greenhouse gas emissions and climate change strategies through the CDP, allowing them to look at the industry best

practices and compare themselves against their peers. Around 3,000 organizations across 60 countries use the CDP to

measure and disclose their greenhouse gas emissions and climate change strategies. The CDP also has a separate

supply-chain program that measures the impact of climate change measures in the supply chain. The following section

provides an overview of carbon disclosure score as defined by CDP.

Carbon disclosure score

Carbon disclosure score reflects a company’s comprehensiveness in terms of the depth and breadth of its CDP response.

The score is normalized to a 100-point scale and is based solely on the information disclosed in the company’s response. A

high score suggests good internal data management and understanding of the issues climate change presents to the

company’s business. It is not a metric of a company’s performance in relation to climate change management since the

score does not make any judgment about mitigation actions.

Companies scoring within a particular range suggest levels of commitment to, and experience of, carbon disclosure. The

section below provides an indicative description of these levels. However, it is important to read individual company

responses in order to understand the context for each business.

High (>70): A ‘high’ score typically indicates one or more of the following:

Strong understanding and management of company-specific exposure to climate-related risks and opportunities

Strategic focus and commitment to understanding the business issues related to climate change, present at the top of

the organization

Ability to measure and manage the company’s carbon footprint

Regular and relevant disclosure to key corporate stakeholders

Midrange (50–70): A midrange score typically indicates one or more of the following:

Growing maturity in understanding and managing company-specific risks and potential opportunities related to climate

change

Good evidence of ability to measure and manage carbon footprint across global operations

Commitment to the importance of transparency

Low (<50): A ‘low’ score typically indicates one or more of the following:

Relatively new commitment to understanding climate-related issues

Appendix



Limited ability to disclose known risks or potential opportunities related to climate change

Limited ability to measure and manage the company’s carbon footprint

Possible reluctance to disclose certain requested information due to commercial sensitivity

Scoring methodology

The rating methodology used to rate companies in Carbon Disclosure Project 2010 Global 500 Report was jointly

developed by CDP and its global advisor PWC. The carbon disclosure rating:

Is based solely on the disclosure information provided in the company’s CDP response

Suggests good internal data management and understanding of the issues climate change presents to the company’s

business

Does not consider other carbon or wider sustainability disclosures provided by companies through corporate

responsibility reporting, environmental statements in annual reports, or through meetings and engagement with

stakeholders and policymakers

Is not a metric of a company’s performance in relation to climate change management, as it does not make any

judgment over absolute levels of emissions, emission reduction achievements, or carbon intensity

The carbon performance score, meanwhile, is a new metric that is being used in CDP and will continue to develop over

future reporting cycles:

Performance points are awarded where a company highlights that it is undertaking, or has undertaken, a ‘positive’

climate change action. A positive action is one that contributes to climate change mitigation, adaptation and

transparency.

It is limited in its consideration of the materiality of actions relative to a company's sector and business.

Answers are considered equally, irrespective of sector.

It is based solely on activities and positions disclosed in the CDP response. It therefore does not consider ‘adverse’ or

‘negative’ actions not mentioned in the CDP response.

It is not a comprehensive metric of the level to which a company is low-carbon or ‘green’ but rather an indication of the

level of action taken by the company to manage its impact on, and from, climate change.

Appendix



Further reading

Datamonitor (2010) UPS Sustainability Case Study, December 2010, EN00001-004

Datamonitor (2010) TNT Sustainability Case Study, December 2010, EN00001-006

Datamonitor (2010) DHL Sustainability Case Study, December 2010, EN00001-005

Datamonitor (2010) A.P. Moller-Maersk Group Company Profile, 21 June 2010

Ask the analyst

The Energy & Sustainability Knowledge Center Writing team [email protected]

Datamonitor consulting

We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you

have further requirements, Datamonitor’s consulting team may be able to help you. For more information about

Datamonitor’s consulting capabilities, please contact us directly at [email protected].

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