MRV & DCS Regulation: Creating Opportunity From Obligation

Jul 23, 2022 | Blog

By now, shipowners should have met their 2021 reporting requirements for the EU’s MRV and the IMO’s DCS regulations, but the story does not end there. Meeting MRV DCS Regulation obligations has generated key business intelligence that can be turned into opportunities – does your company have the appropriate mindset to seize them?

The MRV and DCS reporting requirements could just be viewed as adding another burden to the industry’s already full plate, especially given the specific (and sometimes differing) data and criteria involved for each system. Indeed, the requirements of the EU’s MRV Regulation 2015/757 are separate to that of the IMO’s MARPOL Annex VI data collection system (DCS). Reporting for the EU MRV is required for ships of over 5,000 GT which carry passengers or cargo for commercial purposes to or from European ports – regardless of the flag they fly – and calls for data on actual cargo carried. In contrast, The IMO DCS requirements apply to all voyages, but only require reporting of deadweight tonnage as a proxy for actual cargo carried.

Each has different data checking, formatting and verification requirements, and timelines for compliance. The verified EU MRV annual emission reports for 2021 must be submitted to the EU Commission by 30 April 2022, and the related compliance documents should be on board by 30 June 2022. Ship owners must submit the 2021 reports for IMO DCS to a verifier by 31 March 2022, and the Statements of Compliance should have been on board by 31 May 2022.

The penalties for non-compliance can be severe, including having states refuse a ship entry to their ports. After all, while international shipping is the backbone of our society, it is also a major contributor to global CO2 emissions – and governments are justified in demanding accountability.

Using data management to support MRV DCS regulation compliance

Reducing and eliminating CO2 emissions from international shipping is critical to meeting long-term climate objectives. However, for shipping to truly become a low-carbon sector, it needs to offer reliable “climate action” data that enables stakeholders to monitor, verify and report the emissions associated with their activities.

To comply with the MRV and DCS reports, vessel owners have had to implement several processes and data quality standards. The first step is ensuring report implementation in a structured and harmonized way throughout the fleet. This requires a clear overview of all vessel data and an understanding of data reported. Vessel owners need to record and document the reporting process.

The first steps to achieving this have been taken, with several years of data already accumulated. So, the real challenge now is to ensure that your company can transform these requirements from merely an obligation, into an opportunity.

MRV and DCS requirements are anticipated to promote a better approach to climate change mitigation and generate opportunities for collaboration between countries and companies. Furthermore, they will provide the basis for transparent data governance practices between stakeholders, accelerating shipping’s journey into the digital future.

A strategy for efficient environmental reporting

So, what are the challenges? To guarantee full transparency, all concerned parties must adopt monitoring, reporting and verification criteria. But even if adopted, the question of data quality remains. It is impossible to accurately estimate CO2 emissions without reliable data to refer to.

Many companies still do not have the data required in hand to meet these new standards effectively, so time is of the essence for them to develop and adopt systems that will ensure high-quality emissions reporting shortly. Companies like Opsealog can close the gap between environmental ambitions and the proper measuring of results, bringing transparency to the industry and guiding the sector towards its goals while ensuring the best possible data quality. Engaging with these third-party services also makes it easier to ensure compliance levels remain up to date with constantly evolving regulations.

Once equipped for such reporting and future compliance requirements, vessel owners can start collecting data and performing analysis. This is where many companies are still struggling due to the lack of standardization across fleets and the need to convince people – who, in some cases, have been working in the industry for years – that there’s a better way to do things. But unlike sailing or navigating without GPS, seizing the opportunities that this data collection effort creates is not just about learning a new best practice but about adopting a fresh approach to how they operate.

Measuring and demonstrating progress

“If you can’t measure it, you can’t improve it,” management thinker Peter Drucker famously said. By providing vital insights into a fleet’s performance, data helps shipowners make smarter decisions that will unlock efficiencies, reducing fuel consumption and emissions from their fleets.

We would add: “if you can’t measure it, you can’t prove it.” As companies face greater scrutiny from their customers, they need data to measure and verify their achievements in terms of emissions reductions and other sustainability commitments. This fact-based picture will make the difference between greenwashing and meaningful action and results.

Collecting data and integrating it smartly enables companies to assess their starting point, identify inefficiencies and act on them. Good data management helps companies keep track of progress in terms of their own environmental, social and governance (ESG) goals. Data also facilitates information sharing between the different stakeholders involved, including partners, service providers, suppliers, regulators and investors – ensuring that they have an up-to-date picture of the situation and are all moving in the same direction.

This is crucial, as the shipping sector is under greater pressure from its customers and investors to demonstrate sustainability – and data can help companies prove that they “walk the talk” when it comes to their decarbonization commitments.

The Poseidon Priniciples – a global framework designed to assess and disclose the climate alignment of financial institutions’ shipping portfolios – is a good example of this. They establish a common, global baseline to quantitatively assess and disclose whether financial institutions’ lending portfolios are in line with adopted climate goals. Serving as an important tool to support responsible decision-making, this means that, from a shipowner/operator’s perspective, data collection and reporting are becoming increasingly crucial to securing funding.

Looking ahead: next steps for MRV DCS Regulation

Our position is that shipowners and operators can go even further with the data they already collect for MRV DCS reports by creating a new mindset that seeks out the value of that data – not only in terms of compliance but in potential financial and environmental benefits, too.

An organization’s ability to measure its environmental progress through good data management will be even more critical in the future. The data processes in place today will need constant updates to help companies throughout the sustainability transition. At present, measurements are based on the fuels currently on the markets, but the way we collect and process data will have to evolve to respond to the arrival of new fuels.

The transition to new fuels must be accompanied by robust data to measure consumption and emissions, as well as the impact on other operational costs – including those relating to the logistics of getting these fuels onboard. We are entering an “experimentation phase”, in which several options are on the table, yet the perfect solution does not exist. Data will be essential to understanding each option’s advantages and downsides and help the market (and each operator) decide the best direction for the next 10 to 20 years.

Digital solutions that enable the smart use of data will remain at the forefront of new technological developments and the requirements of new regulations throughout the energy transition. It’s important to see the value they can create and turn obligation into opportunity.

References

DNV

International Maritime Organization

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