Corporate Social Responsiblitiy in shipping Companies

HOW FAR HAS CORPORATE SOCIAL RESPONSIBILIY (CSR) CHANGED SHIPPING COMPANIESS POLICY AND PRACTICE IN RECENT YEARS? WHAT DO YOU CONSIDER TO BE THE FUTURE OF CSR AT THE COMPANY LEVEL? Introduction: Expansion of maritime industry worldwide; increasing of world trade reliance on sea transportation; major environmental impacts caused by sea vessels, such as oil spills and pollution (e.g. Gulf of Mexico oil spill case); Globalization and other related factors have given maritime industry a wake-up call on its role toward corporate social responsibility, meanwhile according to the IMO data More than 90% of world trade is carried by sea (IMO, 2004). Whether it is in shipping Companies or in any Industry, Corporate Social Responsibility (CSR) is not a new phenomenon but its application is actually odd to many shipping companies. It is not surprising to find executive officers, middle and junior staff of big shipping companies in maritime industry who does not know how the social responsible status of his/her company, hence unaware of its impacts (Wilh. Whilhelmsen Group, 2009, pg 73). Shipping policy on other hand, is nothing but a Corporate policy, according to Wheelen and Hunger (2002, pg 14) Corporate policy describes a companies overall direction in terms of its general attitude towards growth and the management of its various business and product line, its typically fits within the three main categories- stability, growth and retrenchment. This essay will look on Corporate Social Responsibility (CSR) and its connection to shipping companies including definitions and policies; will also show the importance of CSR in shipping companies and finalize with some contemporary issues that made shipping companies to change their policies toward better CSR services and improving their relation with stakeholders. What is Corporate Social Responsibility? Corporate Social Responsibility is kind of summarizing concept whereby companies social and environmental integrate their operation with stakeholders on a voluntary basis (European Commission, 2001). Watts (2000) defines corporate social responsibility (CSR) as the commitment of business to contribute to sustainable economic development, working with employees, their families the local community and social at large to improve their quality of life. (Hamad Bakar Hamad 000455020) Page 1

Corporate Social Responsiblitiy in shipping Companies Traditionally, many scholars were not believed if the companys contribution to social needs and workers welfare had direct impact to companies success, according to Prof. Milton Friedman views from the Chicago School: there is one and only one social responsibility of business , to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud (Friedman, 1962, p. 133). Professor David

henderson adding that within the enterprises, the adaption of CSR will tend to bring higher costs and impared perfomance, managers have to take account of a wider range of goals and concers,involves them selves in new process of multiple stakeholders engagements David, H. (2005) In recent years however, extensive stress from pressure-groups both external (environmental and social activists) and internal (workers and their in-organization unions) have forced shipping companies in deviating their original courses toward CSR. International organization like IMO (International Maritime Organization), ILO (International Labor Organization) and EU (European Union) made recommendable contributions in forcing shipping companies and maritime industry in general to change their policies towards CSR betterment. The best example of international community is shown by the International Organization for Standards (ISO) with the full back-up on IMO, which by 30/10/2010 is expected to publish ISO 26000-GUIDANCE ON SOCIAL RESPONSIBILITY (ISO, 2010) on which draft has been issued. According to ISO 26000, it will apply and provide guidance to all types of organization regardless of their size or location or industry. Among important issues to be addressed in the ISO 26000 are environmental awareness, it will include maritime environment as well. This standard will not get a shipping company higher freight rates,

but it will help them to get customers who prefer to deal with a company that is more socially responsible than others added (Capt. Chawla, 2005) Why shipping companies policies changed? Corporate Social Responsibility in shipping companies is something that requires more attention and due care especially when taking into account its nature of operations. A big challenge to shipping industry compared to other industries, is that their working tools (ships) are highly mobile and are used to move almost all around the world. Hence social impacts of shipping companies is likely to be more severe in the sense that, Working partners of shipping companies are many, like its suppliers (bunker, spares, provisions and other suppliers); customers (including shippers, Port authorities and any others who on one way or (Hamad Bakar Hamad 000455020) Page 2

Corporate Social Responsiblitiy in shipping Companies another uses shipping company services); employees (the most valuable part of the business can include those working on board ship i.e crews, at offices around the world and those indirectly used to work with the company). Environment: at the moment, the issue of maritime environment is very hot issue within the maritime industry and to the world at large on these days. From this end, its clear that, the Maritime environments can be destroyed by ships themselves and from human activities onboard ships. However, according to IMO statistics, 77% of marine pollution is generated by human activities- things like sewage, industrial effluent and urban/river run off are major courses, Living ships as the most least environmental damaging forms of commercial transport. Marine Environmental Protection Committee (MEPC) which is working under IMO, HELCOM (the Helsinki Convention for Baltic Sea, 1974), (Barcelona convention 1975) are other example of pressure groups that influence changes in shipping industry. Oil spill on other hand, is the major source of marine environmental destruction caused by tankers. A good number of efforts have been taken to reduce such accidents. For instance data issued by International Tanker Owner Pollution Federation Limited (ITOPF) shows that there is a significant reduction of oil spill in relation to total tones of oil transported worldwide. Phasing out of single hull tanker vessels by end of 2010 is another positive way in controlling oil spill from tankers. INTERTANKO (International Association of Independent Tanker Owners) has also play good role in reducing oil spill by setting turf regulations. (Graph no 1 on appendix). Pollution and Greenhouse Air Emission, comparable ships are the least polluting mean of transport, as well as on air emission. According to second IMO GHG Study 2009 international shipping was estimated to have emitted 870 million tons or 2.7% of the global man-made emissions of CO2 in 2007 compared to 21.3% produced by land transportation while industries and manufacturing amounting to 18.2% . What is future of Social Corporate Responsibility at company level? If the Industry keeps on changing, individual Companies have no option but to follow. From the Globalization perspective, society is expecting a lot from the companies which they are working together. From this end, a company has to pay attention on every step that they are taking on its business and its impact to the society. In nearby time, customers and supplier including stakeholders will not do business with company that is ant-social (Capt. Chawla, 2005). (Tables no 1 and 2 on appendix shows the impact and awareness of people toward CSR) (Hamad Bakar Hamad 000455020) Page 3

Corporate Social Responsiblitiy in shipping Companies In order to be social responsible and keeping the company keep on going, (Elkington, 1997) emphasizes on company development on what so called triple bottom line (long-term perspective, minimize negative effects on environmental uses and meet social expectations. All services offered by company should now be blended to observe CSR, Training at all managerial level to acquit themselves to the CSR logic, Flag state has to play their role to force shipping companies that using their flag to be reasonable on CSR, Company has to plan and budget all costs associated with CSR, Additionally, pressures from environmental issues appear to shape a new socio-economic and political framework that drives shipping company to re-negotiate their position and responsibility in society. Also, current move to building ships that are compatiable with enviromental conditions (Green shipping) such as phasing out of single hull to double hull on tanker ships. Other things that company can do is like build ships with large Bilge water storage tanks,improve ability of managing burn waste and bilge and likes. The Issue of multicultural onboard crew and at office is another hot issue that any shipping company has to address it properly. It is current practice to have a ship using UK flag for example, but have no any British officer or sailor onboard, not only that but all crews are of different nationalities using different languages as a means of communication. The ability to communicate in a common language is the crucial factor determining the success of a multinational crew, regardless of what nationalities are on board, or how many. The more seafarers can understand each other, the more likely they are to run not just an efficient and safe ship, but a happy ship on which personal and working relationships can be built up. (Dr. Erol & Dr. Helen,2002) Qualtiy of life, security and safety of crews onboard ship also has to be taken into account by shipping company as high priority, number of hour worked related to hours crews rest is another social activity that has to be watched carefull as it increase fartique. For instance, a container ship (MV Alva Star) which ran into cliffs at the lonian Island of Zakinthos on 3rd October 2002 with 2,400 TEUs on board, is a good example of fatigue to crew who then lose concentration which not only would have claimed their lives but also had great impact of social lives on shore and great damage to ship owner and shippers cargos. (Picture no 1 on appendix).

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Corporate Social Responsiblitiy in shipping Companies Shipping companies have to participate on social activities especial during the disasters. Wilhelmsens Group is a Norwegian shipping company but it builds / has built several schools in Banda Aceh Province in Sumatra Indonesia following Tsunami; this is a good example of internationalization of maritime industry and how they are responsible for social activities. Problems to the shipping companies to complying with CSR assumptions are many, one is cost, of course it has to be budgeted and be as part of the company policy, while some time CSR consume a considerable amount of funds. For instances it was noted from Precious shipping company, annual report that The company places highest priority on Corporate Social Responsibility and has built it into the companys mission statement and core value the company allocates a budget of 0.50% of net profit per year toward CSR activities (Precious shipping PCL, 2002) also time and training to companys official are another obstacles to this exercise. Conclusion Corporate Social Responsibility has not got an agreeable definition at the moment (Steve, M. 2010) but no one disagrees on its role and importance to the success of companies, be it a shipping company or any industry whereby, working on voluntary basis to shareholders and stake holders interests while balancing the core companys mission of wealth maximization is modern roles of any shipping companys manager. It revealed that CSR has introduced huge changes to big shipping companies and to the industry as well. Many decades have passed when maritime industry had closed eyes policy to social responsibility, seafarers was treated as just as employees and have nothing to do with company apart from receiving their salaries. It also ignores the importance of environmental preservations which lead to outcry from many organizations including environmentalist, trade unions, ILO, IMO and society at large. From that perception, industry has changed reasonably by introducing many directives to its stakeholders, and a pretty good number of standards, conventions and treaties came into effects (ISO 26000, SOLAS, MARPOL and likes) which lead to such kind of changes society was expecting. Far ahead, a shipping company must be taking intentional efforts to include in its policy and on budget CSR. Currently CSR has no standards to be followed; hence each company has to tailor made its policy to fit its situation depending on the needs. It is now a common practice on every shipping company that prepares annual report to include a portion that is explaining (Hamad Bakar Hamad 000455020) Page 5

Corporate Social Responsiblitiy in shipping Companies CSR efforts that have been taken, measures to improve, with budget set aside; but most important is what they are going to do in the next coming years. It is believed that, there should be internal auditing for all shipping companies, as a watch dog to check whether they exercise CSR or not. An appropriate body to do this apart from other international agencies is the Flag state. It is hereby therefore, recommended by this essay that, shipping companies or industry at large, to reschedule their policies and attitudes to cope with global views that all companies have to work for the social needs. They have to contribute to social welfares, avoid human right violation like child labor and discriminating policy at work, and protect environments and proper disclosure of information to public so as to be measurable. It is wise for tax authority to allow for tax purposes all CSR expenses in order to motivate shipping companies to practice CSR. Uses of anti-corrosive color and ant-fouling, lubricants waste and uses of shore-electricity while ship is on port are vital issues to be taken onboard on shipping companies policies.

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Corporate Social Responsiblitiy in shipping Companies Reference: 1. BSD, 2010. Corporate Social Responsibility Monitor: Institute Of Sustainable Development; [ON LINE]Available from http://www.iisd.ord 2. Edward, F. A., (2008). Sustainability and Corporate Social Responsibility Come To China: Responsible Business Strategies: [ON LINE] Available from http://www.ecgi.org/codes/documents/code_en.pdg

3. Florian, C. el al (2005). An Analysis Of Brazilian Ship Financing System: Vol. 32, No. 3, Maritime Policy & Management [ON LINE] Available from http://www.tandf.co.uk/journals [Accessed; JULY-SEPT 2005] p. 209-226 4. IMO (International Maritime Organisation), 2005. World Maritime Day: International Shipping-carrier of the world. IMO: London. 5. Steve, M. (2010). Shipping Sees The Broader Benefit Of Acting Responsibly. Lloyds News Analysis. Available from http://www.Lloydlist.com [ON LINE] [Accessed; Tuesday May 25,2010] 6. WSC, 2009. Environmental Stewardship: Washington D.C: [ON LINE] Available from http://www.worldshipping.org 7. Miles, J., 2010. Corporate Governance: Responsibility Debate comes to the force: [ON LINE] Financial Times, Special Report. London [Accessed from: Thursday October 7 2010] Available from http://www.ft.com/corporate-governance-2010 pg. 1 8. Marisec, 2006. Shipping Industry Guide line on flag state performance:[ON LINE] 2nd Edition, Maritime International Secretariat Services Limited; London. Available from: http://www.marisec.org/flage-perfomance 9. Cargo letter, 2006. MV Alva Star, Full speed ahead: [ON LINE] The Law office countryman & McDaniel, California: http://www.cargolaw.com 10. Hargett, T. and Williams, M. (2009),Wilh. Wihelmsem Shipping Company. Moving from CSR traditional to CSR leadership: [ON LINE] Corporate Governance, Vol. 9 No.1, pp. 73-82. Lysaker,Norway. www.wilhelmen.com 11. Wheelen, T. L., & Hunger, J. D. (2002). Strategic management and business policy (Eighth ed.). Upper Saddle River, NJ: Prentice Hall. 12. David, H, 2005, The Role of Business in the world of today: Acessed JCC 17 Spring 2005. WBC, London. Greenleaf Publishing. 13. Precious Shipping Company limited (PSL). 2002. Corporate Social Responsibility.[ON LINE] Available: www.presciousshipping.com

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Corporate Social Responsiblitiy in shipping Companies APPENDEX

Picture 1 : Source: The Law office countryman & McDaniel (MV Alva Star crashing)

Table no. 1 Percentage of Consumers Who Have Punished Company For Being Socially Irresponsible By Region REGION North America Europe Latin America Africa Eurasia Asia
Source; BSD global (2001)

%
42 23 23 18 10 8

Table no 2 Percentage of Shareholder Bought Or Sold Share Depending On Social Responsibility Of Company COUNTRY % Italy 33 USA 28 Canada 26 Japan 22 Britain 18 France 18 German 18
Source; BSD global (2001)

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Corporate Social Responsiblitiy in shipping Companies

Graph: no 1. Oil spill disasters

Source: ITOPF

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