Improving the Environmental Performance of Ports and Terminals

April 12, 2011
  • Raj Sapru

    Former Director, Advisory Services, BSR

  • Laura Ediger

    Former Associate Director, BSR

Around the world, the shipping industry accounts for more than a third of the value of all trade, and about 4 percent of global carbon emissions. While ports contribute a relatively small amount of the industry’s climate impacts—and of the overall impacts of supply chains—they often have a significant effect on local communities due to their contribution to air pollution. Emission sources include ships docked at the terminal, fuel used in cargo-handling equipment, and the various modes of transportation, especially trucks, that converge at ports to move goods onto the next leg of their journey.

Southern China has one of the world’s highest concentrations of port activities, as well as challenging air pollution levels often combined with close proximity to residential populations. The contribution of emissions from port operations has caused leading regulators and NGOs such as Hong Kong’s Civic Exchange to push for more stringent regulation along with voluntary corporate initiatives.

This trend is playing out in multiple regions, with civil society, government, and customers—especially companies evaluating their logistics and transportation supply chains—asking for information about how port managers are reducing carbon emissions and improving environmental performance.

In spite of this growing attention, it’s difficult to gauge ports’ overall environmental performance because the industry lacks a common framework for collecting and comparing information. As part of a new project supported by the Rockefeller Brothers Fund, BSR is looking at ways to extend supply chain sustainability to ports and terminal operators, building on our ongoing efforts with freight carriers and their customers in our Clean Cargo Working Group to calculate and communicate comparable data about environmental performance.

This article provides an overview of our research on this issue to date, and our recommendations for a framework that provides a benchmark for performance, uses metrics that fit into existing supply chain efforts such as the GHG Protocol, and includes a holistic picture of the diverse environmental impacts of ports.

Existing Efforts

A critical node in the transportation of goods, ports enable the transfer of freight from the ocean (where 75 percent of internationally traded goods travel at some point) to inland waterways or land, via roads or rail. Yet the operation of ports is complex in a way that is not always apparent from the perspective of supply chain sustainability.

What we call a “port” is often a complex agglomeration of individual terminal operations, usually run by global companies and typically governed by a “port authority” that sets a common framework for operation. But there are as many unique governance structures as there are ports. Port authorities, particularly in the United States, are elected and appointed regional governmental organizations ultimately accountable to the communities where they operate.

Within a port, “terminal operations,” the smaller organizational unit that sits atop the leased land of the port authority, are often privately operated businesses with the know-how and equipment to unload, store, and transfer cargo from one mode of transportation to the next. While some terminal operations are owned and maintained by the port authority, a large proportion of global container cargo is handled by one of several global terminal operators.

The nature of these diverse organizational structures makes tracking environmental performance difficult. Nonetheless, a few initiatives, primarily in North America and Europe, have begun to capture information on ports’ environmental impacts. For example, the World Ports Climate Initiative, a program founded by the International Association of Ports and Harbors and supported by 55 port members, has taken steps to measure and reduce carbon emissions from port activities. And the Europe-based Ecoports network has created a more comprehensive framework that provides guidance for ports’ environmental management systems and overall environmental performance.

While these initiatives have made significant progress by engaging port authorities, there is a lack of work at the terminal level. Port authorities respond to public policy and regulation, but terminal operators react to the same business-to-business drivers that currently fuel much of the supply chain sustainability activity occurring with retailers and manufacturers further up the supply chain. Ocean carriers, the mega vessel operators that shuttle millions of containers around the globe each day, have been steered in the direction of sustainability by customers such as IKEA, Nike, and Walmart, who see the movement of their goods as part of their own environmental responsibilities.

Now carriers are beginning to extend sustainability goals into the next node of supply chains, terminal operations. For terminal operators to meet these expectations, however, they must use a framework that sets out simple, comparable metrics that work within existing supply chain frameworks and meet the needs of both terminal operators and their customers.

The Benefits of a Framework

A framework to assess environmental performance of terminal operations will provide multiple benefits:

  • Performance benchmark: A standardized approach to assessing and sharing environmental impacts will allow terminal operators to benchmark their own performance against other terminals at the same port, as well as other terminals in the global corporate portfolio. Global terminal operators will be able to analyze their portfolio of terminals and compare them with peers using the same metrics, providing a better understanding of where potential savings exist.
  • Supply chain metrics: As retailers and manufacturers calculate Scope 3 GHG emissions for their supply chains, and as ocean carriers transfer sustainability expectations to their own suppliers, terminal operators will need to provide the relevant data. A framework to capture environmental performance will prepare terminal operators for an increase in data requests, saving time and reducing duplication, and aligning with initiatives such as the GHG Protocol and the Carbon Disclosure Project.
  • Holistic environmental performance data: Ultimately, an assessment framework for terminals must provide a performance narrative about the set of environmental impacts that are unique to terminals. While carbon measurements will be needed to appease supply chain partners, the relative contribution of carbon emissions by terminals is usually not as great as their local impacts on air pollution and public health. Terminals may also need to track and report on impacts related to management of water, waste, chemicals, and noise. Given this array of issues, terminal operators need a comprehensive assessment framework that allows them to evaluate a portfolio of indicators, with a view to both immediate economic and environmental priorities and long-term planning for more significant investments in port infrastructure and equipment.

BSR’s project will tackle these challenges, starting with Southern China as a focal point. Our objective is to craft a framework that meets the needs of companies and customers, taking into account both local and global environmental priorities. Thus, we are working closely with terminal operators, carriers, and other stakeholders to develop this framework, and we will be sharing the outcomes over the next several months.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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