What is Sovcomflot’s (SCF’s) vision for sustainable development in general and within the Arctic particularly?
I believe that the global shipping industry will be increasingly led by companies that are strongly focused on meeting environmental, social and governance (ESG) criteria. We have long been modelling SCF to be one such company.
Our vision for sustainable development is making a responsible contribution towards the environments in which we operate. Here, I mean environments in the broadest sense of the word, including ecological, social, and market environments.
Our personnel have always been and increasingly remain our most vital asset. We are eager to spare neither time nor expense to ensure their wellbeing and their employment, as well as steadily improve their skill set and keep their competencies at the highest level in the industry.
Equally important for us is reducing the environmental impact from the activities inherent with shipping. I believe that material progress in this area is achievable through further technological advancement, such as adopting new motion methods and new types of fuel. Invariably, technologies become more sophisticated, which further increases the importance of investing in personnel and their training.
Speaking of the Arctic, SCF is, by some margin, the world’s foremost energy shipper within harsh climate and ice conditions, operating more than 80 ice class vessels, which represents over half of our fleet. Consequently, we take very seriously our shared responsibility for the long-term sustainability of Arctic shipping.
We strongly believe that shipping operations in the Arctic should require the cleanest types of marine fuels, and engineering solutions that minimize a vessel’s energy consumption whilst sailing in ice conditions. We are happy to see ABB offer various solutions that allow vessels to maneuver efficiently in ice whilst at a reduced power capacity, which positively contributes to emissions control.
How does SCF implement green technologies on your vessels?
At SCF, we seek to anticipate industry regulations and plan our fleet upgrade to comply with expected standards or exceed them wherever possible.
In 2018, SCF pioneered the introduction of LNG fuel for large-capacity tankers, and planning for this was a good example of our approach that I have just mentioned. Early on, we were anticipating the IMO would tighten emission regulations, and we have identified LNG fuel as the optimal compliant solution available on the market. We have begun working with Shell on introducing our ‘Green Funnel’ series of the industry’s first dual-fuel Aframax tankers in 2015, three years ahead of the IMO announcing their target to reduce the carbon footprint of the global shipping by at least 50 per cent by 2050, and five years ahead of the Sulphur Cap 2020 legislation coming into force.
This ‘Green Funnel’ initiative was a success from both sustainability and technological perspectives, representing a major step towards reducing emissions from the energy shipping industry. This accomplishment was widely recognized by the global community. The lead vessel of the ‘Green Funnel’ series, Gagarin Prospect, has received several ‘Ship of the Year’ awards, including the Nor-Shipping Next Generation Ship Award received in Oslo in the presence of His Majesty King Harald V of Norway. What is even more rewarding, we have seen a significant number of shipping companies follow our path to adopting LNG fuel since then.
For the foreseeable future, we plan to principally order LNG-fueled newbuilds, as well as improve upon LNG fueling technology, both from an engineering and operational standpoint.
However, we fully acknowledge that LNG is still a fossil fuel, and going forward, a more carbon-neutral fuel can emerge to replace it. We continue to explore various alternative fuel options, while also seeking to reduce emissions whilst using existing fuels and generally increase the energy efficiency of our fleet.
In total, we were able to reduce the carbon intensity index of our fleet by some 30 per cent from 2010.
Do you consider the sustainability aspects of your business partners?
Certainly. We believe that by having a shared interest in sustainable development with our partners, we are able to achieve better outcomes from our partnerships, bringing wider stakeholder benefits.
We keep an eye open on what our partners do, sustainability-wise, and seek to collaborate with them on projects with a sustainability component, wherever our expertise and services prove relevant. A good example of this is our collaboration with Shell, from 2015, as we worked closely on the pioneering ‘Green Funnel’ project that I have already mentioned. Shell subsequently time- chartered two of these dual-fuel Aframax tankers, with another two recently time-chartered to Sakhalin Energy, the operator of the Sakhalin-2 project.
We also partner with Shell on developing the LNG fueling infrastructure across the globe. Most recently, in March 2021, we completed the first ever ship-to-ship LNG fueling of an Aframax tanker in two strategic locations, the US and the Mediterranean.
Similarly, we cooperate with companies such as Russia’s energy major Gazprom on developing national-level standards for Marine LNG fueling.
We also collaborate with forward-thinking banks to support green financing. In 2019, we pioneered the compliance with the Poseidon Principles, which were introduced by the banking industry to encourage the decarbonization of shipping in line with the IMO’s policies.
We are glad to see our partners from ABB amongst the leading global companies that set a path towards sustainability. We share ABB’s aspiration to enable a low-carbon society by targeting carbon neutrality in their own operations, developing solutions to make the usage of resources increasingly more efficient, and promoting social progress.
When did you start implementing sustainability in your business? When did it start being a critical factor?
A strong commitment towards safety and efficiency has been an integral part of Sovcomflot since its foundation. More recently, a big step came in 2005, when SCF adopted its ‘Safety Comes First’ philosophy and initiated a profound transformation of its operations. It included overhauling the management system, harmonizing practices across different subsidiaries, and introducing uniform standards and procedures for almost every organizational aspect. This made the company better equipped to seamlessly integrate various sustainability principles into its operations over the following years.
The latest formal step came in March 2019, when SCF introduced its ‘Green Charter’ as a core element within the new corporate Strategy up to 2025 and beyond that. This Charter specifically lays down our commitments towards reducing our carbon footprint and in doing so, exceed the targets set by the IMO rather than simply complying with them.
How do you perceive the International Maritime Organization’s (IMO) regulations and their influence on SCF’s business and the marine industry in general?
It is in the interests of all stakeholders that standards are raised within the shipping industry. The IMO is uniquely positioned to drive this transformation, and we are happy to support the work of the IMO, whenever possible. We enjoy strong, long-standing ties with the IMO and we closely collaborate with them across a broad range of regulatory issues, both directly and through industry associations.
Today, shipping companies are concerned about the growing number of local acts that regulate shipping activities. Very often, these local acts appear to be uncoordinated both with each other and with the broader IMO framework. This makes it difficult for shipowners to know the exact requirements for newbuild vessels when planning fleet renewal.
With this in mind, we believe that the IMO should ultimately be the sole regulating body that sets universal standards for the global maritime industry.
Sustainable development is not a common and easily understood concept for employees in some companies. Do you educate your mariners in any special way? Perhaps, you meet some challenges in this area or maybe quite the opposite?
We dedicate significant time and resource to educating people about sustainable development and the associated benefits both across our company and across the industry.
Since adopting the ‘Safety Comes First’ philosophy in 2005, we have been successful in sustaining a strong safety culture within the organization. This philosophy permeates our operations at all levels. Importantly, the vast majority of SCF staff share a similar background and a common set of values. This allows our employees to enjoy a high level of mutual understanding, so we do not meet serious challenges when communicating such concepts within the company.
Educating people is in itself a part of a sustainable business practice that calls upon us to help people grow and develop. I reiterate, we clearly understand that human capital is our most valuable asset, so continuously training and educating our personnel is amongst my top strategic priorities as the CEO.
We also help educate people outside our organization, primarily through sharing our extensive experience of operating vessels in a sustainable and safe way. We use various platforms to do so, including our training centers that are open to seafarers from outside SCF, our strategic partnership programs with all the major Russian maritime academies, and our initiative to regularly publish specialized manuals that summarize our own expertise. This includes, for example, a set of practical recommendations for operating LNG carriers, equipped with three ABB’s Azipod® propulsion units, in ice conditions, published in 2020.
