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The business model in a zero carbon transition

Decarbonisation will require more than just adopting new fuels and technologies. OrbitMI sees the need for adaptation in the business model to succeed through the transition

DECARBONISATION will mean a fundamental shift in how the success and quality of businesses are measured. But will it mean an equally radical change in the business model?

“If the game is changing and the business model has more components than it did before, then these components are either going to work against you, if you ignore them, or they are going to work for you, if you embrace them,” OrbitMI chief executive Ali Riaz said in a recent interview.

Shipping companies have been traditionally driven by the market needs and wants, while having to adjust to — and ideally capitalising — on the geopolitics of their day.

The ascension of sustainability as a factor in the evaluation of a business by customers and stakeholders, to the point where it has become a key demand parameter, means that it is now one of these key components Mr Riaz is referring to.

But for companies to successfully integrate sustainability into their business in the transition to a zero-carbon future, they need to prepare accordingly.

This is what Mr Riaz calls sustainability applied; the process of taking action today to prepare for the energy transition to a zero-carbon future.

This can range from choosing to operate specific vessels and taking on select cargoes that will affect your operational profile, to bringing in scenario planning and developing simulations as part of your business strategy to anticipate different possible outcomes.

“Focus on carbon and profits are often different sides of the same coin,” Mr Riaz said.

Greater efficiencies should mean reduced emissions but also imply lower fuel consumption, which means a cut in costs. Though zero carbon fuels will ultimately catapult shipping into a decarbonised future, there are still significant gains to be made from efficiency savings today.

Mr Riaz sees some companies in the shipping industry already actively making sustainability a core part of their business model. Others, however, will get there later into the future, with the introduction of new regulations and the wide deployment of technologies. 

Regulations and political commitments have already driven significant changes in the industry; the International Maritime Organization’s 2018 ambition for the international shipping industry to reduce its greenhouse gas emissions by at least 50% by 2050 has helped mobilise industry to take action and start planning much earlier than many expected just a decade ago.

Regardless of whether individual companies agree or disagree with the regulations that are in place or are coming, Mr Riaz believes that compliance with them will be non-negotiable, not least because they represent the collective will of the public. Going a step further, as recent regulations in the finance sector have shown, even those who oppose them today will likely embrace them as a new standard for conducting business.

Despite the challenges that lie ahead, Mr Riaz believes that people are adaptable and can adjust to new demands from customers and other stakeholders. Decarbonisation is no exception.

“Most companies will be slow [to change] but very few are going to die because either someone internally or externally will help with the transition,” Mr Riaz said.

 

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