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HOW FAR HAS CORPORATE SOCIAL RESPONSIBILIY (CSR) CHANGED SHIPPING COMPANIES’S 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, like 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 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 a big shipping companies

in maritime industry who does not know how his/her company is social responsible, 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, it 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

integrate social and environmental concerns in their operation and interaction with stake

holders on 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 or life”.

Traditionally, many scholars were not believed on company’s 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

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concers,involves them selves in new process of multiple stakeholders engagements” David,

H. (2005)

In recent years, extensive stress from pressure groups both external (environmental and

social activists) and internal (workers and their in-organization unions) forced shipping

companies in deviating their original courses toward CSR. International organisation like IMO

(International Maritime Organisation), ILO (International Labor Organisation) 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 organisation

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 on shipping companies is something that requires more

attention taking into account its nature of operations. A big challenge to shipping industry

compared to other industries in general, 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 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: If there is a hot issue on maritime industry and to the world at large on these

days, environmentally awareness and protection should be number one. Maritime

environments can be destroyed by ships themselves and from human activities. 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.

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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)

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

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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 shipper’s cargos. (Picture no 1 on

appendix).

Shipping companies have to participate on social activities especial during the disasters.

Wilhelmsen’s 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 company’s 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 company’s 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. Working on voluntary basis to shareholders and

stakeholder’s interests while balancing the core company’s mission of wealth maximization is

modern roles of any shipping company’s manager.

It revealed that CSR has introduced huge changes to big shipping companies and to 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

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

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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 measurable. It is advisable 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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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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APPENDEX

Table no. 1

Percentage of Consumers Who Have Punished Company For Being Socially Irresponsible By Region

REGION % North America 42

Europe 23

Latin America 23

Africa 18

Eurasia 10

Asia 8 Source; BSD global (2001)

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)

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

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Graph: no 1. Oil spill disasters

Source: ITOPF