sustainable development report - about us report_2012.pdfthe china navigation company / sustainable...

SUSTAINABLE DEVELOPMENT REPORTfor the year2012

2Index

Summary

05 Introduction, Contents, Assurance and Materiality09 Managing Director’s Message10 Sustainable Development Plan 201319 Organisational and Operational Boundaries of Report

Detail 23 Sustainable Development Policy 24 Governance

26 Economic 26 Economic Value Generated During 2012 27 Risks and Opportunities Due to Climate Change 31 Financial Assistance from Government 32 Policy, Practices and Proportion of Spending on Locally-based Suppliers at Significant Locations of Operation 34 Environment 34 Input materials that are recycled 35 Direct and Indirect Energy 36 Biodiversity 37 Scope 1 and 2 GHG Emissions 38 Scope 3 GHG Emissions 39 Initiatives to Reduce GHG Emissions 40 SOX, NOx and other Emissions 41 Total Waste Disposed 45 Total Number of Significant Oil Spills 46 Initiatives to Mitigate Environmental Impacts

Detail / Environment cont.

48 Non-Compliance with Environmental Laws and Regulations 49 Environmental Impacts of Transporting Goods Sold

52 Labour 52 Employment 56 Occupational Health and Safety 60 Training, Education and Counselling

63 Human Rights 63 Total Number of Incidents of Discrimination and Actions Taken

64 Society 64 Total Number of Legal Actions for Anti-competitive Behaviour, Anti-trust, and Monopoly Practices and Their Outcomes 65 Monetary Value of Significant Fines and Non-monetary Sanctions for Non-compliance with Laws and Regulations

Data

69 Fleet Breakdown72 Economic Data and Tables73 Environmental Data and Tables 77 Labour Data and Tables 78 Abbreviations80 Assurance Statement82 Contact83 G3.1 Content Index

The China Navigation Company / Sustainable Development Report 2012 www.chinanav.com

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Summary

4This section gives a summary of what CNCo achieved in 2012, where we plan to make progress in 2013 and beyond and the global and local issues that we believe could affect our business and operations going forward.

We also define our Organisational and Operational Boundaries that this report uses herein, in accordance with ISO 14064 and the Greenhouse Gas Guidelines.

In this section:

05 Introduction

09 Managing Director’s Message

10 Sustainable Development Plan 2013

19 Organisational and Operational Boundaries of Report

The China Navigation Company / Sustainable Development Report 2012

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SummaryIntroduction, Contents, Assurance and Materiality

As with our 2011 Sustainable Development (“SD”) Report, we are continuing to detail our full performance in the areas covered by the Social Responsibility standard: ISO 26000:2010. We have adopted this standard to help us report all the issues that together contribute to making our business more sustainable in the seven widely accepted subject areas of: Human Rights, Labour Practices, The Environment, Fair Operating Practices, Consumer Issues and Community Involvement and Development.

We do this because we strongly believe that transparency and openness is a benefit for our stakeholders, particularly our employees, in order to show where we have been and where we are heading in the future.

This report has been externally assured in accordance with the most widely used reporting framework, Global Reporting Initiative (“GRI”), version 3.1, to level C+ to assure our stakeholders and readers that what is reported is truthful and complete, and in a way that will permit comparison to be made between our performance and that of our peer group who are also open and transparent about the way they operate.

The 2011 Report was the first to be designed from the outset to be read in soft copy. In response to feedback we also made it available in PDF format shortly after its publication and we worked hard to ensure the report’s widest distribution to our stakeholders.

Welcome to the second externally assured (GRI 3.1 C+) Sustainable Development (“SD”) Report for The China Navigation Company Pte Ltd (“CNCo”) as we continue our journey that began at the beginning of 2012; to progress towards “net zero environmental impact”.

In 1983 UN Sec-Gen asked Dr. Gro Harlem Brundtland, the former Prime Minister of Norway and D-G Emeritus, World Health Organization to chair the UN World Commission on Environment and Development (“UNCED”). Its report, “Our Common Future”, issued in April 1987 defined “Sustainable Development” as: “the development that meets the needs of the present without compromising the ability of the future generations to meet their own needs.”

Note: The data throughout this report refer to the status of our business and operations as at 31 Dec 2012, unless otherwise indicated.


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To this end we produced a small hard copy brochure detailing our main achievements in 2011 and one of these was sent to every employee, at sea and in shore support. This will be repeated with this report.

We have also worked closely with a graphic designer to freshen the appearance of the web-based report to make it more engaging and easier and clearer to navigate.

With the benefit of having had our first SD Report published, we have used this to support a wide consultation process to determine issues that our key stakeholders find material (or not material) to help determine how the 2012 SD Report should be changed (if at all).

The SD department has and will continue to conduct formal stakeholder engagement sessions with Senior Management, Sea Staff and our key customers. From these and a review of our Strategic Risk and Opportunity Registers we identified the most relevant issues and narrowed these down to a shorter list of issues that were material to our key stakeholders (Employees, Shareholders, Clients, Regulators and Class Societies and Suppliers). These have been prioritised for action going forward within a suitable time-frame.

The process of identifying and reporting on materiality will be significantly deepened in 2013 and beyond as we transition to reporting in accordance with the new GRI 4 standard that is expected to be formally adopted in 2013.

However, if any readers have any immediate comments, please don’t wait for a formal meeting but contact the General Manager, Sustainable Development (see page 82 for contact details); all feedback, positive or negative, is welcome and helps make this document of ever more relevance to our stakeholders, for whom it is written.

The China Navigation Company – more familiarly, “CNCo” – is the wholly owned deep-sea ship-owning and operating arm – and oldest operational entity – of the Swire group. “Swire” is a multinational conglomerate with interests spanning five continents and with principal areas of operation in the Asia-Pacific region, centred on Greater China. CNCo’s parent company, John Swire and Sons Limited, is headquartered in London and controls a range of wholly-owned businesses in Australia, New Zealand, Papua New Guinea (“PNG”), East Africa, Sri Lanka, the USA and UK.

CNCo was founded in 1872 to operate Mississippi-style paddle-steamers on China’s Yangtze River. Since then the company has expanded globally while its primary operational focus remains in the Asia-Pacific region. Headquartered today in Singapore, it is one of the oldest independent British shipping companies managing its own tonnage “in-house”.

In 2012 CNCo crystalised its internal structure into three operating divisions:

• Swire Shipping charters vessels both from CNCo and third parties. Fleet Management manages CNCo’s owned tonnage of 14 deep- sea ships of multi-purpose, container and liner services for the transportation of containerised, break-bulk, heavy lift and project cargoes. This does not include the four that were sent for recycling at the beginning of the year or the eight 31,000 dwt MPP vessels on order.

• Swire Bulk Logistics holds a 50% share in Swire CTM Bulk Logistics Limited, a joint venture with C Transport Maritime SAM registered in Monaco, and operates a term transhipment contract supporting the Ok Tedi mining project in PNG.

Summary: Introduction, Contents, Assurance and Materiality

• Swire Bulk to control, own and operate a fleet of modern, eco-efficient geared handysize bulkcarriers.

The customers for all three divisions are any and all third parties who wish to ship their cargo (as owner or agent for an owner) on one of our owned or managed ships from one place to another, in accordance with a pre-published schedule (with respect to Swire Shipping), or over a route of their determination for Swire Bulk, or across the deck for export in the case of Swire Bulk Logistics.


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CNCO WAS FOUNDED IN 1872 TO OPERATE MISSISSIPPI-STYLE PADDLE-STEAMERS ON CHINA’S YANGTZE RIVER. SINCE THEN THE COMPANY HAS EXPANDED GLOBALLY WHILE ITS PRIMARY OPERATIONAL FOCUS REMAINS IN THE ASIA-PACIFIC REGION. HEADQUARTERED TODAY IN SINGAPORE, IT IS ONE OF THE OLDEST INDEPENDENT BRITISH SHIPPING COMPANIES MANAGING ITS OWN TONNAGE “IN-HOUSE”.

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Our corporate motto “Esse Quam Videre”, which means “To be, rather than to seem (to be)”. Another way of putting this is that we will not just act like we are doing something, we will actually do it, and mean it. For CNCo this is put into action by a) taking a leadership role in sustainability within our industry and b) reporting everything we do transparently, specifically within this report.


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SummaryManaging Director’s Message

The China Navigation Company (CNCo) is committed to promoting sustainable development within the shipping industry. The Sustainable Development Report (for the year 2012) has been prepared in accordance with the Global Reporting Initiative’s Sustainability Reporting Guidelines in order to provide standardised data for ease of comparison with industry peers.

I would like to thank everyone involved in the preparation of this comprehensive report which has been externally assured as C+ against the criteria set out in the GRI application levels.

China Navigation’s vision is to be the leading provider of sustainable shipping solutions and our customers’ partner of choice. With operational excellence as its guiding principle, the Vision sets out clear objectives which, combined with the values, will help to guide the Company and its employees - ashore and afloat - in all our operational and business decisions. Our Vision serves as the framework for our strategy and describes what we need to achieve in order to grow and develop our business along sustainable lines.

We pride ourselves on being original and forward-looking – qualities that have guided our operations for over 140 years. We are confident

that, if we continue to put our customers first, our stakeholders will also benefit, especially if they are willing to take the long term view.

The Sustainable Development Report (for the year 2012) highlights the steady progress made over the last 12 months on our improvement journey towards achieving “net zero” environmental impact. We are determined to reduce harmful emissions through technological innovation and we have made substantial capital investments in modern, eco-design, highly fuel efficient ships for deployment in our regional liner and global dry bulk operating divisions. Our bulk logistics division continues to develop highly customised, innovative seaborne logistics solutions which represent sustainable alternatives to traditional land based infrastructure.

I am pleased to report that there was no incidence of non-compliance with environmental laws and regulations during the period covered by this report.

CNCo’s progress towards the development of a diverse, industry leading workforce continues to build momentum. Significant resources have been allocated to provide training and development opportunities to develop a

professional and skilled workforce at sea and ashore. In support of our commitment to “zero harm” to colleagues or the Environment the safety governance structure is now embedded and extends to regional third party contractors and service providers. The challenge for the next 12 months will be to improve and sustain our safety performance on a global basis.

We have made some encouraging progress in meeting our responsibilities to the Communities in which we operate. Specifically the establishment of a Centre of Excellence, in partnership with the Maritime College in Madang, Papua New Guinea, represents a significant opportunity to raise the standards of health, safety and environmental practices in the Papua New Guinea marine sector.

Management regularly review the risks to our operations from all causes. The main risks are associated with the vagaries of the weather which impact upon the agricultural sector. CNCo remains a signatory to Hong Kong’s Fair Winds charter as well as a founding member of the Sustainable Shipping Initiative, founded in 2011, to address the three principal challenges facing our industry: rising oil prices, structural shifts in world trade and growing scrutiny of the industry’s social and environmental

performance. CNCo continues to play an active role in supporting the SSI, specifically as a key sponsor of the “Closed Loop Materials Management” workstream.

Established in 1872, CNCo celebrated its 140th anniversary in 2012. In 2013, in collaboration with Forum For the Future, CNCo completed a multi-stage “Futures Scenario Planning” exercise to identify long term strategic risks and opportunities and to reach consensus on a long term strategic plan, Vision 2020. The 2012 Report highlights some of the key outcomes and their contribution to CNCo’s sustainable development performance.


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SummarySustainable Development Plan 2013

Our 2013 SD Plan was developed at the end of 2012 to guide our sustainability activities during 2013. In this section we report historically on the progress we achieved against our 2011 targets in 2012 and then look forward to detail the actions we planned to undertake during 2013.

In the few cases in which we missed some targets in 2012, we have carried them forward to remain as targets in 2013.


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Sustainable Development Plan 2013

Structural

CNCo and its stakeholders will operate more sustainably and in a more integrated manner if they are working within a clear set of established policies and guidelines.

2012 TARGET: In addition to established policies, a Supplier Code of Conduct must be established and issued.

2012 RESULT: A Supply Chain Sustainability Code of Conduct was issued. Version 01/2012 is posted on our web site at http://bit.ly/19wrXaV

CNCo Head Office in Singapore has established both a top level Sustainable Development (“SD”) Steering Group and implemented a SD Working Group. Similar groups have been established at the Swire Shipping regional offices in Australia and New Zealand. We have also established a pan-company operations Shore Safety Committee that meets monthly to review Health and Safety issues involved in the onshore port operations of working our ships alongside.

2012 TARGET: The establishment of these groups must be extended to all CNCo and Swire Shipping main offices and are recommended for companies in which CNCo or Swire Shipping have significant interest. Once established these groups must communicate with each other in order to maximise SD output for minimum resource input.

2012 RESULT: This was achieved in Australia, and at the end of the period Swire Shipping and John Swire and Sons in Sydney had formed a joint SD and HSEQ Committee. There has been liaison between the CNCo Singapore SD department and the Swire Shipping office in Auckland during the

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1.1

1.2

year, and a formal committee will be established at the time of the first SD Stakeholder Engagement meetings in NZ in 2013, after any location- specific issues have been identified.

2013 TARGET: The establishment of these groups should be extended to CNCo’s office in PNG and Swire Shipping’s offices in New Zealand in 2013. Once established these groups should communicate with each other in order to maximise SD output for minimum resource input.

For the past five years CNCo has produced an annual Environmental Report. With effect from this report for the year 2012 we must build upon these and align them with the increased use of management metrics such that a more detailed Sustainable Development Report that reports issues that are material to our key stakeholders is produced going forward.

2012 TARGET: A CNCo SD Report is to be produced to GRI level C+ by the end of July 2012. This is to be used as the basis for formal Stakeholder Engagement during the latter half of 2012 (and then annually thereafter) to determine whether our stakeholders feel that there are more (or less) material issues that should be reported and thus whether subsequent reports should be to level B+ (or A+) in future years.

2012 RESULT: The CNCo 2012 SD Report was published to GRI 3.1 C+, but not until Q1 2013.

2013 TARGET: A CNCo SD Report is to be produced to GRI 3.1 level C+ by Jun 2013.

This is to be used as the basis for formal Stakeholder Engagement during the early half of 2013 (and then annually thereafter) to determine whether our stakeholders feel that there are more (or less) material issues that should be reported.

Achievement of SD 2012 Targets and KPIs during 2013

1.3


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CNCo is embarking in 2012 on the planning for a significant fleet rejuvenation programme from 2013, the first after some time. It is thus timely and prudent to review the external factors, both positive and negative, that may affect our business in the next 20 – 30 years, the general lifetime of a well operated ship. 2012 TARGET: Undertake a workshop-based Future Scenario Planning initiative, facilitated by Forum for the Future, involving both internal and external stakeholders who are either familiar with our industry or not specifically familiar but recognised “futurologists” during 2012. The results are to be tested against current corporate strategies by the end of 2012, and then formally at annual intervals in the future.

2012 RESULT: This was achieved. The process helped CNCo develop a Strategic Risk and Opportunity Register that was then to be tested against ongoing operations, planning and decision-making processes and developments at the beginning of 2013, at a meeting intended to also develop long term goals, plus the metrics to help measure our progress towards achieving these goals.

2013 TARGET: Hold a ‘20420’* offsite meeting annually, starting in Jan 2013 to build on the Future Scenario Planning outputs of the Strategic Risk and Opportunity Registers and develop a Strategic Balanced Scorecard up to the year 2020 that will contain shorter term goals up to that year and KPI metrics to determine CNCo’s progress in getting to these goals. These internal goals mesh into the longer term industry-wide “Vision 2040” to which we have signed up with the Sustainable Shipping Initiative; “for a sustainable shipping industry in 2040”.

Increasingly we recognise that areas in which we work may not only have potential Environmental Issues but also potential Human Rights Issues. We wish to exercise the highest operational standards in both these areas for both from the point of view of the general public good and for enlightened self-interest.

2013 TARGET: We will work over 2013 to establish a set of guidelines as to when and how an Environmental Impact Assessement (“EIA”) and / or a Human Rights Impact Assessement (“HRIA”) should be conducted.

Health and Safety

This is a mission-critical part of CNCo’s business and whilst logically reporting within the Sustainable Development discipline, given its importance it has long had its own dedicated department. The fundamental targets for CNCo are that zero harm shall be suffered by its employees, or be caused to the marine environment. This is managed within our Health, Safety and Environmental Management System.

2012 RESULT: This was partly achieved. There were no oil spills in 2012 and the number of LTIs was more than halved from 9 to 4 during the year.

2013 TARGET: Achieve Zero LTIs and Zero spills of marine pollutants. Suffer a Total Recordable Case Frequency (“TRCF”) of no more than 4.0, increase the number of Near Miss and Toolbox Risk Identification Permits (“TRIP”) Reports by 10% over the figures for 2012 and reduce the Port State Inspection Deficiency Rate to < 2.0 in 2013.

1.4 1.5

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Summary: Sustainable Development Plan 2013

* The 20420 meetings are annual retreats by the 20 most senior managers to review our business strategy up to the year 2020 as a minimum, and then beyond as far as is practical.


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3.1

3.2

Environmental Impact

CNCo Head Office will undergo modifications in Q1 2012 after having settled into the new Singapore office for 2 years. On completion the opportunity should be taken to revisit general office housekeeping. It is also important from both Health and Safety, and operational efficiency standpoints that housekeeping standards on ships receive the same attention.

2012 TARGET: The “5S” Methodology (a workplace organization method that describes how to organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order that uses a list of five Japanese words: “seiri, seiton, seiso, seiketsu, and shitsuke”. Transliterated or translated into English there are five primary 5S phases: “sorting, set in order, systematic cleaning, standardizing, and sustaining”. These are to be instituted in CNCo Head Office after the Q1 modification, on all the new ships being built, and on a rolling basis on existing ships.

2012 RESULT: CNCo Fleet management established a 5S working group to implement the 5S housekeeping standard on all existing and new CNCo vessels. It drew up a project charter stating the objectives and goals and this charter has been signed off by the MD as sponsor.

To accommodate and structuralise the initiative, several changes were made to the Safety Management System. The housekeeping policy has been updated to incorporate the practices of 5S. A 5S circular was produced and released. The 5S working group also produced a change management document that explains how any changes, including those affecting storage and housekeeping are to be handled. This initiative will be continued and built upon in 2013.

2013 TARGET: • TohaveallofournewSclassvesselsfullycompliantondelivery. • Tohaveatleastoneengineandonedeckstoreonourexisting Challenger and Miho class fleets fully compliant. • Tohaveafocuson5Sinthehousekeepingtraininginourin-house Safety Awareness Courses. • Tohavea5Scheckduringallshipmanagers’technicalinspections. • Toachieveareductioninnearmissesrelatingto“defectivetools”and “poor housekeeping” by 50% from the 2012 baseline. • Toachieve100%accuracyin5Sstoreroomsforsparepartsagainst the Amos inventory.

The Singapore Environment Council runs an Eco-Office Certification scheme that assists businesses to run their office premises in a more sustainable and environmentally responsible way. It is prestigious, with only 72 premises in Singapore being awarded accreditation over the seven years up to 2012.

2012 TARGET: CNCo Head Office will gain Eco-Office certification within 2012. The specific scheme is not applicable to other countries, but the concepts and initiatives are identical. All other CNCo and Swire Shipping offices outside Singapore will be encouraged to adopt the same good practices either in or absent a similar scheme locally.

2012 RESULT: This was achieved; CNCo Head Office gained Eco-Office certification in mid-2012. The learning points have been passed to Swire Shipping Offices in Australia and New Zealand.



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3.3

3.4

CNCo is under-going a fleet rejuvenation programme. This will entail the retiring ships to be recycled. Conditions in many recycling yards, especially those using the beaching method, with respect to both worker safety and responsible disposal of hazardous waste, do not meet the standards defined in the Company’s policy for the recycling of ships.

2012 TARGET: CNCo will formally adopt a Responsible Recycling Policy. This will require CNCo vessels being recycled to be sent only to yards that are independently certified to the highest international standards. These will include as a minimum ISO 9001, ISO 14001, OHSAS 18001, compliance with the HK Ship Recycling Convention whether or not it is yet ratified globally and preferably also ISO 30000:2009.

2012 RESULT: This was achieved. Four ships were Responsibly Recycled at the beginning of 2012 - a full report is included in the EN22 Waste Materials Disposal section. The GM for Sustainability agreed to give a presentation on the learning points from this process to the biennial Tradewinds Ship Recycling Forum in Dubai in Q1 2013.

2013 TARGET: To continue to observe this policy for any and all CNCo vessels that are sent for recycling in 2013, and to work with the yards to achieve a higher level of conformance against independent 3rd party auditing by (e.g.) LR than was achieved in 2012.

In addition to 3.3 and looking at the long term future, CNCo is a member of the Sustainable Shipping Initiative (“SSI”) Steering Group. The SSI has a Vision for a sustainable shipping industry in 2040 that is designed to help the industry make long-term plans for future success. An industry with long-lived assets needs long-term thinking, and the SSI aims to help members think beyond the next regulation or design tweak.

2012 TARGET: 13 areas for initial action have been identified by SSI and CNCo will work with the “Closed Loop Material Management” work-stream over the

3.5

18 months from April 2012 to Oct 2013. This seeks to “Implement systems to trace and increase accountability of ship building materials and their sources, with the ultimate aim of having end-to-end responsibility and accountability for these materials”.

2012 RESULT: This was achieved. CNCo has been working on the “Closed Loop Material Management” work-stream since Q2 2012, and has arranged for an intern from Singapore’s Nanyang Technological University to be embedded in the ship building yard for the new “S” Class for the first half of 2013 to run a pilot project with a view to all SSI members reporting back at an industry event in Q3 2013.

2013 TARGET: The GM SD to give a presentation on the learning points from this process to the Tradewinds Ship Recycling Forum in Dubai in Q1 2013.

CNCo and all other SSI members to report back on the various pilot workstreams to an industry event in Singapore in September 2013.

Rightship – an industry body, has established an index to quantify the environmental design performance of existing ships (EVDITM) as the IMO standard (EEDI) only refers to ships delivered post 01 Jan 2013. IMO also has a standard for measuring the operational efficiency of existing ships (EEOI).

2013 TARGET: On the principal that what is not measured cannot be managed efficiently, CNCo will develop internal targets for operational efficiency of existing owned and chartered ships plus criteria for selecting ships to charter based on the environmental and energy efficiency of their design. These targets will be based on 2012 baselines and will be set to become more stringent over time towards 2020.



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4.1

4.2

Supply Chain Management

CNCo recognises that it is not enough for our organisations to internally operate our businesses responsibly, but that it is critical to our business model to be sustainable that we ensure that our suppliers also operate to a minimum set of standards. These are contained in the Supplier Code of Conduct referred to in 1.1 above.

2012 TARGET: In addition to issuing a Supplier Code of Conduct, CNCo must audit and measure compliance and as required take action to reduce non- compliance. This is likely to be both resource intensive and open-ended and will thus be pursued on an on-going basis and reported on in the next annual SD Report.

2012 RESULT: This was achieved, albeit this is an ongoing process. Our results are reported in more detail in the Product Responsibility Section (PR1) and Community Impact Section (SO1).

In addition to CNCo issuing its Supply Chain Sustainability Code of Conduct in 2012, CNCo also took the proactive step of issuing one of the industry’s first “Responsible Carriage of Cargo Policy” (see http://bit.ly/1gfoNHQ). For more details of this see the Environmental Impact Mitigation Section, EN26.

2013 TARGET: CNCo will work with suppliers with whom we have a total annual spend of > USD 1 million to assure ourselves of compliance, and to establish such follow-up action with the suppliers as is required to reduce non- compliance.


Corporate Philanthropy

CNCo remains keen to target this as Strategic Community Investment for term projects that are sustainable, working with partners on projects that are aligned with our business model, in areas where we can leverage the effect of each dollar.

2012 TARGET: The existing Corporate Philanthropy (“CP”) Review Committee will work with all CNCo offices to identify projects and organisations that are in accordance with our internal guidelines.

These seek to:

1) Involve Business Critical Community Engagement (“BCCE”); 2) Be Strategic; 3) Involve a Long-Term Partnership; 4) Be Responsive to Community Needs; 5) Normally avoid “One-Offs”; and 6) Involve fewer but larger sums, rather than many small donations, as these have an impact multiplier.

In complying with the above guidelines, corporately we would generally direct our CP towards:

a) Provision of Educational and / or Health Opportunities for Youth; b) Enhancing CNCo’s Presence in our Stakeholder Communities; c) Environmentally Sustainable issues; whilst as best possible simultaneously: d) Demonstrating a strategic fit with CNCo’s business; and e) Fostering or enhancing a Corporate Partnership with CNCo (rather than being disconnected philanthropy).

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5.1


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These will be supported by a mix of time, resources and money, and we will look at the feasibility of granting paid “Volunteer Days”, as appropriate. One area that CNCo sees as potentially being of particular interest for more support in 2012 and beyond is a deeper partnership with the PNG Maritime College in Madang, PNG.

2012 RESULT: This is (and will be ongoing) work in progress. A CP Committee has been established and set itself ground rules. A review of what causes our employees to seek support has been undertaken, albeit with a lower take up rate than we would have preferred. Two CNCo teams committed to participating in the Sailors’ Society Mt Kinabalu Fund-raising Challenge to be held in Q1 2013, and this will be reported on in the next annual SD Report.

During the latter half of 2012, CNCo budgeted a very significant amount to support the Maritime College in Madang, Papua New Guinea during 2013, and we hope to leverage both this financial support but more importantly our resources to work with the College to achieve concrete results in 2013.

2013 TARGET: Two CNCo teams have committed to participating in the Sailors’ Society Mt Kinabalu Fund-raising Challenge to be held in Q1 2013.

We began drafting an “Employee CP Paid Volunteer Day Policy” in 2012, and are scheduling to issue this in 2013.

We will leverage both our financial support and our resources to work with the Maritime College in Madang, Papua New Guinea to achieve enhanced alignment in 2013.

CNCo wishes to ensure that its Corporate Philanthropy delivers the highest levels of social and environmental value for the investment made, and will begin a project to develop metrics to measure Social Return On Investment (SROI). This is a very nascent field, on which there is much ongoing research being undertaken, and this is therefore anticipated to be a long-term project.



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6.1

6.2

6.3

Employer of Choice

Singapore is seeking to establish itself as a Maritime Hub, having 26 separate Institutes of Higher Education graduating young Singaporeans with learning in a wide range of maritime disciplines. CNCo Head Office is a) under-represented with local managers and b) committed to support Singapore’s intention of being a Maritime Hub. CNCo already support the supply of short-term internship places to around 6-8 maritime undergraduates each year.

2012 TARGET: CNCo will sponsor a number of both commercial and engineering undergraduates under the Singapore Maritime Foundation “SMFOne Scheme” over the next few years. It is sincerely hoped that this can become an entry stream for future local managers, provided the material issue of high labour mobility (found in all Singapore employment sub- sectors) can be successfully addressed.

2012 RESULT: This was achieved. CNCo interviewed a number of potential undergraduates from NTU under the Singapore Maritime Foundation “SMFOne Scheme” for sponsorship as either Commercial or Engineering Management Trainees and selected one Engineering Management Trainee to start after she graduates in mid-2013. CNCo will repeat this process again in 2013. Singapore Management University (SMU) will be launching a new Maritime Economics Concentration (“MEC”) under the School of Economics in August 2013. Under this concentration, SMU undergraduates will benefit from a structured and rigorous programme, which includes maritime modules, internship opportunities, overseas industry study missions, site visits and talks by industry practitioners. This will help build up the shore-based talent pool for Maritime Singapore.

2013 TARGET: CNCo will continue to sponsor a number of both commercial and engineering undergraduates under either the Singapore Maritime Foundation “SMFOne Scheme” and/or the new “MPA Global Internship Award” over the next few years. It is hoped that this can become an entry stream for future local managers, provided the material issue of high labour mobility (found in all Singapore employment sub-sectors) can be successfully addressed.

CNCo will work with SMU in 2013 to support its new Maritime Economics Concentration course in areas that are relevant to our business, prior to the start of the course in Jan 2014.

We believe that outside our home base of Singapore and particularly in our key stakeholder communities of the Pacific Islands, there is also a wealth of untapped talent. Over and above our support of time, money and resources to the PNG Maritime College in Madang, PNG detailed in 5.1 above we seek to establish long-term, mutually beneficial relationships with our other partners and stakeholder communities, particularly in the youth and education areas that are aligned to our business.

2013 TARGET: CNCo’s HR and Fleet Management departments will work to establish cadetships for 10% of CNCo’s annual requirement from suitable candidates in key developing communities in Asia Pacific region within 2013 and beyond.



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Summary / Organisational and Operational Boundaries of Report (as at 31 Dec 2012)

In: Australia

India

Hong Kong

New Caledonia

New Zealand

Republic of China, Taiwan

Peoples Republic of China

Singapore

United Kingdom

The China Navigation Company Ltd

Head Office CNCo Shipping Agency OfficesLiner Trades(Owned) fleet

Liner Trades(Chartered) fleet

Subsidiaries+

Scope 1 GHG

Scope 2 GHG

Scope 3 GHG

8 X Challenger Class

5 X Mihos

8X 31,000 dwt MPP u/c

Tonnage as detailed in Fleet Profile

50% > Swire CTM

Bulk Logistics

25% > Mandarin

Shipping Ltd (HK)

67% > Quadrant Pacific

Agencies (NZ)

Org

anis

atio

nal B

oun

dar

ies

Op

erat

iona

l Bo

und

ries

Fleet Management

Swire Bulk

Swire BulkLogistics

CNCo Pte LtdSingapore

Office VehicularPetrol / Diesel / LPG etc

Office Electricity Usage

Management Air Travel

Office VehicularPetrol / Diesel / LPG etc

Office Electricity Usage Office Electricity Usage


Vessel HFC and HCFC consumption

Vessel HFO, MDO andLO consumption

Crew Air Travel

Vessel HFC and HCFC consumption

Crew Air Travel


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Detail

22In this section we provide more detail on a wide range of areas that, taken as a whole, define our Sustainable Development commitment to People, Planet and Profit. All of these must coalesce to give a positive “Triple Bottom Line” to our Organisation, to the Communities we serve and Environment in which we live and work.

In this section:

23 Sustainable Development Policy

24 Governance

26 Economic

34 Environment

52 Labour

63 Human Rights

64 Society

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DetailSustainable Development Policy

In our operations:

We will meet or exceed all legal requirements and:

•Safeguardthehealthandsafetyofallourstakeholdersasfarasis reasonably practicable in all our operations;

•Beagoodstewardofthenaturalresourcesandbiodiversityunderour influence and ensure that all potential adverse impacts of our operations on the environment are identified, mitigated and appropriately managed;

•Strivetobetheemployerofchoicebyprovidinganenvironmentin which all employees are treated fairly and with respect and can realize their full potential;

•Favoursuppliersandcontractorswhopromotesustainabledevelopment and encourage the responsible use of our products and services by our customers and consumers;

•Promotegoodrelationshipswiththecommunitiesofwhichwearea part and enhance their capabilities while respecting people’s culture and heritage.

We adopt this policy because:

•Sustainabledevelopmentencompasses our dedication towards health & safety, the environment, employment, business partnerships and community matters;

•Long-termvaluecreationforour shareholders depends on the sustainable development of our businesses and the communities in which we operate;

•Wewishtoexcelascorporatecitizens.

Making it happen:

•Wewillexerciseindustryleadershipworking with others to promote sustainable development in the industries in which we operate;

• AllofTheChinaNavigationCompany’s offices shall apply this policy. We will encourage other companies in which we have an interest as a shareholder or through our supply chain to implement similar policies;

• Wewillencourageandempowerourstaffto be proactive on sustainable development matters both at work and in the community;

• Wewillmonitorourperformanceandreportit regularly;

• Wewillreviewthispolicyperiodically,having regard in particular to stakeholder dialogues.

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DetailGovernance

The China Navigation Company Pte Ltd. (“CNCo”) is a Singapore registered company and a wholly-owned subsidiary of The China Navigation Company Limited registered in the United Kingdom. Neither company is publicly quoted on any stock exchange. As can be seen from the Organisational and Operational Boundaries diagram (see page 19), The China Navigation Company Limited is also the parent company for Swire Shipping branded agency companies in Australia, PRC, Hong Kong, New Caledonia, New Zealand and Taiwan.

CNCo also has a 50% share in Swire CTM Bulk Logistics Limited, a joint venture with C Transport Maritime SAM registered in Monaco, a 25% share in Mandarin Shipping Limited registered in HK and is a majority shareholder of Quadrant Pacific Ltd., one of New Zealand, Fiji and Norfolk Island’s leading shipping agency and logistics companies. No material operational companies were purchased or sold during 2012.

The Company’s Board of Directors is the highest level governance and oversight body and this sets strategy for its subsidiary companies. The Chairman of the Parent Company Board of Directors is Mr. B. N. Swire.

The CNCo Board of Directors provides organisational oversight and comprises nine members of whom four are non-executive directors and two are independent. CNCo has a high-level Sustainable Development (SD) Steering Group composed of the MD, the Fleet Health, Safety, Security and Environmental Manager, the GM of Swire Bulk (Australia) and head of the Shore-side Safety Committee plus the GM for SD. This group meets bi-monthly in the Head Office in Singapore and reviews all strategic aspects of SD, but in particular Health, Safety, Environment, Social and Governance issues.

Immediately below this there are SD Working Groups which comprise cross-functional representatives also meeting bi-monthly in the Head Office in Singapore and main regional offices of Sydney and Auckland. These seek to act operationally on the guidance and strategy emanating from the SD Steering Group.

The China Navigation Company Pte Ltd. (“CNCo”) is a Singapore registered company and a wholly owned subsidiary of The China Navigation Company Limited registered in the United Kingdom. Neither company is publicly quoted on any stock exchange.

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Detail: Governance

The shareholders are directly represented on the CNCo Board of Directors and use this forum to provide governance and direction to the company. CNCo has no direct public shareholders itself, however it manages and operates all its businesses in compliance with both the John Swire and Sons (UK) and its own internal Code of Conduct covering ethical standards which are available here: http://bit.ly/1cB7r7H

This compliance is in line with our belief that it is imperative to act with probity, transparency and accountability in order to achieve our long-term objectives. Our Board is committed to maintaining and developing robust corporate governance practices and at their behest, the senior CNCo management conducts regular internal reviews of current operating practices and, looking to the future, of our Enterprise Risk Management documentation that ensures that:

•satisfactoryandsustainablereturnsare made to its parent company;

•thebestinterestsofstakeholdersare safeguarded;

•overallshortandlongtermbusinessriskis understood and managed appropriately;

•wemaintaindeliveryofhigh-qualityservices to the satisfaction of customers; and

•thehigheststandardsofethicsare maintained by all our employees and in all our dealings.

The above are all encapsulated in our Vision Statement, which can be found here: http://bit.ly/1cB72Ck

Our absolute requirement for probity, transparency and accountable conduct in all business affairs is highlighted to all of our new staff during the induction and is a condition of their employment. This was expanded during 2012 to cover all of our Filipino crew at their pre-departure and orientation briefings before their departure from Manila and to our PRC crews at dedicated training sessions held in their departure ports.

We have included other relevant additional information herein which supports the commitment that our activities and commitments to Sustainable Development are considered material to the way we run our business and as such are an integral part of our strategic and operational decision making processes. This is achieved by the General Manager SD having direct reporting responsibility to the Managing Director, building on his wide experience within the shipping industry, both at sea and ashore, plus being able to provide input in the early stages of all strategic decision-making where SD issues may be relevant as he is a full member of the Executive Committee that meets at least weekly to review all existing and planned future business activities.

Internal stakeholder engagement was initially undertaken in relation to the production of our first full SD report with office staff in Singapore and Australia, some of our Filipino Officers and Cadets at a forum in Manila. The purpose of the report was explained to all those present together with the definition of the term “stakeholder” in conjunction with Sustainability Reporting. Based on formal feedback from those present requested after each session the Key Stakeholders were assessed to

be Customers, Employees, Regulators, Shareholders and Suppliers.

Building on the above, the materiality of the content of our SD report for the year 2013 to our stakeholders will be established through a more objective and wider exercise involving review by Senior Leadership of our internal Enterprise Risk and Opportunity Management Registers planned for the early weeks of 2014, together with discussions with our key external stakeholders Customers, Employees, Regulators, Shareholders and Suppliers. This will guide the areas of management focus and the content of the 2013 Report as we move forward.

The responsibility and authority of the Designated Person Ashore (“DPA”) includes monitoring the safety and pollution prevention aspects of the operation of each ship and ensuring that adequate resources and shore-based support are applied, as required.

All staff within our Organisational Boundaries were sent a summary leaflet of our important achievements in the SD area during 2012.

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Detail / EconomicEconomic Value Generated During 2012

Results

CNCo Pte Ltd results for the period 01 Jan to 31 Dec 2012 showed continued improvement. This was achieved as a result of continued efforts to improve net freight contribution levels and the cargo mix in the liner shipping business while reducing costs through route optimisation and eco-steaming (reducing speed to the most economical speed for the hull shape and engine design which will lead to reduced consumption/emissions but also altered schedules). Administration costs were also controlled, remaining at less than 10% of revenues. Included in the profit were earnings derived from joint venture investments in liner trades which focused on the South Pacific.

Liner shipping revenues were 11% higher than budget expectations and 6% ahead of comparative 2011 results. Operating costs were 7% above budget and container costs were 7% above budget as a result of increased volumes and activity.

Despite bunker cost volatility, actual bunker costs were only 7% above budget and this excludes any mitigation from customers paying bunker

adjustment charges. With administration costs under control and some positive returns from the bunker hedging program, the liner shipping operation delivered improved profitability.

Investments

For the liner business, operational excellence, fleet renewal and capacity management remain the key focus as part of the programme to continually improve profitability. Eight 31,000 dwt multipurpose vessels were ordered at the end of 2010 (being built at Ouhua shipyard in China) and will be delivered during 2013, and further work is being carried out to develop suitable replacements for the 1990-1 built Miho class vessels.

Given generally high fuel prices throughout the period of this report, fuel efficiency continues to be a particular area of concern both for newbuilds and for the existing fleet. Investment in existing vessel adaptations is under review and slow/eco-steaming delivered some savings over the period. Work is on-going in this area. In 2011, CNCo embarked on its ambition to diversify earnings over the long term and

Go to page 72 for an overview of the CNCo Charitable Donations in 2012.

We will be targeting in future years to increase our level of corporate philanthropic donations towards 0.5% Attributable Profit After Tax.

enter the bulk shipping market and a startup operation commenced in the handy-size segment of the dry cargo market.

An additional eight, highly-efficient 39,500 tonne B-Delta handy-size bulk carriers were ordered in 2012 for delivery in 2013 - 2014, and CNCo holds options to order for a further eight vessels.

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Detail / EconomicRisks and Opportunities Due to Climate Change

The senior management body in CNCo considers the various aspects of climate change and our mitigation of such anthropogenic drivers that we can impact all current relevant business areas and future projects.

CNCo senior management seeks to have an action plan for identifying any high priority ongoing but negative Sustainable Development issues, mitigating them where possible and managing those parts of them that cannot be viably mitigated. Further, when considering any capital investment CNCo will specifically review the Greenhouse Gas/es (“GHG”) footprint of the potential investment and seek to mitigate it to as low a level as reasonably practical.

CNCo has committed to moving to a “net zero environmental impact” and the above will form a critical part of this.

We do not currently foresee any material risks to our core business in the short term due to physical changes associated with anthropogenic climate change. Such physical changes may include:

• Changesinsealevel.Thesewillnothavea material effect on vessels. When our ships are alongside in ports they may experience

lower freeboard at the jetties but these have always varied over the diurnal tidal cycle and will continue to be managed operationally by the port logistics organisations. The most significantly threatened port that CNCo currently serves is Tarawa. This is on an atoll in the central Pacific Ocean, and which is the location of the capital of the Republic of Kiribati, South Tarawa, that may disappear altogether.

The President, Anote Tong, has said:

“Although in most of the world there is some time to plan and prepare for climate change, we are the first to feel its effects as a direct threat to continued life in our country. We are among the most vulnerable of the vulnerable. Even a marginal increase in sea levels will be disastrous for our country’s future. It is doubtful that any other country feels the effects of climate change as much as we do. In Kiribati, the entire nation faces real danger—our own survival is at stake as a people, as a unique and vibrant culture and as a sovereign nation”.

• Acuteeffectse.g.thoseduetoincreased frequency and ferocity of weather events as the climate changes. These will be treated as at present, as “Acts of God”.

The senior management body in CNCo considers the various aspects of climate change and our mitigation of such anthropogenic drivers that we can impact for all current relevant business areas and future projects.

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Detail: Economic - Risks and Opportunities due to Climate Change

• Chroniceffectssuchasthesustainabilityof different cash crops as climate bands move. These may be expected to be broadly neutral. As some crop cargoes diminish, we would expect human adaptation to produce replacement cash crops for shipment by sea, albeit maybe on different routes to supply different end-users.

With CNCo’s commitment to moving towards having net zero impact on the environment, it is playing its part to reduce the cause of sea level rise and its effects on places such as Kiribati.

• Anyincreaseinfrequencyorseverityof weather events may increase downtime, all

other things being equal, but this can generally be countered by working with shippers to optimise scheduling in the face of any such such increases.

•Anyshiftinclimaticzoneswillaffectglobal food chains which, given the cargo volume of food and forestry products that we carry such as rice, coffee and timber, will directly impact our business operations and network of routes.

However, hand-in-hand with operational risks to our business are the operational opportunities for our business. CNCo contracted with Forum For the Future (“FFF”) to conduct a series of Future Scenario Planning workshops in 2012.

These established a number of credible but stretching scenarios for the world in which we live and do business up to 2030 (this was selected as a reasonably forseeable time in the future and the time period when we will be considering the next fleet replacement programme), and from these we developed a Strategic Opportunity Register.

We plan to convene all (approx. 20) of the senior managers of CNCo in Jan 2013 (a 20420 annual meeting - see p. 12) to review this Strategic Opportunity Register, plus our existing Vision, Values and SD Policy for relevance against the possible output scenarios. We can also identify the direction(s) in which we should be investing and any potential downsides that we need to manage. The output from this meeting will probably have a slightly shorter timescale, helping us to set achiveable goals out to, currently, 2020.

Both of these potential scenario outcomes, to 2020 and 2040, are intimately bound directly with climate change issues and then to the secondary effects of climate change e.g. in the evolution of the patterns of trade that our business supports in the Asia Pacific region over the future life of the ships that we

are currently committing to build. Our anual meetings (at a minumum) will continue to monitor trends and ensure we are placed to minimise the downside from the risks and maximise the upside fro the opportunities presented.

As far as our business today is concerned from a regulatory point of view, our vessels emit Oxides of Nitrogen (NOx) and Oxides of Sulphur (SOx) as a by-product of combustion in the vessels’ engines and the allowable limits of these pollutants are being progressively reduced. The level of emissions is a function of engine design and the fuel specification that each engine uses.

Our vessels consume 3.5% sulphur content grades of Intermediate Fuel Oil (“IFO”) and Heavy Fuel Oil (“HFO”) whilst on passage at sea, but switch to using Marine Gas Oil (“MGO”) - which typically has a sulphur content less than half that of IFO/MGO and which can be as low as 0.2-0.5%, both when in HK port limits because of our membership of the “Fair Winds Charter” (this has been voluntarily adopted by CNCo and 17 other shipowners to reduce SOx air pollution in the Pearl River Delta) and in local statutory Emission Control

Far thinking governments, including Singapore’s have Green Funds that are used to offset some of the port charges for vessels that switch to burning low sulphur fuels in their engines, although the offset does not fully cover the current extra cost of using lower sulphur fuel.

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Areas (“ECA”) such as those that have been established on the West Coast of North America.

This is reported in more detail in the GRI EN18 section: “Initiatives to reduce GHG Emissions”, and involves a split incentive cost to CNCo and other shipowners but with the benefits being borne by the communities close to the port areas in HK, Long Beach and Singapore. CNCo has supported the call by the Fair Winds Charter secretariat and others for the HK Government to legislate our voluntary reduction into regulation to create a level playing field and we expect this to bear fruit in 2013. Far thinking governments, including Singapore’s, have Green Funds that are used to offset some of the port charges for vessels that switch to burning low sulphur fuels in their engines, although the offset does not in any way cover the current extra cost of using lower sulphur fuel.

Levels of NOx and SOx emissions are certified for each vessel by independent Classification Societies in accordance with limits laid down by UN International Maritime Organisation (“IMO”) under its MARPOL Convention Annex VI. All our vessels are fully compliant with this. The revised Annex VI came into force on 1 July 2010.

We have invested significantly in a Kongsberg Vessel Performance System package, which includes “Marorka” software, for all our new ships. This gives dynamic real-time fuel performance of the main engine and auxiliaries, at all alarm and monitoring workstations, i.e. the bridge, E/R control room and cargo office. This then enables us to optimise our fuel consumption by maximising the energy efficiency of the ships while minimising any negative environmental impacts. All the new vessels that will be delivered in 2013 and beyond will have Class-approved Energy Efficient Design Indices (“EEDI”) and we have produced Ship Energy Efficiency Plans (“SEEMP”) for all of our existing ships, prior to it being required by legislation.

We also record lubrictaing oil (“LO”) consumed on our owned and chartered vessels. “LO” covers the complete range of grades of lubricating oil and 100% by volume of the total LO usage we have reported is actually consumed in internal combustion engines and converted into GHG which is then emitted to the atmosphere. We thus use this figure and an average specific gravity of 0.9 across all grades to convert total LO recorded and consumed in litres into GHG emissions in tCO2e.

Regrettably none of the United Nations Framework Convention on Climate Change, Conference of the Parties (“UNFCCC CoP”) meetings over the past four years has achieved sufficient consensus to produce either a legally-binding or global convention for Annex 1 (developed) and non-Annex 1 (lesser developed) countries to limit their GHG emissions to cover the period post Kyoto Phase 1 after the end of 2012.

Expectations were low for the UNFCCC climate negotiations in Doha, Qatar (CoP 18). It was scheduled to be a “finalise-the-rules” type of CoP, rather than one focused on large, political deals that carry on into the early hours of the morning. Key issues on the table included: finalising the rules for the Kyoto Protocol’s second commitment period; concluding a series of decisions on

transparency, finance, adaptation and forests (REDD+¹); and agreeing on a work plan to negotiate a new, legally- binding international climate agreement by 2015. The emissions gap was also front-and-centre to the discussions, as the new United Nations Environment Programme (“UNEP”) Gap Report showed that countries are further away than even a year ago from the goal of keeping the global average temperature rise below two degrees Celsius.

In the end, countries were successful in making progress, but only incrementally. The lack of political will was very disappointing, especially in the light of recent extreme weather events.

At COP 17 in Durban, the EU agreed to a second commitment period for the Kyoto Protocol (“KP2”), but there was no time to finalise all the rules. In Doha, the rules for that

¹ Reducing Emissions from Deforestation and forest Degradation

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second commitment period were finally agreed upon, allowing it to move forward for another eight-year period (2013-2020).

While countries who have joined this second commitment period (including the EU, Australia, Switzerland and Norway) only contribute 15 percent of global emissions, this is an important step, in that it maintains the only legally-binding instrument under the UNFCCC.

The meeting in Durban marked an important milestone by agreeing on a comprehensive set of guidelines for measurement, reporting and verification (“MRV”) of countries’ emission reduction efforts. Doha, on the other hand, resulted in a mixed outcome: While negotiators completed some important pieces of work, they failed to resolve a number of outstanding issues—especially when it comes to ensuring a cost-effective, credible verification framework. MRV however is set to be introduced in the EU soon, and though this will not affect most of CNCo’s own tonnage which is at present trading in the Asia Pacific region, it will be seen in these annual SD eports that we are already measuring and reporting and having these figures externally verified.

Observers and media outlets often question the UNFCCC process and its slow-motion approach. However, the truth is that the UNFCCC will not stop moving in slow motion until key countries do. All eyes must now turn to the re-elected President Obama and the new Chinese leadership, amongst others, to see when large-scale change is going to come. Perhaps they can take some inspiration from the new coalition of Latin countries, which is both driving toward a low-carbon economy at home and bringing fire to the belly of the UNFCCC.

With Doha behind us, the stage has now been set both for additional ambition in the near-term and for an ambitious and equitable 2015 agreement. As climate change impacts increase, it’s a firm reminder of why leaders must expend political capital to move climate action forward and build support nationally and internationally to avoid catastrophic impacts.

Our belief is that the process may well move forward in a bottom-up fashion, and the individual country and company initiatives will slowly aggregate to become a global deal; the planet simply cannot wait for a top-down agreement between the 180-odd members of UNFCCC given all the self-interest circles that cannot be squared.

GHG emissions from shipping are already (in Aus and NZ - and a number more are on the imminent horizon) regulated by such instruments as blunt carbon taxes or national “cap and trade” Emissions Trading Schemes (“ETS”), though the degree of will to enforce these wavers with the perceived local political imperatives of the hour. This is certainly not the ideal way to achieve a global reduction in anthropogenic GHG emissions over the long-term.

The EU had threatened that without agreement at IMO by the end of 2011, shipping, which was excluded from the existing EU-ETS at last review at the end of 2008, will be written back into their regional/international scheme.

It would be a very significant administrative burden to shipping in all sectors worldwide if a patchwork of regional sectoral ETS schemes was to be introduced, due to impatience or frustration with an inability to agree a transparent, legally enforceable, IMO administered, global sectoral scheme that drives real and verifiable reductions in GHG emissions on an urgent basis.

A number of legal objections were lodged by the world’s national airlines to the implementation of the EU-ETS scheme as it affected entire flights to/from EU, and to which shipping was to follow a year later. Prior to this coming to a head, the EU accepted ICAO’s efforts to resolve the issue and the implementation was suspended. On the back of this, IMO has achieved the same for shipping.

CNCo is working on mitigating some of the Scope 1 and 2 GHG footprint for its vessels operationally. With the introduction of ETSs, ECAs and Sulphur Emission Control Areas (“SECA”) globally, there will be increased financial cost implications with compliance. CNCo will be assisted practically in achieving step-change reductions through its significant Capex investment in new vessels of advanced designs and the recycling of our older tonnage. We will detail this in the 2013 report which will cover the launch of our new S-class of 31,000 dwt Multi Purpose (“MPP”) Ships and W-class 39,000dwt Deltamarin-designed B.Delta37 handysize bulkcarriers.

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Detail / EconomicFinancial Assistance from Government

Two grants were received from CNCo’s host government (Singapore) in 2012:

They were an MPA (Maritime and Port Authority of Singapore) grant of SGD 150,000 and a PIC (Productivity and Innovation tax Credit) of SGD 59,000.

The PIC scheme was introduced in the Singapore Budget 2010 to provide enhanced tax deductions and investments in a broad range of innovation value chain activities. CNCo was granted this for acquisition of new ship management software and other IT equipment upgrades.

China Navigation Co. – Sustainability Report 2012 www.chinanav.com

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Detail / EconomicPolicy, Practices and Proportion of Spending on Locally-based Suppliers at Significant Locations of Operation

CNCo is registered under Singapore’s Approved International Shipping Enterprises (“AIS”) Scheme. This aims at building up a critical mass of shipowners and managers which will eventually develop Singapore into a leading global maritime centre. Under the AIS Scheme, “local spending” is defined as that invoiced by a Singapore registered entity. This is audited by the Singapore Tax Authorities and this is the definition and source of figures that are reported herein.

In 2011 50.26% of CNCo’s total global spend was classified as “local”. However this basic statistic is a little skewed, as of the company’s total spend; fully 43.61% was for fuel and lubricating oil supplied where/when required (often outside Singapore, but invoiced in Singapore), 8.32% was remitted to shipyards as we build new ships to rejuvenate our ships

and charter hire invoiced by the charterer from its base country amounted to 15.85%. If these three material line items of non-discretionary spending are excluded, then CNCo’s more discretionary local (non-Fuel, Ship-building, 3rd Party Charter Hire) spend as a percentage of the total (non-Fuel, Ship-building, 3rd Party Charter Hire) spend decreases slightly to 45.12%. This shows that nearly half our total annual spend is in the country of our operational headquarters.

CNCo currently has no explicit policies directing spending to locally-based suppliers. This is a practical acceptance of the fact that as the consumers of the spending; our ships, are continually mobile, so the supply of (non-OEM) products will be driven by the supplies’ delivery location for the vessel as its particular need/s arise.

The senior management of CNCo considers the various aspects of climate change and our mitigation of its anthropogenic drivers that are relevant to our operations when making purchases.

The company however does have procedures for vendor selection to ensure control is maintained over the quality of goods and service supplied by vendors. This is primarily to ensure that goods affecting either the safety of, or prevention of pollution from, our ships are of suitable quality and are delivered in a timely manner. The procedures require not only that the vendor meets the company’s requirements and ISO or equivalent accreditation, but that those suppliers who have an environmental policy and show a positive attitude to environmental protection will be preferred during the selection process. We continue to conduct evaluations on all suppliers seeking to be selected or retained as primary vendors and will start to undertake site audits to examine their environmental performance and compliance with safety and

MARPOL regulations once we are suitably resourced. In addition, the company follows the recommended best practice of the Swire group and (re-)evaluates at least the top 100 most used vendors every 36 months. It is also planned that in 2013 we will start to conduct a business process review of our purchasing processes to ensure that it is fit for purpose to support our expanding business divisions cost effectively, responsively and responsibly.

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Spent outside Singapore54.88%

Spent in Singapore45.12%

Detail: Economic - Policy, Practices and Proportion of Spending on Locally-based Suppliers at Significant Locations of Operation

Spent outside Singapore 49.74%

Spent in Singapore50.26%

Removing from these figures any distortion caused by a global spend of:

43.61% for fuel and lube oil resupply worldwide8.32% to shipyards for new ships and repairs/maintenance to existing ships15.84% to charter third party ships to support our liner business

then:

Breakdown of Total Expenditure in 2012

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Detail / EnvironmentInput Materials That Are Recycled

CNCo as a service provider necessarily processes an insignificant quantity of recycled input materials as a substitute for virgin materials.

We do always however seek to use sustainably resourced material, especially the likes of paper and wood, and to responsibly recycle waste materials such as paper, printer cartridges at the minor level and ships at the macro level (see other sections).

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Detail / EnvironmentDirect and Indirect Energy

Virtually all of CNCo’s significant environmental impacts are due to our core business of providing transportation of goods. These are reported separately in this section (corresponding to GRI indicators EN3, EN4) and more detail in EN29; “Environmental Impacts of Transporting Goods”.

Marine fuel consumption is reported by grade (180 / 380 IFO or MGO) and in respect of owned ships (13 trading plus one trans-shipment vessel) and chartered-in tonnage (15 vessels as at 31 Dec 2012). The same is true for emissions from consumption of Lubricating Oil (LO). See the tables in the Data Section: Environmental (GRI Indicators EN3 & EN4).

CNCo had a total, GHG Protocol defined (see page 38) Scope 1 and 2, GHG footprint in 2012 of 610,558.199 tCO2e (see tables EN 16, EN 17, EN 19, EN 20 in the Data Section:

increased by 22.2% from 2011 to 2012. As this was simultaneous with a near doubling of profit after tax, it means that our employees’ flights footprint per dollar of profit was more than halved: our people are producing more, more efficiently and with a lower carbon footprint. A large portion of this efficiency gain will be due to (as was one of the drivers) the organisational restructuring of Swire Shipping.

All the other emission metrics, for NOx, SO2, Volatile Organic Compounds (“VOC”) and Particulate Matter (“PM”) are reduced by around 12% for the entire fleet (see table EN16 in the data section). This is generally in line with the reduction in activity of 18% when measured in vessels operating days. Note: the reductions will not be exactly linear as it will depend on the changes in trading patterns between the retired and continuing ships.

Environmental). Of this footprint, 99.84% is related to emissions due to consumption of IFO, MGO and LO whilst vessels were engaged in transporting cargo. This is statistically the same as the figure of 99.87% in 2011.

The 2012 Scope 1 GHG footprint is 88.4% of that in 2011. This is predominantly due to the fact that during 2012 four H class vessels were recycled and thus the total number of ship-operating days during the year (from both owned and chartered-in tonnage) was reduced from 11,118 to 9,090, or by 18.2%.

The Scope 2, indirect energy consumption from CNCo’s operations is derived solely from the electricity that was purchased for supply to our onshore operational offices, primarily in Singapore, Australia and New Zealand. All of the electricity is supplied by the local national grid and none is purchased directly from nuclear, steam, solar, wind, geothermal, biomass or hydro suppliers. The total CNCo consumption is 17.3% less in 2012 than in 2011, but this masks parity in Singapore office but a 25% reduction/increase in efficiency in Australia’s and New Zealand’s offices due to the enhanced economy of scale that came from our office space rationalisation over the last 12 months.

As can be seen from the Scope 3 data table for CNCo Air Travel, the total climate footprint for onshore and offshore staff has increased slightly, by 6.1% over the year but this masks bigger movements of the two between 2011 and 2012. With the recycling of four ships in the first quarter of 2012, our seafaring compliment has reduced by just over 20%, and so the sea staff footprint has reduced by 11%. The total flight footprint for the whole company, however expressed as tCO2e per person

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Detail / EnvironmentBiodiversity

We require full compliance with relevant environmental laws and regulations at all times. However, special attention has been given in our operating procedures to the periods when our ships are transiting designated Marine Protected Areas (“MPAs”). The only MPA our trading pattern in 2012 took our ships through was the Great Barrier Reef.

In 2012 the fleet made 61 transits of the Great Barrier Reef Marine Park which was created in 1975 by the Government of Australia and was selected as a World Heritage Site in 1981. An International Union for Nature Conservation (“IUCN”) category VI (protected area with sustainable use of natural resources), the Great Barrier Reef World Heritage Area has been divided into 70 bioregions, of which 30 are reef bioregions, and 40 are non-reef bioregions. Fishing and the removal of artefacts or wildlife (fish, coral, sea shells, etc.) is strictly regulated, and commercial shipping traffic must stick to certain specific defined shipping routes that avoid the most sensitive areas of the park.

The 61 transits took a total of 96.6 ship-days’ duration with an average transit time of 10.8 days each, and there were no infringements recorded or observed. Further to preserve indigenous marine biodiversity and avoid

As part of its commitment to making its business ethically, socially and environmentally responsible and sustainable, CNCo seeks to minimise the impacts of its services on biodiversity in regions it operates.

contamination by invasive species, all vessels moving internationally into US, Canadian, Australian, New Zealand and Russian Federation waters practice good Ballast Water Management (“BWM”), even prior to the full entry into force of the IMO International Convention for the Control and Management of Ships’ Ballast Water and Sediments.

As at 12 Sep 2012, 36 IMO member states had ratified the BWM convention (not including HK, Singapore, UK or USA), equating to 29.07% of the gross tonnage of the world’s merchant fleet, up from 22 states in the previous year. The convention will come into effect 12 months after 30 countries representing a combined total gross tonnage of more than 35% of the world’s merchant fleet have ratified it. There are still issues with type approval of some of the technical equipment required under this convention.

The design of all of our new “S” and “W” class ships under construction are “BWM-system ready”. The only reason for not fitting the equipment at this time is to ensure that the equipment fitted is technically type-approved to meet both the IMO BWM Convention and the US Coast Guard BWM requirements that are due to come into force by Jan 2016.

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Detail / EnvironmentScope 1 and 2 GHG Emissions

Note: The GreenHouse Gas Protocol defines direct and indirect emissions as follows:

• DirectGHGemissionsareemissionsfromsourcesthatare owned or controlled by the reporting entity.

• IndirectGHGemissionsareemissionsthatarea consequence of the activities of the reporting entity, but occur at sources owned or controlled by another entity.

The GHG Protocol further categorizes these direct and indirect emissions into three broad scopes:

• Scope1:AlldirectGHGemissions-thiswouldincludeall emissions from fuel consumed in the engines of ships under CNCo’s Operational Control.

• Scope2:IndirectGHGemissionsfromconsumptionof purchased electricity, heat or steam - in CNCo’s case this refers solely to the electricity consumed in our offices as we do not purchase steam or heat.

• Scope3:Otherindirectemissions,suchastheextraction and production of purchased materials and fuels, transport- related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (such as Transmission and Distribution losses) not covered in Scope 2, outsourced activities, waste disposal, etc. This would include air travel by management and by our seafarers as they fly to join or leave our ships.

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Detail / EnvironmentScope 3 GHG Emissions

Carbon footprint from CNCo air travel Management/ Seaman Total y-o-y Shore Staff Change 2011

tCO2e 1,487 2,797 4,284

Percentage (%) 34.7% 65.8% 100.0%

Number of People 338 487 825

Owned Vessels Operating Days 6,205 -

2012

tCO2e 2,059 2,488 4,547

Percentage (%) 48.1% 54.7% 100.0%

Number of People 331 385 716 79.1%*

Owned Vessels Operating Days 4,733 - 76.3%

2011 > 2012

Change y-o-y tCO2e (total) 138.4% 89.0% 106.1%

Change y-o-y tCO2e (per person) 141.2% 112.5% 122.2%

*Seafarers only

see also Page 51

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Detail / EnvironmentInitiatives to Reduce GHG Emissions

CNCo measures its CO2 and other GHG emissions. It then seeks to mitigate these through eco-steaming and route optimisation as detailed on page 27. CNCo is also investing heavily in fuel-efficient tonnage and the most emission-efficient engines.

A long term solution to much of our GHG emissions’ footprint may well be a switch to LNG fuel. There is the key issue of the price / kW delivered to be addressed together with issues of availability, endurance but these latter two are increasingly being considered and provided in many bunkering ports. Our GHG emissions are reported in tables EN16 and EN17 (see page 73).

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Detail / EnvironmentSOx, NOx and Other Emissions

CNCo not only measures and seeks to mitigate its CO2 and other GHG emissions, it also tracks other potentially harmful emissions such as SOx, NOx, Particulate Matter (“PM”) and Volatile Organic Compounds (“VOC”), see tables EN20.1, EN20.2, EN20.3 in the data section (see page 74).

We have worked voluntarily for some years with the HK shipping industry as a member of the Fair Winds Charter (described in more detail on page 49) to switch to low sulphur MGO when in Hong Kong port limits to reduce the deleterious effects of SOx on the population living near berths and channels.

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Detail / EnvironmentTotal Waste Disposed

The following categories are defined and included in the reportnig from our ships under MARPOL:

Cat. 1 Plastic (discharge to shore only)Cat. 2 Biodegradable timber and paper materialsCat. 3 Ground biodegradable rags, glass or metalCat. 4 Paper products, rags, glass, metal, bottles, cargo residue etc.Cat. 5 Food wasteCat. 6 Incinerator ash (non-plastic)

As a company determined to emphasise the importance of sustainable development and reduce its impact on the environment, CNCo also monitors the following from its own ships, in addition to the categories above:

• Batteries sent ashore• Drums sent ashore• Waste oil sent ashore• Scrap metal recycled ashore

In our offices, CNCo endeavours to reduce paper and printer cartridge usage and wastage by recycling both.

CNCo monitors waste generation both ashore and aboard. CNCo’s owned and chartered tonnage follow the IMO MARPOL Waste categorising system.

It was designed to control waste management on board vessels and define the ways in which different materials can be handled, either through disposal ashore, to sea, or disposal through incineration on board.

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Detail - Environment: Total Waste Disposed

The China Navigation Company (“CNCo”) voluntarily adopted a Recycling Policy in January 2012 as it started its fleet rejuvenation programme that “It would only send vessels for recycling to yards that have valid and verified certification issued by a reputable independent third party against all standards: ISO 9001:2008, ISO 14001:2004, OHSAS 18001:1999 and particularly ISO 30000:2009, and preferably be an “A” member of the International Ship Recycling Association”.

It is widely reported that a large number of ship recycling yards globally using the beaching method have poor (or very poor) health, safety and environmental standards and are often found using child labour along with violating labour and human rights. This evasion (or “leakage”) of the costs of responsible recycling by some shipowners is causing wholly avoidable harm to both the beaching yards’ workers and the nearby communities.

Our corporate recycling policy will not permit us to support this and so we have taken the decision, at an acknowledged small cost premium, to go beyond the existing legislation and to positively promote the use of, and in so doing hopefully encourage the expansion of, more responsible “Green and Safe” ship recycling yards.

This has not gone unnoticed by the yards we have used and they, and others, have seized on this as a differentiating business opportunity that can deliver them a higher margin in a keenly cost-driven global commodity market.

It is also simultaneously a way for the yards to both maintain and enhance their ‘local licence to operate’ by the provision of a safer workplace for their employees, a less polluted environment and thus lead to a more harmonious society for the key stakeholder communities.

Already around 19% of ships to be recycled are reported to be routed to “Green and Safe” yards.

2012 Case Study: CNCo’s decision to seek and use responsible, “Green and Safe” ship recycling yards when recycling the four “D class” ships.

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The key decision requires the adoption of a completely new view of the way the company defines the boundaries of its operations. Historically, responsibility for an asset has ceased on completing the sale transaction. In the new paradigm, the prior owner now continues to take some responsibility for its asset, (in this case – its responsible recycling) after all liabilities and responsibilities would hitherto have been passed to a third party: the willing and aligned buyer.

There are a number of yards that have been externally and independently audited by the EU and awarded “Green and Safe AA” status. Already around 19% ships to be recycled are reported to be routed to yards rated / operating this way. This is a start, but our industry has a long way to go still. For CNCo’s ships being recycled in 2012 a brokerage commission was paid to ensure that the recycling process was carefully managed.

Recycling Plans in accordance with the still not adopted HK Convention were produced before work started. The Green and Safe yards chosen were subject to on-site Superintendency and number of detailed audits from both our Fleet

Managers plus Lloyds Register (“LR”) which was engaged as our independent process monitor. Close out payments were dependent on the production of a satisfactory recycling completion report by LR.

The yards were clean, and importantly injury-free, whilst ‘our’ ships were there, and any hazardous waste was all disposed of appropriately.

Working closely with the yards to achieve successful recycling was an iterative process. LR audited and issued non-conformances during the recycling, but the yard took these in the spirit of continuous improvement and closed them all out prior to the completion of the recycling.

This shows that the yards are willing to improve their practices in a market where they receive financial incentive and are not squeezed out financially. It also shows that a joint commitment will lead to better outcomes for all parties.

24 years ago, the then Chairman of the Swire group exhorted all companies to “always seek to be ahead of legislation rather than reacting to it: that even if the environmentally “clean” way of doing something is more expensive and therefore on the face of it uneconomic, we should always, regardless of mandatory legislation, have a close look at the overall feasibility of adopting such a practice”. CNCo and all other group companies still follow this today.

Even if only a percentage of the publicity is correct, and the ship recycling yards that practice beaching do cause harm to workers and the environment in their surrounding communities, this can be mitigated by a commitment from shipowners to not support those yards commercially. In 2012, as we commenced our fleet rejuvenation programme, and recognising that many of the old ships would be sent for recycling, we discussed and adopted the policy detailed in the summary on the previous page. We did this in the knowledge that in the early years this may cost us a small premium but senior management decided that responsible recycling was the most sustainable option.

There are a number of yards that have been externally and independently audited by the EU and awarded “Green and Safe AA” status.

CNCo has committed to using yards like these for all future ship recycling.

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What are the first steps an organisation can take to replicate this idea/initiative?

1 The owner of the ship to be recycled must decide to exercise leadership in the industry, even in the absence of legislation. This involves the paradigm shift of taking some continuing responsibility for an asset even after it has been transferred to a new owner.

2 The owner of the ship to be recycled must establish an internal policy to accept the need to pay a reasonable premium to support safer working practices and better protection of the environment in key stakeholder communities that the shipping industry has historically relied on, but have been under the radar for many in the past.

5 However boycotting those yards not on the “Green and Safe” list must only be the first step; it is clearly recognised that a close second intent must be that the pan- industry organisations and industry leaders must forge a partnership with those yards that have the commitment (driven by market forces) and to help them raise their standards.

1 The cost to CNCo of exercising this leadership by voluntarily but proactively using more responsible, “Green and Safe” ship recycling yards over the yards with poorer standards was a loss of around 8.0% the potential net profit from the disposal of the ships (53,906 light deadweight tons total).

2 The driver behind the decision was CNCo’s adoption of a recycling policy that required us to avoid supporting facilities reported to have poor safety and environmental practices. We were mandated to preferentially use recycling facilities where workers had comprehensive externally audited safety training, a good safety record and proactive safety practices and observed the appropriate environmental disposal of hazardous materials. However, we believe that this voluntary taking of additional responsibility will be recognised by our employees, who will see us as an Employer of Choice - and we have evidence that this is in fact the case (and so increase our retention/

decrease turnover costs within the company). It will also be reconised by our customers, finaciers and business partners that we are striving to be an industry leader in operating sustainably, as further evidenced by our membership of the Sustainable Shipping Initiative.

3 Further, detailed research in this area would permit either the evaluative or predictive Social Return On Investment (“SROI”) to be quantitatively calculated, based on the inputs (leakage of recycling work, and better commercial returns, from yards with poorer, to those with better standards), outputs (reduced fatalities, injuries and environmental harm) and impacts on the communities and the businesses.

4 As taking a more extended responsibility for the ‘Life Of Asset’ and for those workers associated with it when it is up- cycled, becomes more widely accepted in our industry, evidence of the increased use of “Green and Safe” yards will be demonstrated commercially to the yards with poorer standards.

The owner of the ship to be recycled must decide to exercise leadership in the industry, even in the absence of legislation. This involves the paradigm shift of taking responsibility for an asset even after it has been transferred to a new owner.

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Detail / EnvironmentTotal Number of Significant Oil Spills

Our target for spills of oil or other materials hazardous to the environment (“MHE”) of any size from our fleet is ZERO.

There were no spills of any kind in calendar year 2012.

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Detail / EnvironmentInitiatives to Mitigate Environmental Impacts

We are proud to have had commitment from the Board of Directors and senior management through to the Fleet Operations department to continue to be able “to do the right thing”. We believe that by showing leadership and being transparent in this area we can begin to convince our peers to help enhance the environment, the social conditions of ship recycling yard workers and their families, and the reputation of the industry.

Hand in hand with responsible recycling goes responsible shipbuilding. This enables us to “close the loop”, whereby we aim to track the material that goes into a ship. Then, when it comes time to recycle it we know where both the more hazardous and the more valuable materials are and the ship can be dismantled more safely and cost-effectively. This enables the old asset to be up-cycled and the steel and other materials more efficiently used to build the next new asset. A report on what we are doing follows below.

In mid-2011, CNCo committed to work with other industry leaders to reduce shipping’s negative effects on the environment and joined the Steering Group of the Sustainable Shipping Initiative (“SSI”): http://ssi2040.org

The SSI is a four-stage initiative designed to help the industry make long-term plans for future success. Its membership comprises a cross-industry grouping bringing together 16 other leading companies from across the entire global shipping value chain, together with two NGOs: Forum for the Future and the World Wildlife Fund, the latter acting as “robust in-house challenger”.

The SSI Members are, by sector:

• Shipowners,charterersandoperators:BP Shipping, Bunge, Cargill, Carnival Corporation, China Navigation Company, Gearbulk, Maersk Line, Rio Tinto Marine and U-Ming. • Shipbuilders,engineersandservice providers: Daewoo Shipbuilding & Marine Engineering; Wärtsilä.

• Banksandinsurers:ABNAmro,RSA.

• Classificationsocieties(settingtechnical standards): DNV and Lloyd’s Register

• Representingshippingcustomers:Akzo Nobel and Unilever

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The CLMM challenge was to look at how ships could be better designed, built, operated and dismantled to drive higher value and more efficient recycling of materials and components. The aim was to understand the feasibility and value of tracing and tracking the materials used in ship construction through to recycling. Our target is to collect data of about 98% by weight of all the materials used in the construction of two new vessels and a cruise ship cabin.

The 2040 goal of the CLMM is to achieve full transparency and accountability for the social and environmental impacts from construction through to recycling of ships.

Our findings will be reported in our 2013 SD Report, and at an industry-sharing event in Singapore in Sep 2013, but we firmly believe that if scaled up the impact could be:

• Safer,cleaner,healthierandmoreprofitable ship recycling through helping owners realise the true value of ships during and at the end of their lives. • SignificantCO2 savings from more effective recycling in the wider ‘steel loop’ and establishing ways to further reduce the use of finite resources in future shipbuilding.

• PotentialCO2 and financial benefits from ‘design for remanufacture and reuse’.

In the first stage in May 2011 the SSI members launched a Case for Action in which we stated: “Our goal is to transform the global shipping industry and the wider maritime sector, establishing a new, sustainable approach as the norm.” It analyses the social, environmental and economic challenges shipping faces and how best to react to them and it calls on the industry to take far-reaching action.

This analysis is a call to action for the worldwide shipping industry. The SSI members believe that, with far-sighted leadership, businesses can weather the storm and emerge stronger and more sustainable. And we believe that the industry has a vital role to play in helping create a sustainable, low-carbon economy.

In 2012 CNCo joined the SSI “Closed Loop Material Management” (“CLMM”) workstream. The fourmembers of the CLMM work stream (Carnival Cruises, CNCo, DSME and Maersk) worked on three pilot projects and a stakeholder consultation process to investigate the feasibility and added-value of using a database system to track shipbuilding materials from building to recycling.

The goal is to achieve full transparency and accountability for the social and environmental impacts of all materials, from construction through to recycling of ships (“Life of Asset”). This goes significantly beyond the concept of a “Green Passport” or Inventory of Hazardous Material (“IHM”) as foreseen in the HK Ship Recycling Convention for ships as these only cover hazardous materials. CLMM looks at ALL materials that have gone into the construction of a particular ship.

The ship can then be much more safely and efficiently recycled at the end of its life, giving a higher return in final (and intermediate) sale value to the last (and interim) owner/s. This in turn will assist in making the earth’s resources last longer. Consider: the energy required to manufacture a tonne of steel from iron ore (in itself a finite resource) is 60 times more than that required to recycle a tonne of “scrap” steel!

This concept is already in wide usage in the European and US automobile industry, so we are seeking to adapt it to the marine sphere and in the process avoid “reinventing the wheel”.

Detail - Environment: Initiatives to Mitigate Environmental Impacts

The CLMM challenge was to look at how ships could be better designed, built, operated and dismantled to drive higher value and more efficient recycling of materials and components.

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Detail / EnvironmentNon-Compliance with Environmental Laws and Regulations

A California Air Resources Board (“CARB”) representative visited the MV Chenan on 28 December 2012 and found it to be burning 1% sulphur HFO instead of the permited 1% DMA or 0.5% DMB in violation of their fuel switch requirement (for the reasons behind this see EN29: Environmental Impacts of Transporting Products). Further investigation revealed that the vessel had also not switched over during the previous 2 port calls since the implementation of the new regulations on 1 August 2012. The vessel was fined USD166,500.

The background to this is that on 1 August 2012, a change in the CARB regulations came into effect. Up until that date, Chenan had been changing over to 1.5% marine diesel oil at the 24 nm Californian base line as per the then CARB requirement. On 1 August 2012, the permissable sulphur content was lowered to 1% sulphur for Marine Gas Oil (DMA) or 0.5% sulphur for Marine Diesel Oil (DMB). On the very same date, the North America Sulphur Emissions Control Area came into force whereby all vessels were required to change over to 1% HFO at the 200 nm limit.

CNCo Fleet Management conducted a thorough investigation into why the very

specific and numerous communications that it had sent detailing the two new regulations over the 9 months prior to their implementation had not been fully acted upon. Despite this a number of staff on board this ship were clearly confused between the slightly differing intent and requirements of the new SECA and CARB regulations coming into force at the same time and which concerned related but separate technical issues.

The staff had obviously attempted to meet their understanding of the requirements of both rule changes but had failed to fully comprehend the minutiae of certain differences in detail.

The staff on the sister ship engaged in the same trade in contrast however received the very same information on the fuel requirements over the same period and provided precise and accurate instructions to their relief staff, resulting in that ship conforming fully with the CARB and SECA rules after their implementation on 1 August 2012.

As a measure to avoid any future confusion, we have now included the explicit requirements for present and future fuel switch as per IMO, EU, CARB and CNCo requirements in the Safety Management System (“SMS”).

CNCo regrets that in 2012 it had one incidence of non-compliance by oversight with environmental laws and regulations on one vessel. These include regulations relating to prohibited discharges of oil or other noxious substances (solids, liquids or gases) into the environment (seas, rivers, harbours, ports or the environment).

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Detail / EnvironmentEnvironmental Impacts of Transporting Goods Sold

We report on the significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations.

CNCo’s operations involve carrying cargo for third parties in ships that consume HFO/IFO/MGO. Historically the physical operational boundaries for CNCo’s fleet have been at the quayside. We have thus previously taken responsibility for our impact on communities and the environment from our operations to seaward of the quay as we have little or no control over the distance or mode or transport involved in getting the many cargoes to the quayside.

However this paradigm is changing in two significant areas.

It has been proven to the satisfaction of the Port of Long Beach Authority in Califirnia that the incidence of lung ailments decreases as one moves perpendicularly inland from the quay and that this is due to the emissions of

SOx and Particulate Matter (PM) from ships burning 3.5% sulphur residual fuels in port (the biggest on the west coast of the USA).

The Port and California Air Resources Board (“CARB”) which is tasked with “attaining and maintaining healthy air quality; protecting the public from exposure to toxic air contaminants; and providing innovative approaches for complying with air pollution rules and regulations” has thus introduced regulations which came into effect in 2012 requiring ships within certain distances of the coast and in port to use certain grades of fuel that are have low or ultra-low sulphur content AND are distillate, such as MGO, with much reduced PM emissions than Marine Diesel Oil (MDO), IFO and HFO. Compliance issues with this are reported in Section EN 28.

The effect of this approach mirrors the voluntary one that CNCo has been championing in HK as one of the 17 signatories of the Fair Winds Charter (“FWC”) since its inception. (see http://bit.ly/1cgznJD)

The four FWC 2013 supporting organizations are: The Hong Kong Liner Shipping Association, Hong Kong Shipowners’ Association, Civic Exchange, and Wallem and the Charter is an industry-led, voluntary, at-berth fuel-switching programme for ocean-going vessels calling at Hong Kong. It is the first initiative of its kind in Asia, and the only shipping-industry led fuel switching initiative in the world. Participating vessels switch to low sulphur fuel (0.5% sulphur content or less), at significant unrecoverable cost, while at berth or working mid-stream in Hong Kong.

The intent of this is that the shipping sector is playing its part to help reduce the bad air pollution that HK suffers on many days throughout the year. This pollution is from multiple causes that include upwind industrial sites in the Pearl River Delta, vehicular traffic on HK roads and ships in its port. Companies may also voluntarily extend this to pilotage in and out of HK waters.

CNCo is pleased to note that the HK Government has taken this initiative on board after some lobbying by the HK Ship Owners Association, Civic Exchange and others, and is poised to introduce legislation to mandate compliance by all ocean going vessels, thus creating a level playing field with the Fair Wind Charter signatories.

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Detail - Environment: Environmental Impacts of Transporting Goods

The other significant area in which CNCo is championing this paradigm shift is to take more social and environmental responsibility for ships being recycled after their onward sale. This is the point historically at which any asset owner has considered itself relived of any surviving liabilities. Our initiative in this area is detailed more fully in Section EN22, Waste Disposal.

Both of these areas are notably split incentives, or a “transaction where the benefits do not accrue to the person who pays for the transaction”. These are usually best overcome by leaders, showing that they are willing to work collaboratively for the common good, and be prepared to see an indirect return (if any) in the long term.

Other areas, of less impact, but all contributing to the whole, of which we have some control and thus can take responsibility is the transportation of the members of our workforce.

This has three components:

1. Surface transportation of shore staff in vehicles provided by the company.

2. Air transportation of shore staff as they travel to manage the business.

3. Air transportation of sea staff as they travel to join and leave the ships on which they work.

1. Surface transportation of shore staff

We have had a general vehicle policy since 2011 that all new company vehicles should be hybrid/energy-efficient or diesel.

2. Air transportation of shore staff (see also page 39)

Every sector flown by shore staff is individually recorded and then its GHG footprint calculated using the calculator at www.atmosfair.de. In 2012 we had a management air travel footprint of 2,059 tCO2e (2011: 1,487 tCO2e).

We are mitigating this by structural reorganisation that requires reduced management travel, and by the use of video conferencing where practicable between our main offices (though it recognised that in some of CNCo’s core businesses “face-time” with clients is critical to maintain the level of service

Another area, of less impact, but also contributing to the whole, over which we have some control and responsibility, is the transportation of our workforce.

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Detail - Environment: Environmental Impacts of Transporting Goods

for which CNCo is known). Where we must travel and we have a choice of carrier, we seek to use airlines with a better safety record and those that use more modern, fuel-efficient aircraft.

3. Air transportation of sea staff

This is an inherent requirement of operating manned vessels trading internationally, however we seek to manage crew changes so that they are more efficient e.g. to/from ports closer to the home port of crews wherever possible.

Every sector flown by sea staff is individually recorded and then its GHG footprint calculated using the calculator at www.atmosfair.de

In 2012 we had a sea staff total air travel footprint of 2,488 tCO2e (2011: 2,797 tCO2e) -see data Section: GRI Table EN 29 and page 39 – a decrease of 11%. This corresponds with a decrease of 20% in our sea staff numbers and of 24% in the number in operating days for owned tonnage, year-on-year, as we sent four older ships for recycling as part of the fleet renewal programme. We expect that this will then increase in absolute terms over the next

two to three years as up to 20 new vessels are delivered.

Pacific Ocean Monitoring System

CNCo has worked with the National Oceanography Centre Southampton (“NOCS”) under the SNOMS (Swire NOCS Ocean Monitoring System) Project since 2006. During this time the data collection package was on Pacific Celebes which provided an invaluable platform as it was transitting many little visited parts of the South Pacific, especially in areas where El Niño / La Niña are prevalent and the data collected was thus able to help give early warning of an increase or decrease in activity.

Both these circulations significantly affect weather patterns worldwide and can thus have large impacts on the vital production of foodstocks. As the Pacific Celebes was sent for recycling at the beginning of 2012 the opportunity was taken to return the data box to its base for recalibration and upgrading. It is envisaged that it will be returned to a vessel on a suitable trade for data collection in 2013, and CNCo has agreed to continue to fund the operating cost of the SNOMS research activity at this time.

The total flight footprint for the company management, expressed as tCO2e per person increased by 38.4% in total / 41.2% on a per person basis from 2011 to 2012, but as this was simultaneous with a near doubling of our profit after tax, it means that our employees’ footprint per dollar of profit was more than halved: our people are producing more, more efficiently and with a lower carbon footprint.

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Detail / LabourEmployment

We employ people in a total of 372 positioons in the offices ashore in our three significant employment locations: Singapore (Head Office) – 48.1%, Australia – 33.2% and New Zealand – 18.8%.

This is an increase of around 10% over 2011 and primarily reflects a) additional Superintendency for our new significant building programmes and b) the establishment of Swire Bulk.

Of these onshore employees, 54.0% of the total is male and 46.0% female, a swing away from parity of around 1.6%. However at the management level by the end of 2012, 77.6% were male and 22.4% female, a move of 1.5% towards higher female representation.

At the support staff level the gender disparity has increased by 4.0% with males dropping to 38.6% and females increasing to 61.4% from 2011 levels. In the process of recruiting new personnel we emphasise that CNCo is an equal opportunities employer. We welcome diversity in the workplace, believing that it adds material value to an organisation by helping workers to approach their jobs from different perspectives.

For new employees, CNCo has had discussions both internally and with our external consultants to ensure that Persons With Disability (PWD) with the right skill set are including when seeking any new employees.

Details of the breakdown of CNCo’s seagoing workforce as at 31 Dec 2012 are shown in the tables in the Data Section.

This shows the numbers of sea staff (who are found to split almost exactly 50:50, officers: crew), working on full-time and “fixed-term” contracts, and their nationalities.

None of our employees worldwide would be regarded as self-employed.

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Detail - Labour: Employment

In 2012 CNCo published and promulgated a revised Corporate Code of Conduct however this continues to explicitly state, inter alia:

Respect in the Workplace CNCo is committed to providing an inclusive work culture and appreciates and recognises that all people are unique and valuable and should be respected for their individual abilities.

CNCo will not tolerate harassment or discrimination on the basis of gender, religion, race, nationality or ethnic origin, cultural background, social group, disability, sexual orientation, marital status, family status, age or political opinion. The Code requires all Relevant Persons to behave with courtesy and respect towards everyone encountered in the course of business.

Only eight employees (2.1%) of our shore staff were temporary, as we actively seek to offer and maintain long-term employment. This is not a material change from 2011. The average length of service in New Zealand has increased year-on-year from 5.05 to 5.29 years, in Australia from 6.50 to 7.05 years but dropped slightly in Singapore from 3.3 to 3.2 years.

The lower absolute figure for Singapore compared to Australia and New Zealand is largely a function of the Head Office relocation and start-up in Q3 2009.

Staff turnover or attrition in New Zealand in 2012 was 6.61%. Benchmarking data are hard to find, but New Zealand Government Statistics Office and third-party studies do refer to the country as “a nation of job hoppers” with a common turnover rate of around 14% annually.

In the larger job market of Australia in 2012 the rate was a comparable 7.4%. The local

AMMA and ABS statistics on labour mobility for the maritime sector reports an average rate of around 11%, twice the rate of 2010, so in both locations the CNCo attrition rate is half to two thirds of applicable benchmarks, which is pleasing, but still not yet good enough.

In Singapore the turnover rate at 14.19% was marginally higher than the 2011 rate of 13.8% with the great majority of these voluntarily departing employees left “seeking better terms and conditions elsewhere”. This compares favourably (being 15% lower) with our Singapore benchmark rate of the published annualised monthly resignation rate figures for the Administrative and Support Services sector from Singapore Ministry of Manpower of 16.6% but it is still too high and reducing this was the subject of extra effort in 2012.

In particular we recognise that whilst we have an excellent cadre of employees, the physical separation between the onshore support staff and the seagoing operational staff that is peculiar to the shipping industry means that we must spend more time and resources than many other industries in ensuring and maintaining good lines of dialogue between the two working environments.

We continued with our in-house monthly magazine, “NiuSwire”, which first came out in Nov 2011, and which has grown bigger and more professional looking with each edition. This serves as a valuable way of keeping all the widely geographically spaced parts of the company “glued together”.

However, the major HR initiative in 2012 was the commissioning of an Alignment and Engagement (“A&E”) survey that was circulated to ALL shore and sea staff in July 2012. We used an independent company experienced in this field to ensure it was competently done and fully respected the confidentially of all the respondents.

The purpose of the A&E survey was to allow all employees to be able to totally confidentially contribute their opinions as to what CNCo was doing right, and wrong, to collect ideas for improving all work areas, to measure how connected we are as a company, and obviously how aligned and engaged all our employees are with the company’s vision and values. The response was significantly higher than the survey company had experienced in other sectors. This was especially pleasing considering the logistics of getting responses from the physically more remote ships.

The major initiative in 2012 was the commissioning of an Alignment and Engagement (A&E) survey that was circulated to ALL shore and sea staff in July 2012.

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The results were presented to senior management in late 2012 and have prompted the need for more detailed “focus groups” during the first half of 2013 to get deeper into some of the comment areas to allow us to determine in detail what should be done (stop/start/continue) to rectify/enhance/change the issues raised.

Given the wide variety of our nationality and work locations, we do not herein give a detailed breakdown of types of employment contracts or remuneration / pension entitlements as this would a) be of little material value to anyone in a different region, b) not justify the resources required to produce the detail. Suffice to say, ALL of our contracts are in accordance with local employment law as a minimum and are blind to gender identity or age, whilst recognising experience and competence/qualifications.

Worldwide, 93.3% of our staff are classed as “local”, slightly higher than in 2011. (“local” is defined as a national or permanent resident in the country of employment). The balance of 6.7% are classed as expatriate. This apparently high number of expatriates is a function of 80% of them being parent company managers who

are rotated through internal postings to gain wide sectorial experience throughout the group as they progress during their career.

We employed a total of 385 seafarers to fill positions at sea as at 31 Dec 2012. However, given that some officers will be on paid leave earned on prior voyages at sea and that, as noted below, all of our Filipino seafarers are employed through Anscor Swire Ship Management, a Swire JV manning agency, on single trip contracts as required by national law, there will be a variable number ashore whose employment can be regarded as linked to the company, but is not be counted herein. Of these 385, 34.5% or 133 are Filipino, our biggest provider of seafarers, 28.8% or 111 are from Peoples’ Republic of China (“PRC”) and 78 or 20.3% are from PNG, see Table LA 1.1. For long term “cabotage trades” we would always seek to employ local staff. However despite this, we seek to run all of our operations to a single “international” standard.

These employment figures are materially lower than in 2011, as we recycled four of our older ships in early 2012. We strenuously sought, with some success, to retain as many of the

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Philippines Overseas Employment Agency “POEA”. This is the government body regulating employment and minimum terms and conditions and generally safeguarding their working conditions abroad, however the administration of this demands single tour-of-duty contracts strictly following the POEA format. We believe this single-trip contract (though not the other employment provisions) are against the best interests of both our seafarers and the company and its business.

Unfortunately, at the current time, it is illegal to employ a Filipino seafarer under a direct contract with an overseas company but we continue to actively engage the relevant authorities in discussions to change this, whilst in no way reducing their legal employment protection.

Currently only our seafarers employed in Papua New Guinea are covered by a Collective Bargaining Agreement. We have been working

on changing this to 100% during 2012 in order that we can have this in place well prior to the adoption of Maritime Labour Convention (“MLC”) 2006 convention, expected to be in Q3 2013, but negotiations with some of the requisite (non-Filipino, non-PNG) parties have been more protracted than we expected or hoped.

The China Navigation Company employs seafarers from more than ten different nationalities covering more than five different religious faiths within its global marine operations which involves 14 owned ships plus 15 chartered ships (as at 31 Dec 2012). They currently call at many ports worldwide but are predominantly working within the Asia Pacific region, demarcated by Vladivostok in the north, Port Klang in the west, Lyttleton on New Zealand’s South Island in the south and Vancouver, Canada in the east, with a significant presence in trades to and from Papua New Guinea.

displaced seafarers as possible, recognising that they were intimately familiar with our Safety Management System (“SMS”), ethos, vision and values, and that we would need to recruit/re-employ more than this as our new ships will be delivered in 2013 and beyond.

In interpreting these figures it should be borne in mind that it would be meaningless to state which country or region the sea staff (the majority) are working, as due to the trans-border nature of working at sea the geographical distribution is very dynamic and fluid and thus would only be a snapshot at a moment in time.

With respect to the ratio of sea staff on permanent / fixed term contracts, we strongly seek to have all sea staff on permanent contracts of employment.

This gives the seafarer security of employment, enables our operations and service to benefit from familiarity with company equipment, and reduces the resources required by the company inculcating the company vision, mission and ethos to new employees.

However, employment of seafarers (and all other Overseas Filipino Workers (“OFW”) in the Philippines is strictly controlled by the

The China Navigation Company employs seafarers from more than 10 different nationalities covering more than 5 different religious faiths within its global marine operations

56


Detail - LabourOccupational Health & Safety

Health and Safety CNCo has made considerable improvements in safety performance during 2012 which saw the leading indicators (near miss reports / TRIPs) for safety having a positive effect on the lagging indicators (LTI/RWC/MTC).

The drive for zero harm for all its employees and contractors remains paramount and is headlined at every opportunity during training sessions, meetings and in in-house publications.

Quarter

Injuries

TRCF per 1 mill MANHOURS TRCF per 1 mill MANHOURSTRCF per 1 mill MANHOURS LTIF 1 mill MANHOURS

Per

sona

l Inj

urie

s / 1

mill

ion

man

hou

rs w

orke

d

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2 Q10 3 Q10 4 Q10 1 Q11 2 Q11 3 Q11 4 Q11 1 Q12 2 Q12 3 Q12 4 Q12 1 Q131 Q10

note:LTI Lost Time InjuryTRCF Total Recordable Case FrequencyRWC Restricted Work CaseMTC Medical Treatment CaseTRIP Toolbox Risk Identification Permit

57


Governance Overview

Detail - Labour: Occupational Health & Safety

The key to ensuring that safety is prioritised as the main commitment for the Company was the adoption of a bottom-up style of management in which everyone is empowered to take action to affect safety directly or indirectly, whether on board or ashore and where positive reporting of safety related matters is encouraged and recognised.

The governance to drive this commitment comes from CNCo’s Sustainable Development Steering Group which maintains a balance of representation between Seniormost Management, Sustainable Development, Fleet Safety and Shore Safety and is structured so that each is interlinked with each other.

Sustainable Development Steering Committee

> Engagement with Head, Liner and Agency Offices

> Produce the annual SD report

Fleet Safety Steering Committee

> Engagement with Fleet

> HR and Training Institutions

> Flag

> Class

> Port State

Shoreside Safety Committee

> Engagement with Shippers

> Contractors and Suppliers

> Port Authorities

58


The following proactive and predominatly leading safety tools were in effect during 2012 to drive our commitment to Zero Harm:

Near Miss ReportingNear Miss Reports (“NMR”) are actively encouraged as they highlight opportunities for improvement.

General Permit to Work Toolbox Risk Identification Permit (“TRIP”) – these identify possible risks and hazards, enabling control management and the development of the required shared ownership for the work activity.

Take 5 Concept This is a personal safety tool that provides a conscious and subconscious “on the job” message to work more safely.

Digital Safety CountersInstalled on every ship and office: both real time and visual behavioural based safety prompts.

Implementation of 5SSort, Straighten, Sweep, Standardise & Sustain.

4-Box Alerts These are high-impact, visual alerts of high-potential incidents that create a strong visual message that are quickly circulated around the entire organisation and seen by everyone.


59



Further initiatives to strengthen the wider process have been introduced, including vessel inspection protocol for both CNCo and 3rd Party ships and an auditing and training programme for stevedoring operations within our sphere of operations.

For vessel vetting, this has resulted in a standardized vessel inspection format with emphasis on the Human Element as well as technical matters.

Transparency in reporting safety KPIs is crucial to ensure that everyone understands that CNCo takes safety seriously.

The safety tools mentioned above as well as considerable investment in safety awareness training (looking at the softer elements of safety management) have provide the framework for tangible improvements in safety management as can be shown in the comparison for CNCo’s safety pyramids for 2011 and 2012.

Each indicator shown improved between 2011 and 2012, as we seek fewer LTI and RWC/MTC but more Near Miss Reports and TRIPs. CNCo was recognised for its achievements in improving its safety performance as well as its safety culture during 2012 with two awards:

The Lloyd’s List Global Award 2012Amver Assisted Rescue at Sea Award - MV Kwangtung for search and rescue of Rabaul Queen

The Lloyd’s List Asia 2012Safety Award – The China Navigation Company

LTI<

<

<

<

<

<

<

<

RWC / MTC

NEAR MISS

TRIP

Safety Pyramid

21,609

984

9

4

2012

12,076

562

20

9

2011

60


Detail / LabourTraining, Education and Counselling

Due to local regulations for Overseas Filipino Workers, all of our seafarers employed through Anscor Swire Ship Management (“ASSM”) are engaged on a contract-by-contract basis. This means that these 133 seamen, from our total of 385 (34.5%), all receive a briefing at the ASSM office in Manila before each departure. Each briefing includes education on communicable disease issues.

In 2012 we additionally instituted this for our PRC seamen and thus this captured another 111 seamen, or 28.2%, meaning that nearly 63% received this important safety and health briefing prior to their departure to join their ships.

Health and Hygiene issues for the entire fleet are covered in a dedicated section in the fleet SMS that governs the marine operations of the company and is available to all seafarers. The latter also includes information of contagious diseases, smoking, drug, alcohol and substance abuse, and obtaining medical attention.

Policies concerning (No) Smoking and Drug, Alcohol and Substance Abuse are included in the SMS, and are posted in conspicuous places on all company vessels and at all other company work sites. CNCo has adopted the guidance of both the Standards for Training

and Certification of Watchkeepers (“STCW”) Code and the Oil Companies International Marine Forum (“OCIMF”) with respect to consumption, working under the influence, and random testing for Drug, Alcohol and Substance abuse.

All staff are screened for contagious and communicable diseases during pre-employment and pre-contract medicals, and at the industry medicals required at prescribed intervals during a seafarer’s professional service. We do not currently provide education and training, or counseling on a general basis to employees families or their community members, as working globally at sea precludes there being any geographically local workplace communities.

After our initial discussions in 2011 with the Singapore Business Coalition for Aids (“BCAS”) to investigate the establishment of a company–

wide AIDS/HIV policy, we have regrettably not managed to progress this in 2012. This is still work in progress and its importance in many of our stakeholder communities is recognised. We now hope to address this in the future.

CNCo’s 373 shore staff received a total of 530 man-days of generally discretionary training at a total cost of almost USD 171,730 during the year. This is 3.3 times the amount spent in the previous year, for fewer man-hours and represents more targeted and in-depth training.

The managerial level staff received an average of 8.57 hours each over the year, at a cost of USD 455 per staff member, whereas the “junior and support staff” received an average of 13.22 man-hours / USD 464 per employee (5% more hours, but at 50% more cost, than in 2012).CNCo’s 487 (during the year; 385 is the figure for 31 Dec) sea staff received a total of 1,063 man-days of discretionary training at a total cost of almost USD 1,634,363 during the year.

CNCo’s 373 shore staff received a total of 530 man-days of generally discretionary training at a total cost of almost USD 171,730 during the year.

61


Detail - Labour: Training, Education and Counselling

This is a reduction in cost of 38%, due mainly to a reduction in seafarer numbers of 21% on a y-o-y basis. It equates to USD 4,245 for each seafarer over the year, and is nearly 10 times greater than the shore staff figure.

This is predominantly because nearly all the sea staff training will involve flights and accommodation, which is not generally the case for shore staff.

We do not maintain a database of mandatory, STCW required professional training. Given that many courses are 3 or 6 months long, but for which not all attendees are fully sponsored by CNCo, the average figure quoted is not representative of the total training commitment of all the company to its employees.

ALL seafarers receive a Personal Evaluation Report (PER), generally by their immediately ranking senior and/or the Master/Chief Engineer at the end of every tour of duty. They may thus receive up to a maximum of three reviews per year. Every evaluation it is sent for review to the General Manager, Fleet. After his review, it is sent to the HR Manager for final review and soft-filing.

The above work flow ensures that all performance reviews are sighted by management. It also ensures that a record is kept that will highlight trends in comments on reportees, (and importantly also by reporters).

All managers and local onshore support staff also receive a personal performance review by their line manager annually.

CNCo started the roll-out of a new HR software package across the company in 2012 that will help establish “SMART personal goals”, facilitate a gap analysis and identify the general and specific competence training needs for each person. This will assist management to more clearly define employees career paths within the overall needs of the company. This is a multi-year project.

All managers and local onshore support staff receive a personal performance review by their line manager annually

62


Training Position Staff members Training Hours Training Hours Training Costs Training costs (US$) Total Avg per staff member Total (US$) Avg per staff member

Seafarers - 385 8,510.00 22.10 1,634,362.82 4,245.10

Shore Staff Managerial 147.00 1,259.50 66,898.78 8.57 455.09

Non - Managerial 225.50 2,981.50 104,830.74 13.22 464.88

Training Costs and Time

Detail - Labour: Training, Education and Counselling

63


The CNCo Code of Conduct was re-advised to all onshore and offshore personnel at the end of 2011.

We are pleased to advise that there were zero acts of discrimination or harassment reported on any grounds to, or by, any CNCo personnel during the calendar year 2012.

Discrimination is defined under ILO Convention No. 111 as any distinction, exclusion or preference involving internal and/or external stakeholders made on the basis of race, colour, sex, religion, political opinion, national extraction or social origin (among other characteristics), “which has the effect of nullifying or impairing equality of opportunity and treatment in employment or occupation”.

It also includes “harassment”, defined as “a course of comments or actions that are unwelcome, or should reasonably be known to be unwelcome, to the person towards whom they are addressed.”

The CNCo Code of Conduct was revised at the beginning of 2013 to ‘Rev 4’ but the provisions with respect to discrimination and harassment are unchanged (except that a “child” in “child labour” is now defined as “being under the age of 16, or local minimum age, whichever is the higher”).

It can also be found at http://bit.ly/1cB7r7H

It contains these following explicit provisions:

Respect in the Workplace

CNCo is committed to providing an inclusive work culture and appreciates and recognises that all people are unique and valuable and should be respected for their individual abilities. CNCo will not tolerate harassment or discrimination on the basis of gender, religion, race, nationality or ethnic origin, cultural background, social group, disability, sexual orientation, marital status, family status, age or political opinion. The Code requires all Relevant Persons to behave with courtesy and respect towards everyone encountered in the course of business.

The Code promotes the following principles:

•Upholdingallapplicablelegalandcorporate occupational health and safety standards;

•Notpermittinganybreachesofemployment law or the use of child (defined as being under the age of 16, or local minimum age, whichever is the higher) or forced labour;

• Reportingunacceptableconducttoline management or the business unit head;

• Notcondoningbullyingandharassment;

• Complyingwithanylegalrequirements concerning the collection, holding, processing, disclosure and use of personal data;

• Respectingintellectualpropertyrights, including copyright, belonging to others.

Detail / Human RightsTotal Number of Incidents of Discrimination and Actions Taken

CNCo is committed to providing an inclusive work culture and appreciates and recognises that all people are unique and valuable and should be respected for their individual abilities.

64


Detail / SocietyTotal Number of Legal Actions for Anti-competitive Behaviour, Anti-trust, and Monopoly Practices and their Outcomes

CNCo takes all these behaviours and practices very seriously and requires both its employees and its contractors the highest ethical standards, as described in its Corporate Code of Conduct (“CCoC”).

We are pleased to report that CNCo was not involved in any legal actions for anticompetitive behaviour, anti-trust, and monopoly practices during the calendar year 2012.

In Q4 we were establishing a more rigorous regime for making employees aware of our Code of Conduct and its contents. This would have (will) demonstrated quantitatively and formally that all employees were aware of all the provisions of CCoC.

However during this process it was decided to materially expand the CCoC. Whilst this process did not change a single one of our underlying principles, it was felt that it would be helpful if the supporting data and

examples/explanations were significantly more detailed and expanded to ensure ease of comprehension by all employees.

This necessitated re-writing the bank of questions to be randomly selected by the web-based survey programme, and re-looking at the process of promulgating the revised code before our employees could undertake the survey.

The planned promulgation, awareness raising, training and testing of the CCoC rev 4. was thus postponed to Q1 2013.

CNCo also plans to enhance its auditing of its suppliers to ensure their compliance with the Supply Chain Sustainability SCoC in 2013.

CNCo takes all these behaviours and practices very seriously and requires both its employees and its contractors the highest ethical standards, as described in its Corporate Code of Conduct (“CCoC”).

65


Detail / SocietyMonetary Value of Significant Fines and Non-monetary Sanctions for Non-compliance with Laws and Regulations

During 2012, the fleet of 19 ships (including the 4 to-be-recycled Pacific Celebes, Pacific Flores, Pacific Java & Hangchow) were inspected on a total of 52 separate occasions. In the first half of the year the ships received clean bills of health with only 41 non-detainable deficiencies against any shipping industry regulation being found. In the second half, a total of 31 deficiencies were found, giving an average of 1.38 Deficiencies per Port State Inspection (PSI), (DpI).

Of the total 72 deficiencies over the calendar year, 69 (95.8%) were minor and/or rectified prior to the scheduled departure of the vessel. Regrettably two vessels received the balance of three deficiencies that were deemed serious enough that the vessel was delayed from sailing as scheduled whilst the defect was rectified. Our target Port State Compliance Index rate for 2012 is <2.0 DpI.

This is disappointing given that there were zero Port State Detentions the previous year, but the vessels’ increasing age has meant that increasing effort and resources have been applied to turning this trend round and returning

In 2012, CNCo received no fines for non-compliance with non-environmental laws and regulations. The only non-monetary sanctions that were received by CNCo during 2012 related to the results of Port State Inspections (“PSI”) of ships in the owned fleet (as detentions in chartered in tonnage are the primary responsibility of the relevant owners).

the metric to zero. The statistics are circulated around the fleet and crews are rewarded for good performance (i.e. a result of zero deficiencies during a PSI).

It should be noted that there whilst nearly all port inspectors are rigorous and efficient in application of the rules and indeed this is heartily supported by CNCo as a means of moving towards safer seafaring and cleaner seas, there may be a very small minority in some ports who occasionally may be a little over-zealous in their personal interpretation of the rules as understood by experienced industry professionals.

In these cases CNCo has followed the established and correct formal procedure of seeking the opinion of independent classification surveyors and where our objections to deficiency findings have been supported we have appealed these to Flag State Authorities.

67

Data

68This section reports all the supporting data that is used to provide the narrative in the Detail section.

The data is aggregated from many sources - primarily the owned and managed fleet and our offices worldwide, that are contained within CNCo’s Organisational and Operational as shown in the Summary section on page 19.

We review both the boundaries and which data is material for reporting to our stakeholders annually.

In this section:

69 Fleet Breakdown

72 Economic Data & Tables

73 Environmental Data & Tables

77 Labour Data & Tables

78 Abbreviations

80 Verification and Assurance Statement

82 Contact

83 G3.1 Content Index

69


DataFleet Breakdown

Coral Chief 1990 8809191 15.5 24.0 IFO 180cst 13,387 10,352 5,804 158.06 22.0 981 N/A N/A 3 x 45t Hong Kong Lloyds 981 TEU, Geared, MPP D Register Highland Chief 1990 8809189 15.5 24.0 IFO 180cst 13,669 10,357 5,804 158.06 22.0 876 N/A N/A 3 x 60 Hong Kong Lloyds 981 TEU, Geared, MPP D Register Island Chief 1990 8810449 15.5 24.0 IFO 180cst 13,387 10,352 5,804 158.06 22.0 981 N/A N/A 3 X45t Hong Kong Lloyds 981 TEU, Geared, MPP D Register Kokopo Chief 1991 8907412 15.5 24.0 IFO 180cst 13,387 10,352 5,804 158.06 22.0 981 N/A N/A 3 X45t Hong Kong Lloyds 981 TEU, Geared, MPP B Register Papuan Chief 1991 8901705 15.5 24.0 IFO 180cst 13,387 10,352 5,802 158.06 22.0 981 N/A N/A 3 X45t Hong Kong Lloyds 981 TEU, Geared, MPP B Register Changsha 1991 9003847 18.5 48.0 IFO 380cst 25,561 18,391 9,229 184.90 27.6 1,123 32,114 34,103 3 X26t, 2 x 31t, 1x20t Hong Kong Lloyds 1,123 TEU, Geared, MPP G Register Chekiang 1991 9003835 18.0 48.0 IFO 380cst 25,561 18,391 9,229 184.90 27.60 1,123 32,114 34,103 3 X26t, 2 x 31t, 1x20t Hong Kong Lloyds 1,123 TEU, Geared, MPP G Register Chenan 1992 9007374 18.0 48.0 IFO 380cst 25,561 18,391 9,229 184.90 27.60 1,123 32,114 34,103 3 X26t, 2 x 31t, 1x20t Hong Kong Lloyds 1,123 TEU, Geared, MPP F Register Chengtu 1991 9007362 18.5 48.0 IFO 380cst 25,561 18,391 9,229 184.90 27.60 1,123 32,114 34,103 3 X26t, 2 x 31t, 1x20t Hong Kong Lloyds 1,123 TEU, Geared, MPP F Register Kwangsi 1995 9103116 18.5 48.0 IFO 380cst 25,607 18,468 9,253 184.90 27.60 1,193 32,114 34,103 3 X26t, 2 x 31t, 1x20t Hong Kong Lloyds 1,193 TEU, Geared, MPP F Register Kwangtung 1994 9070709 18.5 48.0 IFO 380cst 25,607 18,451 8,250 184.90 27.60 1,193 31,472 29,819 2 X26t, 3x 35t Hong Kong Lloyds 1,241 TEU, Geared, MPP F Register Kweichow 1994 9070694 18.5 48.0 IFO 380cst 25,524 18,451 8,250 184.90 27.60 1,241 28,831 29,820 2 X26t, 3x 35t HongKong Lloyds 1,241 TEU, Geared, MPP F Register Kweilin 1994 9103104 18.5 48.0 IFO 380cst 25,410 18,468 9,201 184.90 27.60 1,193 32,608 33,756 2 X26t, 3x 35t HongKong Lloyds 1,193 TEU, Geared, MPP F Register Erawan 1982 8100997 9.0 18.0 LSMGO 64,643 35,716 20,830 225,00 32.20 N/A 71,246 74,996 3 x30t Grab I.O.M. Lloyds Panamax Bulk Carrier, N/A Register Silo Vessel

Owned Vessels In Operation as at 31 Dec 2012

Vessel Name Year IMO Service FO Cons at Grade FO DWT Gross Net LOA Max Capacity Hold Hold Cargo Gear (t) Flag Vessel’s Vessel’s EVDI Built No. Speed this speed in ME (SSW Tonnage Tonnage (m) Breadth Nominal Capacity - Capacity - Class Type (Knots) (mt/day) - mts) (m) (TEU) Bale (m3) Grain (m3)

70


DataFleet Breakdown

Shansi 2013 9614476 15.5 29.0 IFO/MDO/LSMDO 30,699 25,483 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Shantung 2013 9614488 15.5 29.0 IFO/MDO/LSMDO 30,699 25,483 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Shaoshing 2013 9614490 15.5 29.0 IFO/MDO/LSMDO 30,699 25,483 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Shengking 2013 9614505 15.5 29.0 IFO/MDO/LSMDO 30,699 25,483 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Shuntien 2013 9614517 15.5 29.0 IFO/MDO/LSMDO 30,699 25,483 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Siangtan 2013 9614529 15.5 29.0 IFO/MDO/LSMDO 30,699 25,483 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Soochow 2013 9614531 15.5 29.0 IFO/MDO/LSMDO 30,699 11,814 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Szechuan 2013 9614543 15.5 29.0 IFO/MDO/LSMDO 30,699 11,814 11,814 190.50 28.20 2,082 41,881 44,807 4 x 60 / 50 / 40t Singapore Lloyds 2,118 TEU, Geared, MPV31 F+ Register Wuchang 2014 9657844 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wuchow 2014 9657856 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.0 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wuhu 2014 9657868 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wulin 2014 9657870 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wantung 2014 9681871 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wanlui 2014 9681883 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wanyuan 2014 9681895 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier Wanyi 2015 9681900 18.3 14.0 IFO/MDO/LSMDO 39,500 N/A N/A 179.90 30.00 N/A N/A N/A 4 X 30t Singapore Lloyds Bdelta Handysize Eco Bulk/ B Register Timber Geared Bulk Carrier

Owned Vessels Under Construction/On Order as at 31 Dec 2012

Vessel Name Year IMO Service FO Cons at Grade FO DWT Gross Net LOA Max Capacity Hold Hold Cargo Gear (t) Flag Vessel’s Vessel’s Forecast Built No. Speed this speed in ME (SSW Tonnage Tonnage (m) Breadth Nominal Capacity - Capacity - Class Type EVDI (Knots) (mt/day) - mts) (m) (TEU) Bale (m3) Grain (m3)

71


Pine 1 2011 9438377 14.0 29 IFO 380cst 34,037 22,998 12,319 182.9 28.4 960 41,166 44,746 2 x 40t , 3x 35t Panama Lloyds MPP E Pine 3 2011 9438389 14.0 29 IFO 380cst 34,065 22,998 12,319 182.9 28.4 960 41,166 44,746 2 x 40t , 3x 35t Panama Lloyds MPP E Pine 6 2010 9438365 14.0 29 IFO 380cst 34,022 22,998 12,308 182.8 28.4 960 41,166 44,746 2 x 40t , 3x 35t Panama Lloyds MPP E Anhui 2003 9231145 15.0 36.5 IFO 380cst 30,346 23,132 9,375 192.9 27.8 1,831 34,793 34,793 2 x 100t , 2x 50t Liberia Gemanischer MPP F Lloyds Anking 1990 8918241 18.0 28 IFO 380cst 22,568 17,331 8,142 176.7 27.0 917 29,511 30,833 4 x 25t , 1x 35t Marshall NKK MPP E Ningpo 1997 9134658 19.5 36.5 IFO 380cst 22,900 16,800 8,662 183.9 25.3 1,728 29,668 29,817 3 x 40t Germany Gemanischer B170 (reclassified as F Lloyds general cargo vessel) Ninghai 2003 9236444 19.6 36.5 IFO 380cst 23,067 16,802 8,672 184.0 25.3 1,728 29,668 29,817 3 x 40t Marshall Gemanischer B170 (reclassified as D Lloyds general cargo vessel) Nanchang 1995 9102514 19.5 36.5 IFO 380cst 22,900 16,175 8,801 184.7 25.0 1,728 N/A N/A 3 x 40t Liberia Gemanischer B170 (reclassified as D Lloyds general cargo vessel) Yunnan 2002 9255529 19.5 30.5 IFO 380cst 16,794 13,764 5,157 154.0 23.3 1,078 N/A N/A 2 x 40t Singapore ABS Container Carrier F Yingchow 2008 9499010 19.4 13.6 IFO 380cst 13,760 9,954 5,117 148.0 23.3 1,022 N/A N/A 2 x 45t Antigua & Gemanischer CV1100 (reclassified as E Barbuda Lloyds MPP vessel) Tasman Star 1990 8821802 13.0 18 IFO 380cst 12,200 7,950 4,160 129.6 18.9 678 14,870 14,870 3 x 40t Dutch Lloyds MPP (A Type) D Tasman Sky 1991 9014872 13.0 18 IFO 380cst 12,150 7,949 4,157 129.5 19.1 678 14,870 14,870 3 x 40t Dutch Lloyds MPP (A Type) D Micronesian Pride 2008 9383481 15.0 20 IFO 380cst / MDO 7,665 5,338 2,309 117.0 19.7 618 9,422 9,602 2 x 40t Cyprus China General Cargo F Classification Antung 2007 9371957 15.0 20 IFO 380cst / MDO 7,702 5,316 2,309 117.0 19.7 618 9,523 9,522 2 x 40t Malta China General Cargo F Classification

Managed / Operated Vessels as at 31 Dec 2012

DataFleet Breakdown

Vessel Name Year IMO Service FO Cons at Grade FO DWT Gross Net LOA Max Capacity Hold Hold Cargo Gear (t) Flag Vessel’s Vessel’s EVDI Built No. Speed this speed in ME (SSW Tonnage Tonnage (m) Breadth Nominal Capacity - Capacity - Class Type (Knots) (mt/day) - mts) (m) (TEU) Bale (m3) Grain (m3)

72


DataEconomic Data & Tables

CNCo Charitable Donations 2012 Education94.7%

Environment0.3%

Youth (non-Education)0.1%

Health & Welfare5.2%

73


DataEnvironmental Data & Tables

Consumption

180 IFO 380 IFO MGO LO Petrol Diesel Boat Days Boat Days y-o-y (m3) (m3) (m3) (m3) (litres) (litres) 2012 2011Owned 23,621.13 63,891.28 1,766.17 1,345.23 5,866.39 - 4,732.75 6,205.00 76.3%Chartered - 94,428.17 2,661.42 1,238.43 5,518.24 161,077 4,357.00 4,913.00 88.7%Total 23,621.13 158,319.44 4,427.59 2,583.66 48,818 10,461 171,538 11,118.00 81.8%

Table EN3.1

Scope 1 & 2 GHG Emissions (tCO2e) Table EN16

Scope 3 GHG Emissions (tCO2e)

180 IFO 380 IFO MGO LO (m3) Petrol litres Diesel litres Totals (2012) Totals (2011) y-o-y Management travel NIL NIL NIL NIL NIL NIL 2,059.114 1,487.350 138.4%Crew Travel NIL NIL NIL NIL NIL NIL 2,488.27 2,796.786 89.0%Total 4,547.384 4,284.136 106.1%

Table EN17

180 IFO 380 IFO MGO LO Petrol Diesel Totals (2012) Totals (2011) y-o-y Factor 3.2281 3.2281 3.4926 3.1815 0.0022320 0.0026720 292,519.190 366,487.287 79.8%Owned 76.251.38 206,247.43 6,168.52 3,851.86 NIL NIL 317,664,894 323,136.343 98.3%Chartered NIL 304,823.56 9,295.28 3,546.05 NIL NIL 610,320.988 690,241.520 88.4%Total 23,621.13 511,070.99 15,463.80 7,397.91 108.96 27.95 610,558.199 690,527.982) 88.4%

74



Factor from paper: US EPA (1995) ‘Compilation of Air Pollutant Emission factors: Volume 1: Stationart Point and. Area sources’ AP-42 Fifth Edition, January 1995.Table C.5 on page 30: http://bit.ly/1jYLEML

SOx emissions (metric tonnes) Table EN20.2

Factor from paper: US EPA (1995) ‘Compilation of Air Pollutant Emission factors: Volume 1: Stationart Point and. Area sources’ AP-42 Fifth Edition, January 1995.Table C.5 on page 30: http://bit.ly/1jYLEML

NOx emissions (metric tonnes)

180 IFO 380 IFO MGO LO Totals Totals y-o-y

(mt) (mt) (mt) (mt) (2012) (2011)Factor 81.767 81.767 40.687 40.687

Factor 82.777 82.777 43.507 43.507

Owned 1,931.438 5,224.221 71.860 49.260 7,277 9,046 80.4%

Chartered NIL 7,816.454 115.791 48.492 7,981 8,206 97.3%

Total 2,014 13,123 231 141 15,510 17,506 88.6%

Table EN20.1

180 IFO 380 IFO MGO LO (m3) Totals Totals y-o-y

(mt) (mt) (mt) (mt) (2012) (2011)Factor 70 70 70 20

Owned 1,653.479 4,472.389 35.323 24.214 6,185 7,744 79.9%

Chartered NIL 6,609.972 53.228 22.292 6,685 6,842 97.7%

Total 1,723 11,152 109 67 13,051 14,766 88.4%

75



Factor from paper: Eyring, V., et., al., Transport impacts on atmosphere and Climate: Shipping, Atmospheric Environment (2009), doi: 10.1016/j.atmosenv.2009.04.059Average of 5 in Table 2 at http://bit.ly/1jYM1XM

Factor from paper: Representative emissions factors for use in “Quantification of emissions from ships associated with ship movements between port in the EC”Average in Table VII at http://bit.ly/1d2cTNt

Particulate Matter (“PM”) emissions (metric tonnes)


(mt) (mt) (mt) (mt) (2012) (2011)Factor 6.648 6.648 1.200 1.200

Owned 157.033 424.749 2.119 1.453 585 733 79.9%

Chartered NIL 627.758 3.194 1.338 632 648 97.6%

Total 164 13,123 7 4 1,233 1,396 88.3%

Table EN20.3

Volatile Organic Compounds (“VOC”) emissions (metric tonnes)


(mt) (mt) (mt) (mt) (2012) (2011)Factor 1.20 1.20 1.20 1.20

Owned 28.345 76.670 2.119 1.453 109 136 79.8%

Chartered NIL 113.314 3.194 1.338 118 120 98.2%

Total 164 13,123 7 4 231 261 88.7%

Table EN20.4

76



Factor from URL: Dera Coversations Factors: http://bit.ly/JoyyrJ Table 10c, Rolling 5 year advantage for Overseas Electricity CONSUMED (i.e. after Transmission and Distribution (“T&D”) losses) at May 2012)

Scope 1 Energy Consumption (GJ) Table EN3

180 IFO 380IFO MGO LO Petrol Diesel Totals Totals y-o-y

(2012) (2011)Factor 40.19 40.19 43.33 51.72 0.027533 0.30396 NIL NIL Owned 949,333 2,567,790 76,528 62,620 NIL NIL 3,656,272 4,580,107 79.8%Chartered (GJ) NIL 3,795,068 115,319 57,649 NIL NIL 3,968,036 4,036,767 98.3%Total 949,374 6,362,899 191,891 120,320 1,344 318 7,626,145 (GJ) 8,624,206 (GJ) 88.4%

Scope 2 Energy Consumption Table EN3

SIN 2012 AUS 2012 NZE 2012 Electricity Totals Totals y-o-y (2012) (2011)Grid Factor 0.00055965 0.00095677 0.00022411 0.003600Electricity (kWhr) 139,795 137,770 121,148 NIL 398,713 482,351 82.7%Electricity (tCO2e) 78.24 131.81 27.15 NIL 237.20 286 82.8%GJ 503.26 495.97 436.13 1,435 NIL NIL NILTotal 1,435 1,435.37 1,736.46 82.7%

77


DataLabour Data & Tables

Breakdown of Nationality of Sea Staff Positions2012

Total Nationality %

133 Filipino 34.5%

111 PRC 28.8%

78 Papua New Guinea (PNG) 20.3%

25 Ukraine 6.5%

18 Hong Kong SAR 4.7%

16 Commonwealth 4.2%

4 Other 1.0%

385 Total 100%

PRC28.8%

Other1.0%

Filipino34.5%

Commonwealth4.2%

Hong Kong SAR4.7%

Ukraine6.5%

PNG20.3%

Total

385

78


DataAbbreviations

AMSA Australian Marine Safety AuthorityASA Australian Shipping AssociationASSM Anscor Swire Ship Management manning agencyBHP Brake Horse PowerCAR Audit-driven Corrective Action ReportCBA Collective Bargaining AgreementCCoC Corporate Code of ConductCFC Chloro-fluoro-carbon/sCNCo The China Navigation Company Pte LtdCoC Certificate of CompetencyCSR Corporate Social ResponsibilityDCC Australian government: Department of Climate ChangeDECC UK government: Department of Energy and Climate ChangeDEFRA UK government: Department for Environment, Food and Rural AffairsDPA ISM Code Designated Person AshoreECA Emission Control AreaEEOI Energy Efficiency Operational IndexEPA US government Environmental Protection AgencyETS Emission Trading SchemeGEDO Australian government DCC Greenhouse and Energy Data OfficerGHG Greenhouse Gas/esGJ (unit) Giga-Joule, 1 billion joules of energyGRI Global Reporting InitiativeHCFC Hydro-chloro-fluoro-carbon/sHCV High Conservation ValueHFO Heavy Fuel Oil – a residual fuel

HHV Higher Heating Value, also known as gross calorific value, of a fuel is defined as the amount of heat released by combusting a specified quantity and returning the temperature of the combustion products to 150°C. LHV assumes all the water component is in liquid state at the end of combustionHOF Head Office (in Singapore)HSE Health, Safety and the EnvironmentICAO Inter Civil Aviation Organisation IFO Intermediate Fuel Oil - residual fuel. Usually 180 or 380 CST viscousity. See http://intertek.ch/schwerol

IHM Inventory of Hazardous Material, per the HK Ship Recycling Convention ILO (UN) International Labour OrganisationIMO (UN) International Maritime Organisation ISM International Management Code for the Safe Operation of Ships and for Pollution Prevention, (International Safety Management (ISM) Code) as chapter XI of SOLASIUCN International Union for Conservation of Nature and Natural ResourcesKBA Key Biodiversity AreaKPI Key Performance IndicatorkW hr (unit) Kilo Watt hour, is a unit of energy equal to 1,000 Watt hours or 3.6 mega Joules LHV Lower Heating Value, also known as net calorific value, of a fuel is defined as the amount of heat released by combusting a specified quantity and returning the temperature of the combustion products to 150°C. LHV assumes all the water component is in vapour state at the end of combustionLO Lubricating OilLTI Lost Time InjuryLTIFR Lost Time Injury Frequency Rate

79


Data: Abbreviations

MARPOL IMO International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 and laterMCA (UK) Maritime and Coastguard AgencyMDO Marine Diesel Oil – a distillate fuelMGO Marine Gas Oil – a distillate fuel MHE Material Hazardous to the EnvironmentMLC ILO Maritime Labour Convention, 2006MTC Medical Treatment CaseNGER Australian National Greenhouse Gas and Energy Reporting ActNI Nautical InstituteNOX Oxides of NitrogenOFW Overseas Filipino WorkersPM Particulate MatterPO Purchase Order/sPOEA Philippines Overseas Employment Agency PSI Port State Inspection, DPl: Deficiencies per Port State Inspection, CARB: California Air Resources Board, PSCI: Port State Inspection Compliance Index, TRCF: Total Recordable Case Frequency RateQHSE Quality, Health, Safety and EnvironmentRFQ Request For a QuoteRWC Restricted Work CaseSD Sustainable DevelopmentSECA Sulphur Emission Control Area/s

SEEMP Ship Energy Efficiency Management PlanSIN SingaporeSMS Safety Management SystemSMTC Swire Marine Training Centre, located in Loyang, Singapore SOLAS IMO International Convention for the Safety of Life at Sea, 1974, as amended in 1980 and laterSOX Oxides of Sulphur STCW IMO International Convention on Standards of Training, Certification and Watch-keeping for Seafarers, 1978, as amended in 1995 and latertCO2 Tonnes of Carbon Dioxide tCO2e Tonnes of Carbon Dioxide equivalent. This is CO2 plus the other four “natural GHG of CH4, N2O and the two industrial GHG of SF6 and HydroFluroCarbonsGHGTRCF Total Recordable Case FrequencyTRIP Toolbox Risk Identification PermitULS Ultra Low Sulphur contentUNFCCC United Nations Framework Convention on Climate ChangeVOC Volatile Organic Compound/sy-o-y Year on Year change 5S “Seiri, Seiton, Seiso, Seiketsu, and Shitsuke” or “Sorting, Set in order, Systematic cleaning, Standardizing, and Sustaining”

Copeland & Partners Limited

Anne Copeland T +852 9833 5979 [email protected] 3B, Block 1, Victoria Garden, 301 Victoria Road, Pokfulam, Hong Kong, PRC

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Anne Copeland T +852 9833 5979 [email protected] 3B, Block 1, Victoria Garden, 301 Victoria Road, Pokfulam, Hong Kong, PRC

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82


DataContact

Request for feedback

In order that we may continually improve our reporting, we would be grateful for your views and comments on any aspects of this report via e-mail to the address below.

Contact Details

Thank you for reading this report

Simon BennettGeneral ManagerSustainable Development 300 Beach Road, #27-03 The Concourse, Singapore 199555

Tel +65 6309 3632

[email protected]@chinanav.com

www.chinanav.com

83


DataG3.1 Content Index - GRI Application Level C

Profile Description Reported Cross-reference Reason for Explanation Disclosure / Direct answer omission

1.1 Statement from the most senior decision-maker of the organization. Fully Summary - MD’s Message

1. Strategy and Analysis


2.1 Name of the organisation. Fully Summary - Introduction

2.2 Primary brands, products, and/or services. Fully Summary - Introduction

2.3 Operational structure of the organization, including main divisions, Fully operating companies, subsidiaries, and joint ventures. Data section - Governance

2.4 Location of organization’s headquarters. Fully Summary - Introduction

2.5 Number of countries where the organization operates, and names Fully Data section - Governance of countries with either major operations or that are specifically relevant to the substainability issues covered in the report.

2.6 Nature of ownership and legal form. Fully Data section - Governance

2. Organizational Profile

STANDARD DISCLOSURES PART 1: Profile Disclosures

Application Level C assured by Copeland & Partners LimitedReport fully on the below selection of profile disclosures or provide a reason for omission

84


Organization Profile cont.

2.7 Markets served (including geographic breakdown, sectors served, Fully Summary - Introduction and types of customers/beneficiaries).

2.8 Scale of the reporting organization. Partially Summary - Introduction As CNCo is a private company, financial Net sales, capitalization omitted on purpose and performance data is confidential 2.9 Significant changes during the reporting period regarding size, Fully Summary - Introduction structure, or ownership.

2.10 Awards received in the reporting period. Fully Achievement of SD 2012 Targets and KPIs during 2013 Head Office certified EcoOffice, Lloyd’s List awards


3.1 Reporting period (e.g. fiscal/calendar year) for information provided. Fully Summary - Introduction

3.2 Date of most recent previous report (if any). Fully Summary - Introduction

3.3 Reporting cycle (annual, biennial, etc.) Fully Summary - Introduction

3.4 Contact point for questions regarding the report or its contents. Fully Data- Contacts

3.5 Process for defining report content. Fully Summary - Introduction

3.6 Boundary of report (e.g. countries, divisions, subsidiaries, leased Fully Summary - Introduction facilities, joint ventures, suppilers). See GRI Boundary Protocol for further guidance.

3. Report Parameters

Data: G3.1 Content Index - GRI Application Level C

85


Report Parameters cont.

3.7 State any specific limitations on the scope or boundary of the report Fully Summary - Introduction (see completeness principle for explanation of scope).

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, Fully Summary - Introduction outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.

3.9 Data measurement techniques and the basis of calculations, including Fully Summary - Introduction assumptions and techniques underlying estimations applied to the compilation of the indicators and other information in the report.

3.10 Explanation of the effect of any re-statements of information Fully Summary - Introduction provided in earlier reports, and the reasons for such re-statement (eg. mergers/acquisitions, change of base years/periods, nature of business, measurement methods).

3.11 Significant changes from previous reporting periods in the scope Fully Summary - Introduction boundary, or measurement methods applied in the report.

3.12 Table identifying the location of the Standard Disclosures in Fully This table the report.

3.13 Policy and current practice with regard to seeking external Fully This table, Summary - Introduction and MD’s message assurance for the report.


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4.1 Governance structure of the organization, including committees Partially Data Section - Governance under the highest governance body responsible for specific tasks, Not by age or diversity such as setting strategy or organizational oversight.

4.2 Indicate whether the Chair of the highest governance body is also Fully Data Section - Governance an executive officer.

4.3 For organizations that have a unitary board structure, state the Fully Data Section - Governance number and gender of members of the highest governance body that are independent and/or non-executive members.

4.4 Mechanisms for shareholders and employees to provide Fully Data Section - Governance recommendations or direction to the highest governance body.

4.14 Stakeholders are not identified in the Governance section so Fully Data Section - Governance this is not fully addressed.

4.15 Basis for identification of full of stakeholders needs to be addressed Fully Data Section - Governance in the Governance section to fully comply.

4. Governance, Commitments, and Engagement


87


Economic

STANDARD DISCLOSURES PART 3: Performance Indicators

Report fully on 10 core or additional Performance Indicators - At least 1 from each Indicator Dimension (Economic, Environmental and Social)

Economic Performance

Indicator Description Reported Cross reference

EC1 Direct economic value generated and distributed, including revenues, operating costs, Partially Data Section - Economic Performance Summary / Revenues and employee compensation, donations and other community investments, retained earnings, operating costs disclosed as percentages and philanthropic activities and payments to capital providers and governments. disclosed qualitatively. Recognised that financial reporting limited as CNCo is a private company.

EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change. Fully Detail Section - Economic/Risks & Opportunities due to climate change

EC3 Coverage of the organisation’s defined benefit plan obligations. Not

EC4 Significant financial assistance received from government. Fully Detail Section - Economic/Local Purchasing Policy

Market Presence


EC5 Range of ratios of standard entry level wage by gender compared to local minimum wage at significant Not locations of operation.

EC6 Policy, practices and proportion of spending on locally based suppliers at significant locations of operation. Fully Detail Section - Policy, Practices and Proportion of Spending on Locally-based Suppliers at Significant Locations of Operation

EC7 Procedures for local hiring and proportion of senior management hired from the local community at Not significant locations of operation.


88


Indirect Economic Impacts


EC8 Development and impact of infrastructure investments and services provided primarily for public benefit Not through commercial, in-kind, or pro bono engagement.

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. Not


EN1 Materials used by weight or volume. Not

EN2 Percentage of materials used that are recycled input materials. Not

Environmental

Materials

EN3 Direct energy consumption by primary energy source. Fully Detail Section - Environment - Direct and Indirect Energy and Data - Scope 1 Energy Consumption

EN4 Indirect energy consumption by primary source. Fully Detail Section - Environment - Direct and Indirect Energy and Data - Scope 2 Energy Consumption

EN5 Energy saved due to conservation and efficiency improvements. Partially Detail Section - Environment - Direct and Indirect Energy

EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and Not reductions in energy requirements as a result of these initiatives.

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. Not

Energy


89


EN11 Location and size of land owned, leased, or managed in, or adjacent to, protected areas Not and areas of high biodiversity value outside protected areas.

EN12 Description of significant impacts of activities, products, and services on biodiversity in Fully Detail Section - Environment - Biodiversity protected areas and areas of high biodiversity value outside protected areas.

EN13 Habitats protected or restored. Not

EN14 Strategies, current actions, and future plans for managing impacts on biodiversity. Partially Detail Section - Environment - Biodiversity

EN15 Number of IUCN Red List species and national conservation list species with habitats in Not areas affected by operations, by level of extinction risk.

Biodiversity


EN8 Total water withdrawal by source. Not

EN9 Water sources significantly affected by withdrawal of water. Not EN10 Percentage and total volume of water recycled and reused. Not

Water

EN16 Total direct and indirect greenhouse gas emissions by weight. Fully Detail Section - Environment - Scope 1 & 2 GHG Emissions EN17 Other relevant indirect greenhouse gas emissions by weight. Fully Detail Section - Environment - Scope 3 GHG Emissions EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. Fully Detail Section - Environmental Initiatives to reduce GHG Emissions

EN19 Emissions of ozone-depleting substances by weight. Fully Detail Section - Environment - Initiatives to reduce GHG Emissions EN20 NOx, SOx, and other significant air emissions by type and weight. Fully Detail Section - SOX, NOx, and other emissions and Data Section

Emissions, Effluents and Waste


90


EN26 Initiatives to mitigate environmental impacts of products and services, and extent Fully Detail - Environment - Initiatives to Mitigate Environmental Impacts of impact mitigation.

EN27 Percentage of products sold and their packaging materials that are reclaimed by category. Not

Products and Services

EN28 Monetary value of significant fines and total number of non-monetary sanctions for Fully Detail - Environment - Non-Compliance with Environmental Laws non-compliance with environmental laws and regulations. and Regulations

Compliance


EN21 Total water discharge by quality and destination. Not

EN22 Total weight of waste by type and disposal method. Partially Detail - Environment - Total Waste Disposed

EN23 Total number and volume of significant spills. Fully Detail Section - Environment - Total Number of Significant Spills

EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under Not the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats Not significantly affected by the reporting organization’s discharges of water and runoff.

Emissions, Effluents and Waste cont.


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Social: Labor Pratices and Decent Work

Profle Description Reported Cross reference

LA1 Total workforce by employment type, employment contract, and region, broken down by gender. Fully Detail - Labour - Employment LA2 Total number and rate of new employee hires and employee turnover by age group, Partially Detail - Labour - Employment gender and region.

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time Not employees, by major operations.

LA15 Return to work and retention rates after parental leave, by gender. Not

Employment


LA4 Percentage of employees covered by collective bargaining agreements. Partially Detail - Labour - Employment

LA5 Minimum notice period(s) regarding significant operational changes, including whether Not it is specified in collective agreements.

Labor / Management Relations


EN29 Significant environmental impacts of transporting products and other goods and materials Fully Detail - Environment - Environmental Impacts of Transporting used for the organizations’s operations, and transporting members of the workforce. Goods Sold

Transport

EN30 Total environmental protection expenditures and investments by type. Not

Overall

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LA10 Average hours of training per year per employee by gender, and by employee category. Partially Detail - Labour - Training, Education and Counselling. Training hours by gender not disclosed

LA11 Programs for skills management and lifelong learning that support the continued employability Not of employees and assist them in managing career endings.

LA12 Percentage of employees receiving regular performance and career development reviews, Partially Detail - Labour - Training, Education and Counselling by gender.

Training and Education

LA13 Composition of governance bodies and breakdown of employees per employee category Partially Detail - Labour - Employment according to gender, age, group, minority group membership, and other indicators of diversity.

Diversity and Equal Opportunity

LA14 Ratio of basic salary and remuneration of women to men by employee category, by Not significant locations of operation.

Equal Remuneration for Women and Men


LA6 Percentage of total workforce represented in formal joint management-worker health and Not safety committees that help monitor and advise on occupational health and safety programs.

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of Partially Detail Section - Labour - Occupational Health and Safety work-related fatalities by region and by gender. Partial data only is supplied

LA8 Education, training, consulting, prevention, and risk-control programs in place to assist Partially Detail - Labour - Training, Education and Counselling workforce members, their families, or community members regarding serious diseases.

LA9 Health and safety topics covered in formal agreements with trade unions. Not

Occupational Health and Safety

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Social: Human Rights


HR4 Total number of incidents of discrimination and actions taken. Fully Detail - Human Rights - Total Number of Incidents of Discrimination and Actions Taken

Non - Discrimination


HR1 Percentage and total number of significant investment agreements and contracts that include Not clauses incorporating human rights concerns, or that have undergone human rights screening.

HR2 Percentage of significant suppliers, contractors and other business partners that have Not undergone human rights screening and actions taken.

HR3 Total hours of employee training on policies and procedures concerning aspects of human Not rights that are relevant to operations, including the percentage of employees trained.

Investment and Procurement Practices


HR5 Operations and significant suppliers identified in which the right to exercise freedom of Not association and collective bargaining may be violated or at significant risk, and actions taken to support these rights.

Freedom of Association and Collective Bargaining


94



HR6 Operations and significant suppliers identified as having significant risk for incidents of child Not labor, and measures taken to contribute to the abolition of child labor.

Child Labor

HR7 Operations and significant suppliers identified as having significant risk for incidents of forced Not or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor.

Forced and Compulsory Labor

HR8 Percentage of security personnel trained in the organization’s policies or procedures concerning Not aspects of human rights that are relevant to operations.

Security Practices

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken. Not

Indigenous Rights


95


HR10 Percentage and total number of operations that have been subject to human rights reviews Not and/or impact assessments.

Assessment

HR11 Number of grievances related to human rights filed, addressed and resolved through formal Not grievance mechanisms.

Remediation


96


SO7 Total number of legal actions for anti-competitive behavior, anti-trust and monopoly Fully Detail - Society - Monetary Value of Significant Fines and Non- practices and their outcomes. monetary Sanctions for Non-compliance with Laws and Regulations

Anti-Competitive Behavior

Social: Society

SO1 Percentage of operations with implemented local community engagement, impact Not assessments, and development programs.

SO9 Operations with significant potential or actual negative impacts on local communities. Not

S10 Prevention and mitigation measures implemented in operations with significant potential Not or actual negative impacts on local communities.

Local Communities

SO2 Percentage and total number of business units analyzed for risks related to corruption. Not

SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures. Not

SO4 Actions taken in response to incidents of corruption. Not

Corruption

SO5 Public policy positions and participation in public policy development and lobbying. Not

SO6 Total value of financial and in-kind contributions to political parties, politicians, and related Not institutions by country.

Public Policy


97


Social: Product Responsibility

PR1 Life cycle stages in which health and safety impacts of products and services are assessed Not for improvement, and percentage of significant products and services categories subject to such procedures.

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning Not health and safety impacts of products and services during their lifecycle, by types of outcomes.

Customer Health and Safety

PR3 Type of product and service information required by procedures, and percentage of Not significant products and services subject to such information requirements.

PR4 Total number of incidents of non-compliance with regulations and voluntary codes Not concerning product and service information and labeling, by type of outcomes.

PR5 Practices related to customer satisfaction, including results of surveys measuring customer Not satisfaction.

Product and Service Labelling


SO8 Monetary value of significant fines and total number of non-monetary sanctions for Fully Detail - Society - Total Number of Legal Actions for Anti-competitive non-compliance with laws and regulations. Behaviour, Anti-trust, and Monopoly Practices and their Outcomes

Compliance

98


PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses Not of customer data.

Customer Privacy

PR9 Monetary value of significant fines for non-compliance with laws and regulations Not concerning the provision and use of products and services.

Compliance


PR6 Programs for adherance to laws, standards, and voluntary codes related to marketing Not communications, including advertising, promotion, and sponsorship.

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning Not marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

Marketing Communications

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