Yards worldwide are rising to the challenge of sustainable ship recycling in response to stringent new EU regulations but third-party supervision is still needed to ensure compliance with these rules and eliminate reputational risk for the shipowner, according to recycling consultancy Sea Sentinels.

Environmental, social and governance principles are now seen as vital to a vessel owner’s equity story as the maritime and offshore industries face mounting pressure from clients, investors, financiers and the public to ensure vessels are recycled in a safe, green and responsible manner.

These industries must also relate to a plethora of regulations that have emerged in recent years to stamp out scandalous scrapping practices – including the use of child labour and release of hazardous materials – that have led to serious accidents involving fatalities at unregulated yards.

Regulatory complexity

The IMO’s 2009 Hong Kong Convention for the safe and environmentally sound recycling of ships was preceded by various rules issued under the aegis of the International Labour Organisation (ILO) and Basel. More recently, there has been the European Union Ship Recycling Regulation (EUSRR) and Basel Ban.

The latter regulations require EU-flagged vessels to be recycled at one of the current 41 yards on a list of approved recycling facilities worldwide and Sea Sentinels is now offering its services at yards in Norway, Belgium, Spain and other European countries included on the list.

Its chief executive Rakesh Bhargava says though that simply selecting an approved yard is actually not sufficient for owners to achieve compliance due to regulatory complexity, and on-site supervision is needed to enforce the requirements – mirroring a shipbuilding project in reverse.

“Enforcement still remains a major challenge today. As an independent provider, Sea Sentinels addresses the core problem that is ‘on-the-ground’ enforcement and compliance so that best practice is observed,” he explains.

“We strongly believe that having a full-time independent, experienced and strong site presence is a key contributor to safe and environmentally friendly recycling operations in compliance with both regulations and owner policies.

“Our teams like to get their hands dirty and believe in active engagement at the worker level.”

Zero incidents

Sea Sentinels boasts a track record of zero incidents from sustainable recycling projects for international owners on both ships and offshore rigs at yards in major scrapping locations including Turkey, China (now closed) and India as it expands its supervision activities in Europe.

The Singapore-based company, with offices and representations in Norway, Malaysia, China, Japan, Indonesia, India and Turkey, provides comprehensive services for ships and offshore units based on three main business pillars – sustainable recycling, inventory of hazardous materials and its maintenance (IHM) and lay-up services.

As part of its consultancy role, the company performs benchmarking and audits for selection of an appropriate ship recycling facility as Bhargava says “there is not much awareness or domain knowledge among most owners for carrying out due diligence towards yard selection”.

During the recycling process, Sea Sentinels deploys a specialist supervision team on site to monitor activity so HSE requirements are fulfilled and provide continuous reporting – such as documenting hazardous waste disposal – so that final certification can be gained to secure regulatory compliance.

ESG risk

“Given the regulatory requirements, this is a complicated and exhaustive process that simply cannot be left to chance if owners want to demonstrate their credibility to stakeholders and minimise their ESG risk exposure,” Bhargava says.

“Nobody wants untoward incidents that will jeopardise the environment as well as the lives and safety of workers. These also generate negative publicity for all stakeholders, be it the owners, yards or certifying bodies. Corporate social responsibility is the watchword.”

Lately, courts in Europe have held that shipping companies can be held liable for incidents on their ships during recycling even after the vessels have been sold.

While European yards typically offer lower scrap prices than their South Asian counterparts due to higher operating costs, Bhargava believes carrying out recycling sustainably with expert enforcement will benefit business in the long run given heightened green awareness in the market.