Keeping up with compliance: How businesses can weather regulatory change
Complying with new regulations can be costly for companies large and small. The introduction of a new rule — whether national, international or sector-specific — often requires businesses to rethink their workflows and processes.
While the thought of overhauling operations might seem intimidating at first, companies should embrace the opportunity to test their agility. Regulatory change is a constant in today’s business climate. And only enterprises that are flexible and forward-thinking will be able to weather the storm.
Businesses don’t need a crystal ball to help them make decisions to meet the new regulatory requirements. Instead, they need to have a sense of where their industry is going — and they should ensure their commercial decisions align with this new course.
Rough seas ahead
The shipping industry, for instance, is currently grappling with new rules aimed at increasing its environmental sustainability. The International Maritime Organization (IMO), the UN agency responsible for regulating the sector, has mandated that the fuel used on ships should contain less than 0.5 per cent sulphur starting in 2020. This change, aimed at decreasing the industry’s environmental impact, will mean critical changes to the way goods are transported around the world.
The heavy fuel oil used in global shipping contains around 2,700 times more sulphur than road fuel. When burned in an engine, the sulphur in traditional ship fuels produces toxic sulphur dioxide emissions (SO2). These are harmful to human health. Around 14 million global cases of childhood asthma can be attributed to ship pollution each year.
From a public health and environmental perspective, the “sulphur cap” regulation makes sense. But it’s causing a real headache for the people who own and operate commercial ships. This is because no one really knows what they will use to replace heavy fuel oil — and every possible option will require a large investment in new fuels and equipment.
Weighing the options
The average lifetime of a modern commercial vessel is around 25 to 30 years. Any company hoping to invest in new ships today will have to make sure it complies with all imminent regulations — and ones that could affect business in the future.
Shipping companies looking to reduce their SO2 emissions by 2020 could choose to burn “cleaner” low-sulphur fuels or liquefied natural gas (LNG). But there’s one issue with these solutions: they still produce carbon dioxide (CO2) emissions. And regulators with a focus on environmental protection are coming for these pollutants next.
On 13 April, the IMO announced that its member states had agreed to cut the shipping industry’s greenhouse gas emissions by 50 per cent by 2050 to bring it in line with the Paris Agreement. This means that the sector must not only think about eliminating SO2 emissions, but emissions in general.
While the path to 50 per cent emissions reduction isn’t obvious yet, one thing is clear. The shipping industry needs to start planning for a total adjustment to low-carbon operations.
Investing in the future
The first thing a company must do when faced with this kind of sweeping regulation is look at how it could fit compliant technologies and processes into its current operations. Take battery power, for example. It is a good fit for ships that sail across short and predictable routes where charging infrastructure is easily accessible.
Several ferry operators in Norway, which is also a world leader in electric vehicle uptake, have already begun embracing battery power for their ships. Most recently, a tourism company called The Fjords introduced an all-electric catamaran that will operate across a pristine area of the country’s UNESCO World Heritage-listed fjords.
A common challenge
Though shipping firms are facing dilemmas that are unique to the industry, having to adapt to regulation is not. At some point, all sectors will have to contend with regulatory changes. This is part of how industries evolve. Individual companies must choose their approaches carefully – don’t get left behind.
Tips for approaching regulatory change:
- Don’t fear an upfront cost. Regulatory change will inevitably require an investment in new equipment and training. But it’s better to face capital outlays now than potential fines later.
- Talk to your industry. Researching how your peers plan to tackle regulatory change could inform your own approach. After all, best practice should be shared.
- Embrace the change. Companies that stay ahead of the curve could enjoy a competitive advantage. Be an early adopter, rather than a straggler.
Helping you meet today’s business challenges
Find out more about how SMEs are meeting today’s business challenges at Real Business, Caspian Media’s digital publication for ambitious SMEs.
If you are interested to learn more about the maritime industry, and how it is evolving to embrace greater sustainability, visit The Marine Professional, the Institute of Marine Engineering, Science & Technology‘s membership magazine, managed and produced by Caspian Media.
By Jennifer Johnson, Industry Reporter, The Marine Professional