Safety4Sea reports that The Boston Consulting Group (BCG) surveyed 125 ocean carriers to gauge their willingness to pay a premium for carbon-neutral shipping. Their answers present challenges and opportunities for the shipping industry.
“82% of shipping customers are willing to pay a premium for zero carbon shipping,” BCG says.
BCG’s recent 2022 survey showed that 82% of shipping customers are willing to pay a premium for zero-carbon shipping. In addition, the willingness to pay (WtP) premium increased by more than 30% to around 3% in 2022, which would correspond to between $10 billion and $20 billion. in additional revenue for the maritime transport sector.
A partial conversion of wavering customers also appears to be occurring, with the low WtP segment (WtP 2%) shrinking from about 40% in 2021 to around 30% in 2022.
Looking ahead, the WtP premium trajectory is positive and is expected to be well above 3%, with approximately 65% of customers surveyed in 2022 indicating a willingness to pay an even higher premium in the future.
“However, a WtP premium of 3% per year is not enough if cargo owners are only required to finance decarbonization, which would require them to pay a premium of 10-15% per year until 2050.”
In addition to the year-over-year increase in WtP, more shipping customers are responding that they would be more loyal to a zero-carbon carrier. Overall loyalty is higher (71% in 2022 vs. 67% in 2021), with a significant change in the low WtP segment.
While regulation remains the most common driver of WtP premiums, demand across the transportation customer value chain is playing an increasing role, rising from 29% in 2021 to 34% in 2022.
Such growth included an increase of more than 9 percentage points in the high WtP segment and more than 5% points in the low WtP segment. “This dynamic reflects a general consumer trend, with 57% of consumers willing to change their shopping habits to help reduce negative environmental impact and 33% already choosing brands that have publicly embraced environmental causes or social,” according to a report by the Maersk Mc-Kinney Moller Center for Zero Carbon Transport.
Take steps to fill the void
Given that a WtP premium of 10-15% per year is required to finance decarbonisation by 2050, it is clear that waiting for the market to fill the financing gap “organically” on its own is not a winning approach to achieving the Accord goals. from Paris.
The current WtP growth trajectory of 30% per year will not reach the 10% threshold in the next few years. It is also clear that consumer behavior holds an increasingly vital key to closing the gap.
Taking a broader perspective, overall sustainability awareness among consumers is around 80%, with around 70% willing to pay a small premium (5%) for sustainable consumer products, according to the Maersk Mc-Kinney Moller Center. . Fortunately, fully decarbonizing the value chain of many consumer products costs less than 5% of the price of the products.
Solutions to speed up this process are already underway. Policymakers and regulators have great influence in facilitating change and must move forward with the institution of carbon taxes to help finance the green transition, BCG told Safety4Sea.
Companies that choose to act as pioneers in green solutions
Some companies have chosen to pioneer green solutions to foster the transition between peers and customers, not only responding to demand but increasing (green) supply to create demand and generate new infrastructure in the value chain.
However, being a pioneer is not a requirement to take positive decarbonization steps and begin the transition itself.
Examples among shipping companies include Maersk, CMA and COSCO, each of which has committed to making significant investments in vessels capable of running on green methanol. And giants like IKEA, Amazon, and other major transportation buyers have collectively committed to zero-emission transportation by 2040.
Shipping companies can also participate in the public debate to help shape the views of their customers and policymakers. Additionally, these customers can take advantage of the growing awareness and interest in sustainability issues among consumers to make decarbonized products more attractive, both through day-to-day marketing and longer-term campaigns.
Raising the consumer WtP for goods is expected to be very effective for some segments, as the effect of slightly increasing prices for some products (such as apparel, electronics, and consumer goods) can help finance decarbonization.
Improve the perception of green offers
Both shipping companies and their customers must communicate the benefits. In fact, a BCG study clearly showed that consumers value other social and environmental issues above carbon emissions across multiple industries.
Additionally, shipping companies need to understand and act in response to green products, working closely with their customers to identify what matters most to them and determine how a premium can or cannot be earned.
“A one-size-fits-all approach doesn’t work,” says BCG.
Shipping companies need to confirm the impact of choosing green services compared to traditional services. This can be achieved in part, for example, through fully transparent carbon accounting and billing practices, such as specifying carbon emissions on invoices and receipts.
Players should also work to create standardized classifications for decarbonized transportation, possibly in collaboration with policymakers.
Such an initiative could include fuel usage, as well as ship ratings according to the IMO Carbon Intensity Indicator.