This episode looks at environmental, social and governance (ESG) during complex shipping disasters. What are the risks and opportunities when managing these large-scale incidents? We explore whether that can be done in a way that balances the interests of those directly affected and the insurers who pay for the clean-up.

To discuss this, Kait Borsay is joined by Nicky Cariglia, who has a background in marine biology and has spent the last ten years focussed on environmental emergency response, attending more than 30 oil spills and vessel groundings, where she has offered technical guidance.

Also on this episode is Sam Kendall-Marsden, the global head of claims for The Standard Club, who has spearheaded the club’s response to several major marine casualties, including the sinking of the cruise ship Concordia off the Italian coast in 2012.

This podcast coincides with the publication of Standard Club’s first Sustainability Impact Paper, entitled ‘Planet | People | Performance’. The report breaks down Standard Club’s strategy into two key impact indicators. The first focuses on how the club will work with its members to help create more sustainable services and practices, while the second indicator details how it plans to make its own operation more sustainable.

You can read the full report here: https://www.standard-club.com/knowledge-news/sustainability-impact-paper-people-planet-performance-4674/

Hello and welcome to Alongside, the podcast from Standard Club for the shipping industry across the world. I'm Kait Borsay. In this episode we look at ESG - environmental, social and governance - risks and opportunities when managing large scale complex shipping disasters. We'll be exploring whether that can be done in a way that balances the interests of those directly affected and the insurers who pay for the cleanup.

We want to be responsible and responsive underwriters and do the right thing. But sustainability is a lot broader than just decarbonisation or reduction in emissions.

The patchwork of environmental protection legislation that applies is ever changing and increasing legislation that perhaps wasn't designed to apply to emergency situations or casualties.

Joining me to discuss this is Nicky Cariglia and Sam Kendall-Marsden. Nicky has a background in marine biology and has spent the last 10 years focused on environmental emergency response. Attending more than 30 oil spills and vessel groundings offering technical guidance. Sam Kendall-Marsden is the Global Head of claims for the Standard Club, and has spearheaded the club's response to several major marine casualties, including the sinking of the cruise ship Concordia of the Italian coast in 2012. A warm welcome to you, Sam.

Hello.

Ad a warm welcome to you, Nicky.

Hi, there. Thanks for having me.

Let's get stuck into the topic in terms of what the principles are. We hear a lot about those, Nicky, environmental, social and governance principles. What do they mean to you - break them down for us?

Well, at their core, they're essentially what underpin the definition of sustainability. And that, at its most basic level, is the ability to meet our current needs without depleting natural resources to the extent that future generations cannot meet their own needs. And so within that we have a wide complexity of whether it's the environmental aspects, the social aspects and the governance aspects together with the economic component. In maritime, there's been a very strong focus on the regulatory perspective on climate change and greenhouse gas emissions. But the E in ESG is so much wider than that, including the risks and impacts to biodiversity, how we use and utilise resources, and manage waste and reuse materials where possible... those wider components are what is most relevant to how we manage casualties.

Is there an example that you can think of Nicky, where you've been able to apply these principles and how perhaps a disaster that you've attended, where you have to make sure that you're meeting those three pillars? Those three principles?

Well I would say that actually, when we respond to a casualty, and understanding that those principles are driving how we respond is there. Historically, we've looked at these ESG issues on a more ad hoc basis, because of the unique nature of each situation, the sheer variety of jurisdictions that they can occur. And it didn't really make sense. But I think looking at them more systematically, now is very much an option in a more formalised process. But as an example, I have done that on some casualties, where you go in and you do a screening risk assessment from the environmental, social and governance perspective. And in detail analysis of what are the environmental components here? What are the sensitivities? What are the resources? And also how do the people live? What value do they take from the coastal environment? And what are the economic activities around there?

And just elaborate on a few examples for me, if you can, Nicky where you've used those principles?

Well, there was one large casualty which became a wreck removal. And I was actually brought in there to do this initial scoping assessment, before the tender was written for it to go out to wreck removal, where you go through identifying the E and the S risks and sensitivities, how they might be impacted by no action, or how they might be impacted by various wreck removal options. And it was managed in a more systematic framework with spreadsheets and databases, so that you could actually use it to manage the project. And as the project went on, if certain activities were found to be having a negative impact, or if there were concerns in the local community, you could go back and adjust and see if you could mitigate those. There's also a lot of examples in terms of how we manage waste. Often the formulaic ways to manage waste that come from casualties are those governed by legislation, but in many cases, actually, you can find ways to utilise the wastes or innovative methodologies to recycle the waste and add value to it.

That's really interesting. Sam, let's pick up from the insurance side now. Insurers like Standard Club pick up the tab of course when one of these major shipping disasters occurs. What's more important the effectiveness of the response, or how much it costs.

Well in terms of our role the standard club is one of the 13 clubs within the international group of protection and indemnity associations and between us, we insure 90% or so of ocean going tonnage. And so when when one of these incidents occurs, when a major casualty occurs and a ship founders, becomes a wreck, or if there's pollution, the chances are one of the International Group clubs, like the Standard Club is going to be involved. We provide the financial resources and the know how to respond in the event of a casualty. And that might be right at the very outset, when we're dealing with the salvage phase and making sure that prompt salvage assistance is rendered so that things don't worsen. But where there is pollution, making sure that we have the resources in order to respond to that. And then similarly, if there's a wreck removal to to respond to that now, we want to be responsible and responsive underwriters and do the right thing. But sustainability, as Nicky mentioned earlier, it's a lot broader than just decarbonisation, or reduction in emissions, the environmental component of that is much broader. And in a financial sense, it's also about maintaining the viability of the insurance industry. Because if we weren't there, then there wouldn't exist, the financial firepower that's needed in order to respond to these very big casualties.

How much consideration do you have to give to costs specifically, how does that work within what you do?

I suppose it's the expanding art of the possible that's driven by financial resource. There have been concerns within the insurance industry about the rising costs of wreck removal. And in fact, within the international group, we looked at this, we started to look at this, over 10 years ago, when some cases in particular had driven these concerns. We set up a group of people who were very experienced casualty practitioners within the group, and came up with a strategy because we identified that it was very important to maintain the confidence of the maritime states that we deal with where these incidents occur, remembering that about a third of the world's population live in these coastal areas. So that's a really good example of the social aspect of this. But what we also recognised was that it was important to support the legal underpinnings of casualty response through the various International Maritime Organisation liability conventions. So that's an example of the of the governance there. And then in relation to environmental aspects, making sure that the response was, was right. And sitting on top of all this is an outreach initiative that we've been propagating now for a number of years. And that involves making friends with coastal administration's getting to know each other, doing drills practising what might happen in the event of a major casualty. So if these things unfortunately do happen, we already have those relationships in place. We have the legal underpinnings, and we know that we're going to behave in the right way and have that level of trust.

Nicky, from your perspective, do you understand that insurers have to think a little bit about the bottom line that obviously those ESG principles need to be kept to, but it needs to be manageable? Is part of your role an understanding of that of the cost concern perhaps?

No, it's absolutely part of the process as well, I think because, for me, the first and foremost is always what is technically the best option going forward. Now, increasingly, that may also require taking into account social considerations or public expectations. So for me, first and foremost, is the technical aspect. But I also like to involve and discuss and engage with as many stakeholders as possible to get as good an idea of the wider picture as possible. Where I think some issues can arise is when a certain option that is hugely expensive, or could go on for a long time, is being advocated and where I don't believe it actually technically is the best approach. And that's where my main concern with Costa as Sam said, the horizon of what is possible is ever expanding, it doesn't always mean we should go that way. For me, I want to know, what is the best outcome for people in environment,

Just to jump in there when Nicky you've been involved in casualties. And we're beyond the initial response phase where you know, a prompt responses is a good thing. And you're into a longer, let's say, wreck removal operation. I just wanted to explore the idea of time a little bit and how sometimes the shortness of time can perhaps be a factor leading to suboptimal results. Have you seen that and what sort of pressures or authorities under under those circumstances?

Well, that's the thing we have to understand. These incidents are huge. They have a really high profile. And so in the initial phases deploying a huge response for all potential options is absolutely understandable in many situations, it depends with a pollution incident, once you've removed the bulk of the oil, or once a casualty goes to a wreck removal, you tend to have a bit more time to refine your response. The salvage side of things or the early pollution cleanup tends to be technically low skill with little time. Whereas the more down the road, you go to the response, the more options that become available with differing costs, details and impacts. So those are the ones where you you take a bit more time to kind of come up with the most suitable pr oject.

I just wanted to mention on that casualty response point, because the question that was raised earlier was where the the quality of the response, if you like, meets the headwind of cost. And we see that I think in in the early phases of casualty. So if you imagine a situation where a ship might be on fire, or it's run aground, it's in need of urgent salvage services. Typically, it's a good idea to respond promptly to avoid the situation worsening, to avoid pollution to avoid wreck removal. And there's a contract in the market Lloyd's open form that permits an early response. It's, it's been around since 1908, it's well understood in the industry. But recently, what we've seen is a decline in the use of Lloyds open form. And the reason why that's a problem is because it then means that there is a delay sometimes in the provision of salvage services, and things get worse. That's worse for us from a financial perspective. But more importantly, it's worse for the three things that we look at in the context of emergency response. And that's people and the preservation of life. That's the environment and protecting natural resources, the marine environment, and then thirdly, saving property. And so I think before we get to casualty response removal, it's important to look at that that phase as well. And within the international group, we recently commissioned Hugh Shaw OBE, who's the former Secretary of State's representative for intervention and salvage, to commission an independent report on delay in the provision of salvage services. And Hugh interviewed a very wide range of stakeholders. And some of his findings included the fact that cost was a concern for certain insurance property insurers that typically pay for salvage. And the difficulty there then is if that then leads to a delay or an alternative contract is negotiated, you may end up with a worse situation after the fact. So I think it's important to consider this throughout the whole lifecycle of the casualty, we touched a little bit on tendering, but also at the outset, and it's important to look at that as well.

As we said, right at the start of the podcast, you were involved in the Standard Club's response to the cruise ship Concordia sinking of the Italian coast in 2012. And I just wonder whether that's a good example to use where, actually, you know, because of the high profile nature of it, it makes it really tough to sort of stick to the stick to ESG, because of the different pressures on you.

Yes, and I think, you know, it goes a little bit broader than the, the immediate focus of what we've been talking about up to now. Because, you know, ultimately, that was a human tragedy in which 32 people lost their lives. So that clearly was the primary focus of this. And in terms of what we've done, as insurers, it's not just about addressing pollution aspects or removal aspects, but actually initially focusing on on the people, and then in time, looking to make sure that the claimants are appropriately compensated in relation to that that particular incident, where the incident occurred, it was in the Turanian sea off the west coast of Italy. It's a pristine environment. And so there were naturally concerns from the local community about pollution and we share those concerns. And I actually travelled out to the island straight after the incident occurred. And we were able to run a tender process, involving two salvors with a very simple scope of work to remove the pollutants from the ship, predominantly fuel oil, but other things as well. And that contract was negotiated within a matter of days. And they were able to do that very successfully, and protect the environment from pollution. Beyond that, we then planned an extensive wreck removal operation, which was completed in 2014. That ship has since been recycled. And subsequent to that we're currently involved in an environmental restoration programme. So everything that fell from the wreck of the ship has been removed from the seabed, all of that debris and sediment has gone and we've engaged a team of scientists from the University of Rome, and they're involved in a five year project, restoring that environment and replanting Posidonia seagrass so we replanting different types of coral to restore that environment to the best that it can be. It's reviewed by the authorities on a yearly basis. We've also engaged a coral reef expert from Florida, who flies over to examine the work and provide input. And I'm very confident that when we get to spring 2024, when the project comes to a conclusion that we'll have left that environment in as best the state as it possibly can be,

Nicky, what's changing in the way the sector responds to casualties or incidents?

Well, I think what I've noticed in the last five to 10 years, really, is that the drivers of responding to casualties are becoming evermore complex. And by this, I mean, of course, public expectations are rising. When we were younger, it was normal to walk on a beach and find a tar ball. And that is no longer acceptable. That applies to all the situations we may find casualties in we have much higher standards and expectations, which is one of the cost drivers as well. We've also noticed and is more nuanced and needs to be backed up by data. But in a in a survey of the industry, a lot of people are overwhelmingly finding this is that actually, the patchwork of environmental protection legislation that applies is ever changing and increasing legislation that perhaps wasn't designed to apply to emergency situations or casualties, nonetheless need to be adhered to during the response. So it goes beyond and above the liability regime developed by the IMO. But legal instruments such as MARPOL, such as the EU ship recycling regs, the Basel Convention, all these make it incredibly complicated for the range of situations we may find ourselves in.

Nicky, let's talk about data with you. And the focus really on how to gather and, and analyse data to the optimum really to inform better decisions. Is that something that you're focusing on more and more, are there any barriers in the way to gathering good data to help inform decisions?

if we look at the wider sustainability space, or the discussions going around this, everything centres on data, it's becoming more available, it's becoming easier to process easier to store. And we're evolving ever more sophisticated ways of gathering environmental data. But data really comes in several parts. So the information required to make decisions, the marine environment is highly dynamic. And it's been very difficult traditionally to understand processes in detail of what is happening. And so in order to make decisions in terms of how we respond to a casualty, sometimes now data may be available. But if it is not the use of experts and their opinions, it is another less granular level that can be relied upon. So there's the data required to make decisions. And then as Sam has been discussing with the Costa Concordia restoration project, the data that identifies impacts, and monitors how those evolve over time. So I think we have to be cautious because I do believe that when we respond to casualties, and when we manage wreck removals, or oil spills, we do need to start better collecting data. But we do not want it to become as Sam said earlier, like a planned project that takes years in order to do this. For me, the main thing is the process - as long as we have a systematic process in place that captures what we should be looking at. I think we do need to be really careful in that if we do start to use more systematic tools that we don't drown in red tape, and bureaucracy, and actually that they help make a more efficient response with better decisions.

Nicky, it sounds then like there's a lot of good work going on in this area. We're still having this conversation about it, though. So I wonder whether more needs to be done. Are there areas for improvement, then when it comes to getting the best out of these ESG principles, making sure that they're adhered to?

I really think that would be up to the industry in terms of to what extent it's necessary to do more in terms of developing more robust frameworks in line with general business practices, meeting the sustainability agenda of the moment. So for example, for now, the regulatory landscape regarding corporate governance is very much voluntary. But in the EU from 2024. A mandatory legislation will come in, it adds an E, S and G burden in terms of disclosure requirements. So whether it's biodiversity related, whether it's consumption related, resource use related and also outcomes for people and social aspects. What we could do is, is there a way and is there a need to better record similar performance indicators in how we respond to casualties? Because let's not forget, there's been 50 years of real Finding how we respond to these. And there's a lot of good practice that has already been done. And as Sam said earlier, there's already quite a rigorous environmental protection liability regime at the level of the IMO. For me, if these corporate governance disclosure requirements progress, will they apply to us in how we manage casualties. And if they do, I would very much like the the good mechanisms we already have in practice, are reflected by any of those sorts of disclosure requirements added to that moving away from the regulatory side. From a voluntary perspective, I think there could also be a lot of benefit in helping the communication of how we respond to casualties by coming up with these performance indicators and other tools from environmental best practice already in place for planned marine developments.

That's really interesting. Sam carry on with that for me, when we're looking at the future, and it how the principles of ESG can be adhered to enhanced, so that everyone and everything gets a better deal out of when really unfortunate incidents happen. Where do we look to where are the issues of flashpoints for you in the future?

Well, I think it's about making sure that we respond appropriately. But also making sure that people recognise that sustainability goes beyond the considerations we've been talking about. And it also relates to the financial sustainability of the system. Because the the International Group has a unique arrangement, we're able to provide very high levels of insurance, cover and reinsurance cover, that, as I mentioned earlier, provides the resources to respond to these very large cases, in a way that isn't found elsewhere. And so I think we, you know, we have the opportunity, and we are a force for good within the insurance industry. And it can be, you know, not just in terms of responding when things have gone wrong, but also in terms of prudent risk selection in terms of working with ship owners, to drive up operating standards, to work with them in terms of educating crews to mitigate the risk of these incidents happening in the first place. So to try to drive meaningful change. But you know, there is a balance to be struck. It's about maintaining the viability of the system that we have. Part of that relates to the legal underpinnings of all this. So we're liability insurers, we respond to a ship owners legal liabilities, as set out in various international and national legal instruments. And so what we try to do is to influence states to implement those conventions so that we have certainty in terms of legal liability and cost, because that helps to support the sustainability of the group system.

Well, we've heard a lot of fascinating insight there. To sum up the conclusions of both our guests....for Nicky there could be better comps on how casualties are responded to, and tools to better document decision making. And for Sam, the International Group is an opportunity to be a force for good. It's then really important to maintain the viability of that system currently in place. Well, thank you to both of you for joining us on this episode of Alongside. That's Nikki Cariglia and Sam Kendall-Marsden, and a reminder that Standard Club have officially released their first sustainability impact paper. It's called 'Planet People Performance'. The report breaks down Standard Club's strategy into two key impact indicators. The first focuses on how the club will work with its members to create more sustainable services and practices. While the second indicator details how it plans to make its own operation more sustainable. The link to that paper is in the show notes. Join us next time on Alongside when we continue to explore key topics affecting the maritime industry and those who are part of it. Click follow on this podcast to ensure you don't miss an episode. Thanks again to both our guests - from me Kait Borsay, thanks for listening.