Managing Director's Message

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Dear friends of CNCo,

Welcome to the sixth, externally assured (GRI G4: Standard Disclosures – Core) Sustainable Development Report for The China Navigation Company Pte Ltd (CNCo). CNCo reports its full performance in all the areas covered by the Social Responsibility Standard: ISO 26000:2010, viz. Human Rights, Labour Practices, The Environment, Fair Operating Practices, Consumer Issues and Community Involvement and Development. These are reported under the broad headings Health and Safety, Environment and Biodiversity, and Our People and Communities. We have had this report externally assured in accordance with the most widely used reporting framework, GRI guidelines: G4 (Standard Disclosures – Core), to assure our stakeholders and readers that what is reported is truthful and complete, and in a way that will permit comparison to be made between our performance and those of our peer group who are also open and transparent about the way they operate.

2016 was a year in which we placed a very strong emphasis on safety or “Zero Harm to all stakeholders”. CNCo has been in the shipping business for over 140 years. For it to remain sustainable and fit for business in the next century, the safety of all our stakeholders and avoidance of harm to the environment is absolutely crucial. Regrettably, in Q2 2016 CNCo recorded three fatalities (one to a CNCo seafarer and two to stevedores on one of our ships – the learning points from these tragic events are detailed later) and 14 LTIs.

So in the second half of 2016, the company embarked on an even stronger push to immediately further strengthen and embed our safety culture, with the roll-out of several initiatives, led by our top management. CNCo’s goal for Zero Harm and to establish it firmly as part of CNCo’s safety culture in every single operation we undertake, now and going forward, can only be realised with hard work, dedication and total commitment from everyone, top to bottom, ashore and on board.

I am happy that this emphasis and commitment is in place, at all levels in the company, but there is always more that can be done. Safety excellence leads to operational excellence and drives positive business results and we detail in this report the immediate initiatives we put in place to work towards achieving Zero Harm. Medium and longer term initiatives to maintain and securely embed our current momentum and drive ever higher standards will be detailed in next year’s report.

In 2016, CNCo completed its four year energy-efficient fleet renewal and expansion programme that delivered 12 multipurpose liner vessels, 28 handysize bulk carriers and one dedicated cement carrier. This has established CNCo’s position for safe, sustainable, cost-effective operations as our customers’ partner of choice for the long-term. In so doing this expansion in fleet size led to a commensurate increase in the number of our sea and shore staff and led us to evolve our management structure to be more responsive to customers’ needs.

Going in lockstep with the addition of new tonnage, is the sustainable retirement of tonnage that has reached the end of its economic life. The most environmentally efficient solution to this retirement is responsible and environmentally sound recycling of ships, through which over 99% of the ship by weight is reused, either as is or in re-constituted form. CNCo is the lead company in the Sustainable Shipping Initiative (SSI) on the Sustainable Ship Recycling Working Group. A significant success during the year was our sponsorship of a second Roundtable on Sustainable Ship Recycling immediately post an industry Sustainable Ship Recycling Conference in Dubai in Q2. We had around 30 attendees, including all Hong Kong Convention (HKC) certified compliant Ship Recycling Facilities (SRF) in India, representatives from the Danish, French, German and Japanese Ship-owners’ Associations, four IACS Class Societies, five SSI members, the relevant EU Directorate and the NGO Shipbreaking Platform. All the attendees made commitments to a) press their relevant governments to ratify the HKC and/or b) to maintain communication to help raise standards in an industry that had a very tainted name in the past.

During the year we oversaw the successful sustainable recycling (zero injuries, zero pollution incidents, increased level of HKC compliance and social commitment at the SRF) of two of our ships: MV Changsha and MV Chengtu, at an HKC-compliant SRF in India. All four SRF who bid for this work fully accepted our requirement for external independent auditing, visits by our General Manager for Sustainability and the embedding of a three- man HKC Compliance Monitoring Team at the SRF during every minute when demolishing work was taking place, (all at our additional cost) to ensure that capacity building continued and that standards and best practices were maintained. It is worthy of note that the SRF willingly accepted all third party advice on improving operations from all three parties and that all three parties were empowered to stop any/all work if it was seen that personnel were in danger of injury or that there was a risk of an environmental pollution event. This is especially noteworthy as with the exchange of the bill of sale, CNCo, as prior owners, no longer had any liability or responsibility for the ship. We believe this is a significant paradigm shift in any sector, post-sale of an asset.

Adverse climate change has called for an urgent global consensus and real action to transform the world into a low-carbon economy. More than 99% of CNCo’s GHG footprint is produced from the combustion of residual fossil fuels in internal combustion engines on ships. Because of this, CNCo is committed to radical decarbonisation and helping to move the dial in this crucial area, notwithstanding that, even “because”, shipping (and aviation) are excluded from the Kyoto Protocol/2015 Paris Agreement, by developing a viable alternative fuel technology that can be marinised and scaled-up to be suitable for a high proportion of this sector. We believe that Bio Fuel Oil (BFO) derived from waste product feedstock, such as is produced by our sister company Argent Energy is a candidate with great potential to achieve this necessary decarbonisation goal, ultimately for the whole deep-sea sector, and we started work with Argent on an R&D project to prove the feasibility of this technology as a drop-in fuel in a marine context. We report on our joint progress with this initiative later in this report.

Although 2016 was another challenging year commercially for most shipping sectors, CNCo continues to take a long-term view of our business, which remains the most GHG-efficient mode to move the cargo that we all need, globally. 2016 was a busy and positive year for Swire Shipping. In June we launched our new Pacific Islands service which has been highly commended by both new and long-term customers.

We were honoured that through our hard work and customer-facing commitment Swire Shipping won the Seatrade Asia award for the “Best Owner/Operator” despite tough competition from several much larger, global carriers. We continue to enhance our network by increasing the frequency and improving the port coverage on several of our services. We welcomed new colleagues in Fiji and Samoa into the CNCo family, as we established our own branch offices there, in these key markets and so retain our leadership position in the Pacific basin.

Despite the worst dry cargo market since 1985, with rates reaching their lowest in February, the Swire Bulk business grew by over 100% during the year. On 1 January 2016, the division was operating 27 vessels and as of 31 December it was operating 55 vessels. The team has grown organically during the year, with new offices opened in Melbourne and Miami, permitting us to be closer to our customers in Oceania and the Americas. Swire Bulk has considerably expanded its customer base, well positioning the business for better times. In 2017 the division is looking to grow its footprint in the parcel trades.

In 2015, Swire Bulk Logistics entered into a long-term partnership with New Zealand’s Golden Bay Cement to build and operate a self-discharging cement carrier. In 2016, CNCo took delivery of the vessel, MV Aotearoa Chief, and she has commenced operations in New Zealand.

In 2016 we were awarded the merit winner of the SEC-MPA Singapore Environmental Achievement Award (SEEA) 2016 (maritime category). This external recognition by the major marine regulatory and environmental bodies in Singapore is a strong endorsement that we are committed to doing our share to enhance our sustainability and doing the right thing for the people and planet.

We strongly believe that by regularly reporting what we do openly and transparently, as in this CNCo Sustainable Development Report for the calendar year 2016, we will develop an ever closer relationship with our stakeholders and that this will help us on our journey to be the leading provider of sustainable shipping solutions and our customers’ partner of choice.


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James Woodrow