20/07/2022 - News

MRV & DCS Regulatory reporting: creating opportunity from obligation

large vessel are imacted by new reglementations

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 these legal 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 different timelines for compliance. The verified EU MRV annual emission reports for 2021 were required to be submitted to the EU Commission by 30 April 2022, and the related documents of compliance should be on board by 30 June 2022. The 2021 reports for IMO DCS were required to be submitted 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.

timeline for MRV reporting

Using data to support shipping’s climate ambitions

We know that reducing and ultimately eliminating CO2 emissions from international shipping is critical to meeting long-term climate objectives. However, in order 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 a number of processes and data quality standards. The first step is to ensure that reporting is implemented in a structured and harmonised way throughout the entire fleet. This requires a clear overview of all vessel data, as well as an understanding of which data will be reported. The reporting process also needs to be recorded and documented by vessel owners.

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 reporting

So, what are the challenges? In order to guarantee full transparency, monitoring, reporting and verification criteria must be adopted by all concerned parties. But even if they are 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 in the near future. 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, whilst ensuring the best possible quality of data. Engaging with these third-party services also makes it easier to ensure compliance levels remain up to date with constantly evolving regulations.

Once the vessels are equipped for such reporting and future compliance requirements, data collection and analysis can begin. This is where many companies are still struggling, due to the lack of standardisation 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 completely 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 decarbonisation 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

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

An organisation’s ability to measure its environmental progress through good data management will be even more important in the future. The data processes we have in place today will need to be constantly updated 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 the respective advantages and downsides of each option, 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.

 

 

 

 

 

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