The MOL Group set its vision 10 years from now in the new management plan "Rolling Plan 2017." Reaching the goals set out in the plan will require enhanced marine technical skills, IoT, technology development, new approaches to the environment, workstyle reforms, and other achievements. In this section, we invited Eiichiro Adachi of The Japan Research Institute, Ltd. to participate in a dialogue with CSR Committee Chairman Shizuo Takahashi and evaluate the group's initiatives.
Advanced initiatives to solve environmental issues reflect our social commitment as an ocean shipping company
Adachi : In international society, the Paris Agreement was adopted at COP21 in 2015, showing the world's common goals for a post-carbon society. On the other hand, I think there is still a demand for providing transport services as long as some customers need fossil fuel energy sources such as coal and petroleum. It is often said that ocean shipping's business model demands prior investment and needs to forecast the next change by closely monitoring social trends as well as providing services. What do you think about the difficulties it faces?
Takahashi : There is a term "stranded asset" - if efforts to reduce CO2 emissions, result in reduced demand for fossil fuels such as coal and petroleum, we may also see a scale-down of the need for vessels that carry such cargoes. We recognize that such a significant change is very likely to start by 2050. In the new management plan "Rolling Plan 2017" introduced the other day, we discussed the vision for the company 10 years from now and looked at methods to achieve that vision in three-year business strategies. This is attributed to the possibility of significant changes even in the ocean shipping business. For example, the U.S. was expected to become a huge LNG importing nation in the early 2000s, but actually, the continued development of shale gas has turned the U.S. into an LNG exporter rather than an importer. That means, in most cases, the world economy will be moving in a different direction than anticipated.
Therefore, our group selected an approach to shift our business strategies to match changes in the world and fulfill our vision for the future. And we put "the environment" at the core of the plan's management strategies, which form the basis of the "Environmental Vision 2030."
Adachi : I think the ocean shipping industry's business environment has undergone extreme changes, making it very difficult to steer from a business management perspective. Actually, the market and business sentiment of the entire world economy have a direct impact on the business, so it is very important to formulate business strategies flexibly and from a mid- and long-term standpoint. What discussions did you actually have before deciding on "the environment" as one of your management strategies?
Takahashi : Ocean shipping is considered a superior means of transporting mass volumes of cargo from an environmental viewpoint, but the fact is that CO2 emissions from vessels account for about 2% of the world's total greenhouse gas (GHG) emissions, generating a significant impact on the environment. Vessels will emit GHGs as long as we are in business, even if we switch to LNG and other fuels that generate lower CO2 emissions.
We saw the possibility to make our business emission-free overall, and reduce the environmental impact of the services we provide for our customers, through our carbon offset capability, primarily through renewable energy, with GHGs generated by ocean transport, if we can grow the renewable energy business as core business. Our approach to viewing environmental issues as strategic business opportunities resulted in the "Environmental Vision 2030."
Adachi : Today, we see an increase in ESG investment, which evaluates the integrity of changes in cost structure, and consistency between its irreversible flow and management strategies from a long-term perspective. It will be very interesting to see how ESG analysts will look at this "Environmental Vision 2030."
You also set specific target of reducing GHGs, don't you?
Takahashi : We don't have a plan to completely offset carbon from our ocean transport in the environment and emission free businesses. But our goal is to reduce GHG emissions by 50% per transport unit in 2050. We think we can achieve a 30% reduction using our existing technologies and programs, introduction of new technologies, offset of GHGs by the environment and emission free businesses, and so on. However, we need new innovations to achieve the remaining 20% reduction. Then, we initiated the "Environmental Vision 2030" to share the necessity of innovation with all employees.
Adachi : You set an ambitious reduction target. Does that mean the key to achieving your target depends on new innovation in the future?
Takahashi : Setting a target that we can achieve by steadily executing existing programs is just a matter of homework. As long as we set the vision, we need to foster innovation and it will require a great leap to drastically reduce GHGs.
Adachi : I heard your ideas behind the vision, and appreciate that the MOL Group set a vision that goes beyond the existing image of an ocean shipping company. In particular, I feel a visionary, pioneering spirit from the idea that "The vision is not just the goal or the homework." Japanese corporations tend to have absolute views as what they absolutely must achieve as soon as they set targets. This may generate a kind of rigidity. At the MOL Group, the story of value creation is clear and in addition, the management plan matches the environmental vision. I think it is wonderful if the business portfolio will be steadily restructured.
Offering truly optimal solutions to international society, from the stance of an ocean shipping company
Adachi : It is important to play a leadership role in making international rules and lead the industry toward sustainable growth with society.
Takahashi : There are various international rules, such as treaties, relating to regulations and systems about the environment and safety. Of course, this affects our group, too. The Ballast Water Management Convention will enter into force on September 8, 2017. As a result, all MOL Group vessels also need to be equipped with ballast water treatment systems. Further, regulations on NOx and SOx emissions, which cause air pollution, and CO2 emissions regulations for prevention of global warming will be tightened. We will comply with those regulations, of course, but we also see compliance with the environmental regulations as strategies for differentiation, and will strive to proactively expand applications for excellent environmental technologies.
The impact of Japanese ocean shipping industry and shipbuilding industry is limited when it comes to rulemaking. This is because the IMO members that are not necessarily ocean shipping nations take their own initiatives during multilateral talks involving IMO member nations. This is the current status of international society when it comes to rulemaking.
We think it will become even more critical to offer truly optimal solutions to international society, through proposals and solutions from the stance of an ocean shipping company and vessel operator. Therefore, we think it's important to cooperate with the government as well as create our own internal system.
Adachi : Not many Japanese corporations take a leadership role in international rulemaking. However, in the long-term view, the reality is that it has become difficult to differentiate services due to the mature economy and intensified competition among corporations. So corporate strategies in trying to lead rulemaking and government industrial policies become very important.
Takahashi : We are trying to change methods of public announcements and public relations to demonstrate our stance as a corporation. Traditionally, we have disclosed information on our achievements, but we are planning to lead open innovation to address social concerns and invite partners by proactively disclosing the concept and ideas at the initial stage of projects. Furthermore, to realize innovation toward autonomous sailing and global environmental conservation in the "ISHIN NEXT - MOL SMART SHIP PROJECT -," launched in 2016, our newbuilding vessels will adopt both "advanced support technologies for safer vessel operation" and "technologies for reducing environmental impact," and conduct demonstration tests to verify practical effects of these technologies every year after the vessels go into service, and publicly announce the results as needed. We also connect customers' potential needs by combining the group's operational knowhow and the underlying seed technologies of IoT, seeking to become the world leader in safe operation and global environmental protection.
Offering services with 'marine technical skills' at the core
Adachi : By the way, what do you mean by "marine technical skills," stated as one of the groupwide priorities for strengthening the MOL Group in the new management plan?
Takahashi : "Marine technical skills" means being able to operate the ship safely and provide reliable transport. The most important foundation for our group, which runs an ocean shipping business, is safe operation. However, as you know, natural disasters and threats occur at sea to a much larger degree than on land. Thickness of steel hull plate is 2cm to 3cm in general. A 200m-long vessel is built with 2cm-thick plates and floats. If you were looking at a 20cm-long scale model of a ship, that steel plate would be as thin as aluminum foil. Those plates are affected by waves and winds on the open sea, requiring all kinds of know-how and expertise from both hardware and software aspects to operate vessels safely.On the other hand, unfortunately, around 70% of marine incidents and vessel failures are caused by human errors. Therefore, operational systems that prevent human errors and enhancement of technological capabilities will lead to safer operation.
"Marine technical skills" tends to be generally thought as the skill to run the engine and operate the vessel, but actually the term includes various other abilities. We need distinctive skills to analyze what the risks are and cope with them not individually but through teamwork. No one except crewmembers can do such jobs, so the employee at sea is the driving force of differentiation. We will enhance marine technical skill by visualizing implicit knowledge by using IoT, and passing on both technology and know-how to the next generation.
Adachi : Weather at sea is also affected by climate change. Are there any threats or other challenges to overcome?
Takahashi : Typhoons lashing Japanese coastal waters, cyclones in the Indian Ocean, and hurricanes in the Caribbean bring very powerful low pressure like we've never seen in the past. In recent years, we have encountered disasters of a greater magnitude than ever before. And it is not an excuse to say that it was unexpected at sea. We have to anticipate the climate changes that we will have to cope with. At sea, we have to spot strong typhoons beforehand and make sure we have enough of a margin of safety to avoid them. Trying to avoid a low pressure system consumes additional fuel and take extra time. So we are acutely aware of the effects of climate change.
Adachi : That point links to the establishment of the "Environment Vision 2030," and is one of the factors behind your initiatives, isn't it?
Workstyle reforms - To do more innovative work -
Adachi : Most of the ocean shipping industry, including supply chains, still depends on people, and is managed by people. Conversely, I feel this industry cannot be fully automated, manualized, or made routine. May I ask your thoughts about human resources development in relation to the "marine technical skills" we were talking about?
Takahashi : Our company has a 133-year history, and we have developed sophisticated know-how on ocean transport and division of labor, and built a system that can safely and efficiently carry massive volumes of cargoes anywhere, over any distance, by recruiting and allocating highly skilled people.
However, there are irreversible changes going on in the world. Sailing ships were replaced withsteamers, and coal was replaced by petroleum fuel. In recent years, cargo transport was containerized. There is no turning back from such events. I think innovation is the progress made by concentrating people's wisdom but never turning back again, aside from factors such as global warming, which has occurred as a result of human being activities.
It's important that the personnel on the front lines, who are directly responsible for providing customers with safe, reliable transport service, are the ones who will "create the ocean shipping industry of tomorrow."
Adachi : That means, know-how and experience, wisdom and tact, and various other things are needed to sail the ship. And the key is to share all that with younger members and help them advance in their careers.
Takahashi : What's more, I think "employees at sea and on land work hand in hand and work to create the ocean shipping industry of tomorrow." These are the ideal personnel that the industry needs. Efforts to foster the corporate culture for those ideal personnel are "workstyle reforms." This stems from the need to train innovative personnel who have creativity and the ability to take action to realize the vision for the MOL Group 10 years from now. I think this will create synergy and make the company more energetic, through crossdivisional and cross-hierarchical communication. Of course, we emphasize reduction of overtime work and work-life balance. However, the nature of workstyle reforms in our group is the creation of an environment where innovative personnel who have creativity and the ability to take action can work in comfort, and do the work that will create the MOL Group of tomorrow. Therefore, discussions among people with various backgrounds, experience, and expertise, whogather and view the same topic from different viewpoints, are the cradle that nurtures new ideas. We need to energize that cradle.
Adachi : This story makes me keenly aware that the ocean shipping is a business run by organizations. Individual personnel need competence, and their competence should not go to pieces nor become obsolete through routines. This requires diversified personnel, and a system (the company, management, projects) to manage them. I can see that ocean shipping is a business in which the organization has considerable capabilities at its roots; one that requires teamwork to survive and thrive; and one in which technologies, know-how, and experience must be handed down to foster the expertise of future generations. I also feel that risking one's life on the job is closely related to the high tension level of teamwork during onboard operation.
Helping solve global-scale issues as a global corporate citizen
Adachi : Currently, geopolitical risks are increasing, and corporations need to address various situations in an appropriate manner. From one aspect, private companies are expected to contribute to global-scale issues such as SDGs. And we might face this situation in the future: Corporations cannot operate businesses soundly without a healthy world and society. What do you think of this point?
Takahashi :The keyword is "poverty." The large and growing gap between rich and poor causes social instability and increases geopolitical risks. The United Nations also lists eradication of poverty in its SDGs. Contributing to global economic growth and improving the welfare or livelihoods of people around the world is spelled out in our corporate principles, which also state that our business helps to stabilize society and promote peace.
Adachi : As you advocate contribution to achievement of SDGs in your corporate social responsibility targets, you transport various cargoes in your main business and your business activities themselves are related to many targets. In addition, I expect to see various initiatives in this field since your network connects to the entire world, including emerging countries.
Takahashi : Thank you very much for your insights today. The MOL Group works together as one team to realizing sustainable growth in step with society, aiming to become a multimodal transport group that leads the world.