Setting the Course for Decarbonization: The Importance of Scope 3 Emissions for Shipowners

As the maritime industry embarks on its monumental journey toward decarbonization, a comprehensive understanding of its emissions footprint is critical. Traditionally, direct emissions from ship fuels have been the main focus of emissions reduction efforts. However, as the industry moves towards greener fuels and technologies, indirect emissions, especially Scope 3 emissions, become a sharper focus. This article explores the importance of calculating and establishing a baseline for Scope 3 emissions early in the decarbonization process and why a Life Cycle Assessment (LCA)-based approach is recommended.

Understanding Scope 3 Emissions:

To understand Scope 3 emissions related to a ship, it's crucial to consider the vessel's entire lifecycle, from construction to decommissioning – a concept often called 'cradle-to-grave.' This approach considers every stage where emissions could be generated, directly or indirectly.

A vessel's construction phase significantly contributes to Scope 3 emissions. One of the main materials used in ship construction is steel, and the production of steel is a highly energy-intensive process that releases a considerable amount of carbon dioxide. Furthermore, the extraction and processing of the iron ore used to make the steel also contribute to these emissions. As such, the choice of steel, its source, and the production methods used can substantially impact the vessel's overall carbon footprint.

Finally, the decommissioning and end-of-life treatment of the vessel can also contribute to Scope 3 emissions. This includes emissions from the dismantling of the ship, waste treatment, and the recycling or disposal of materials. The methods used for these processes can significantly affect the total emissions associated with the vessel's lifecycle.

By taking a cradle-to-grave approach and considering all of these sources of emissions, shipowners can gain a comprehensive understanding of their Scope 3 emissions. This will enable them to identify areas for reduction and make informed decisions that contribute to the overall goal of decarbonization.

Navigating the Implications of EU CSRD Regulations for Shipowners: The Critical Role of Scope 3 Emissions

With the European Union's Corporate Sustainability Reporting Directive (EU CSRD) coming into effect, the need for robust and comprehensive emissions accounting has never been greater for shipowners. The EU CSRD requires large companies to disclose certain types of sustainability information, which includes detailed reporting on their greenhouse gas emissions.

Significantly, the EU CSRD emphasizes the importance of Scope 3 emissions, which are indirect emissions that occur in a company's value chain, including upstream and downstream emissions. For shipowners, this involves emissions not just from the operation of their vessels but from the entire lifecycle of a ship – from the extraction and processing of raw materials used in ship construction to the end-of-life disposal of the ship.

Including Scope 3 emissions in the EU CSRD underscores the shift in regulatory focus towards a more comprehensive understanding of a company's carbon footprint. It recognizes that to mitigate climate change effectively; companies need to look beyond their direct emissions and consider the broader environmental impact of their activities.

This presents a significant challenge for shipowners, given the complex and global nature of maritime supply chains. However, it also provides an opportunity to drive meaningful change towards decarbonization. By taking a holistic view of their emissions through approaches like Life Cycle Assessment (LCA), shipowners can identify areas for emission reductions that they might otherwise overlook.

Moreover, by aligning their emissions reporting with the EU CSRD, shipowners can ensure regulatory compliance and enhance their sustainability credentials. This can help to attract investment, meet increasing customer demands for sustainability, and safeguard their long-term business viability in a low-carbon economy.

In conclusion, the EU CSRD represents a significant step forward in sustainability reporting and highlights the critical importance of Scope 3 emissions. To successfully navigate these new requirements, shipowners must adopt a comprehensive approach to emissions accounting that captures their vessels' full lifecycle and provides a clear path toward decarbonization.

Introducing the Recommended Approach for Assessing Scope 3 Emissions

Life Cycle Assessment (LCA) emerges as the recommended approach for assessing Scope 3 emissions in light of the complexities and potential inaccuracies of spend-based methods. With its holistic perspective that covers the entire lifecycle of a vessel, from raw material extraction through to end-of-life disposal, LCA offers a more precise and comprehensive assessment of emissions.

An LCA-based approach can effectively mitigate the risks associated with the 'gray box' of unidentified emissions in the maritime industry. By laying a solid foundation for understanding and managing indirect emissions from the supply chain, shipowners have the information they need to make strategic decisions that can significantly reduce their carbon footprint and contribute meaningfully to global decarbonization efforts.

What is Lifecycle Assessment (LCA)?

Life Cycle Assessment, often abbreviated as LCA, is a technique used to assess the environmental impacts associated with all stages of a product's life. In simpler terms, it is a method that helps us understand the full environmental cost of something, be it a product, service, or process, from its beginning to its end.

The 'life cycle' in LCA refers to the notion that every product goes through several stages, all of which can impact the environment. These stages include:

1. Extraction and Processing of Raw Materials: This initial stage is gathering and processing raw materials. For example, in the case of a ship, this could involve mining iron ore and processing it into steel.
2. Production: The raw materials are then used to produce a product. Our ship example involves constructing the vessel using processed steel and other materials.
3. Use or Operation: This is the phase where the product is used for its intended purpose. For a ship, this would be the time when it's operational, transporting goods or passengers across water bodies.
4. End-of-Life: When the product is no longer useful or functional, it reaches its end-of-life stage. This could involve the dismantling and recycling or disposal of the ship.

The goal of LCA is to quantify the environmental impacts at each stage, providing a comprehensive picture of the product's total environmental impact. These impacts include greenhouse gas emissions, water use, waste production, and more. 

In the context of the maritime industry, LCA provides a tool for shipowners to understand and manage the environmental impacts of their vessels across their entire lifecycle, from construction to operation and eventually decommissioning. By doing so, they can develop strategies that significantly reduce their carbon footprint and contribute to global decarbonization efforts.

The Adoption of LCA-based Approach in Other Industries:

The use of Life Cycle Assessment (LCA) is a concept that has been introduced previously in other industries. Various industries have long recognized its value in mapping out the environmental impacts of products and services. From agriculture to manufacturing, energy to waste management, an LCA-based approach has helped these sectors better understand their environmental footprint and identify areas for improvement.

For example, in the automobile industry, LCA has been used to compare the environmental impacts of conventional vehicles with those of electric vehicles, considering not just the emissions during use but also those associated with vehicle production, maintenance, and end-of-life disposal. Similarly, in the energy sector, LCA has been instrumental in assessing the environmental impacts of different energy sources, from coal to solar power, helping to guide energy policy and investment decisions.

While the maritime industry has been slower in adopting LCA, the tide is changing. Recognizing the importance of a holistic view of emissions and the limitations of traditional methods, more and more shipowners are now turning to LCA to guide their decarbonization efforts.

Performing an LCA of a vessel requires a range of data covering the entire lifecycle of the ship. At the start, this includes information on the materials used in ship construction, such as the type and quantity of steel, as well as data on the energy used in producing and transporting these materials.

Data on fuel consumption, vessel maintenance, and the goods and services purchased to support the vessel's operation are required for the operational phase. This includes the types and quantities of fuel used, the frequency and nature of maintenance activities, and the lifecycle emissions of the purchased goods and services.

Finally, data on the methods used for ship dismantling, waste treatment, and material recycling or disposal are needed for the end-of-life phase. 

Collecting this data can be a complex task due to maritime supply chains' global and fragmented nature. However, with the right tools and expertise, it is possible to build an accurate LCA model that can guide a shipowner's decarbonization journey.

The Advantage of an LCA-based Approach

Given the limitations of spend-based methods, we recommend an LCA-based approach to calculating Scope 3 emissions. Life Cycle Assessment (LCA) is a systematic analysis of the environmental impacts of a product or service throughout its entire life cycle, from raw material extraction to disposal or recycling. This approach provides a more accurate and comprehensive view of emissions, considering all stages of the product or service life cycle and the specific practices used at each stage.

Charting the Course for a Sustainable Maritime Future

As we navigate the maritime industry's future, the Life Cycle Assessment (LCA) approach emerges as an invaluable tool to guide us toward successful decarbonization. By providing a comprehensive view of Scope 3 emissions across a vessel's lifecycle, LCA empowers shipowners with the information to make strategic decisions that significantly reduce their carbon footprint.

The commitment to understanding and managing our environmental impacts is not just an option but a necessity for our industry's sustainability and our planet's health. With an LCA-based approach, we safeguard the maritime industry's future and contribute to global decarbonization efforts.

The journey towards a sustainable maritime industry is one we must undertake collectively. Now more than ever, it's vital for all stakeholders, especially shipowners, to step forward and take decisive action. We'd like to encourage you to reach out and learn more about how you can contribute to this essential journey toward a greener future. Let's chart a course for a sustainable and resilient maritime industry together.