Managing Director & Partner
Copenhagen
By Peter Jameson, Ulrik Sanders, Camille Egloff, Mikkel Krogsgaard, Alex Dewar, Laurids Schack, and Daniel Caceres Larsen
Peter Jameson
The maritime industry stands at the forefront of global trade, playing a pivotal role in connecting markets and fostering economic growth. Yet despite being a highly efficient form of transporting goods, shipping is also responsible for roughly 3% of global carbon emissions. If the maritime industry were a country, it would rank among the top ten emitters worldwide a stark reality that underscores an urgent need for improvement to support global decarbonization efforts.
On the positive side, for an industry that has long been perceived as an environmental laggard, 2023 marked a turning point. Key developments that will help enable decarbonization included:
In BCG’s third annual Shipping Decarbonization Survey—a study aimed at assessing the readiness of shipping customers to pay a premium for green transportation methods—we engaged 125 decision makers in 2023. These survey participants included heads of logistics, supply-chain directors, and other executives who determine cargo owners’ choices of maritime providers. Among our principal findings is that the shipping industry is still struggling to convert commitments into measurable actions.
How can carriers speed up this process in the overall drive toward net zero? Although the barriers to progress are high, we see clear navigational paths that can overcome them.
Green shipping is broadly gaining momentum, with significant developments in both the public and private sectors. The same can be said for related technologies and the development of alternative fuels. Our 2023 survey showed that more than 80% of shipping customers are prepared to pay a premium for green shipping, with the average premium currently at 4%—an increase of 33% from 2022 and double the rate of 2021. (See Exhibit 1.) Nonetheless, the projected growth rates still fall short of the levels required for significant decarbonization.
According to a study coproduced by BCG and the Global Financial Markets Association (GFMA), a premium of 10% to 15% will be necessary to achieve complete decarbonization of the shipping sector by 2050. In the shorter term, the premium might need to be as high as 30% to 40% before the production of alternative fuels can be scaled up effectively. As of now, only a select group of companies is willing to pay a premium exceeding 10%.
Overall, we have identified three major barriers that continue to impede the progress of green shipping.
Subscale Alternative-Fuel Production. A 2023 BCG study coproduced with the World Economic Forum (WEF) indicated a rising demand for alternative fuels, as demonstrated by the order of more than 180 dual-fuel ships. However, over 95% of projects focused on producing these fuels are still in the pre-final investment decision (FID) stage. The study outlines 10 key challenges to scaling up the zero-emission fuel supply, including issues related to macroeconomics, regulation, supply chains, and organizational structures.
Shifting Regulatory Requirements. Although 2023 witnessed significant regulatory actions by the IMO and the EU, the regulatory landscape remains in flux particularly regarding vital decisions on fuel standards and the size and timing of a potential carbon tax. Such shifting regulation can prompt companies to stay on guard and remain hesitant to invest rapidly and confidently in green shipping.
A Budget Gap Among Cargo Owners. Although more than 60% of our survey respondents have committed to reducing Scope 3 shipping emissions—those for which a carrier is indirectly responsible throughout its value chain but does not generate itself—less than half report having an adequate budget to achieve their targets. Clearly, the gap between admirable ambitions and required financial resources is still fairly wide.
The present state of the maritime industry calls for a shift from mere promises to tangible investments in green initiatives. The key enabling developments are robust, and commitments from both public and private sectors are in place. The real challenge lies in converting these commitments into concrete actions. In this crucial phase, the cargo carriers cannot wait for optimal regulations to take shape or for customers to take the lead. They must proactively identify and seize opportunities for growth in green shipping. There are two principal imperatives.
Capture untapped segments. We believe that untapped pockets of growth in the market can finance the development of a viable and sustainable green shipping product. But carriers must first identify prospects that are willing to invest in carbon-neutral transportation. Overall, current WtP premiums vary widely both by industrial sector and level of green commitments. (See Exhibit 2.)
Our survey has revealed several promising segments:
Be an early mover. The unexploited commercial opportunities in green shipping are fundamentally the result of a gap in market offerings and customer needs. Despite a clear willingness among many cargo owners—especially those with Scope 3 commitments—to pay a premium for green shipping, they often face limited access to such options. Our survey revealed that only about 35% of customers have been presented with green shipping options, with the percentage slightly higher (at around 40%) for those with Scope 3 commitments.
This disconnect may stem from two primary issues. First, shipping companies currently providing green transportation might not be effectively segmenting their target market, or they may lack a robust go-to-market strategy. Second, companies not yet offering green options may be unaware of the existing demand from their customers, causing them to miss out on substantial business development potential.
Such a scenario presents a lucrative chance to capture market share for early movers. By developing a strong go-to-market strategy that clearly identifies and serves customers that are ready to invest in green shipping, cargo carriers can secure a sizable competitive advantage. At the same time, they can help drive the industry’s progress toward sustainability. This type of proactive approach is critical to the quest for a greener and more sustainable maritime future.
At this pivotal moment in the maritime industry’s shift toward sustainability, it’s mandatory for shipping companies to successfully develop and market green products. Based on the overall BCG framework for successfully navigating climate change and sustainability issues, we see a number of imperatives for shippers.
Develop a holistic go-to-market strategy for green shipping. To effectively launch green shipping products, carriers need a comprehensive, strategic approach that goes beyond merely creating an operational product. They must also align their offerings with market demands and customer needs. Key aspects of this strategy include the following:
Collaborate across the value chain. The 2023 BCG/WEF report highlights the substantial benefits of collaboration between fuel producers and their customers to develop a green-fuel value chain. This partnering approach significantly reduces risks and facilitates the launch of large-scale fuel projects, as evidenced by the benefits below:
Proactively take key transformational steps. Thoroughly preparing an organization for transformation is vital to success. The key elements for readiness involve these action steps:
By following these strategic recommendations, carriers can not only champion the cause of green shipping but also leverage it as a significant business opportunity—one that contributes to a sustainable future and positions cargo carriers as leaders in the green transformation of the maritime industry.
The maritime industry stands at a key juncture. It is facing the dual challenges of taking on environmental responsibility and seizing the business opportunities presented by green shipping. This inflection point demands strong leadership and a collaborative spirit among customers seeking green solutions and companies that are capable of delivering them.
For cargo carriers, the current moment offers a unique chance to lead the way in sustainability. By developing and marketing green transportation products, backed by effective go-to-market strategies, they can significantly contribute to a more sustainable future.
Long-term success will not come easily, of course. It calls for bold, early-mover leadership. But by acting decisively, shipping pacesetters can make great progress in steering their own industry and the greater business community toward a truly net-zero future.
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