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insight The Lloyd’s Register Group magazine

Issue 4 March 2012

Arctic challenge: maintaining the balance

Inside • COP 17 outcomes • New fuels, new engines and new designs • Engineering the Olympics • ISO 9001 evolution • Focus on Brazil • Hong Kong MTR asset management


Inside Issue 4: 2 Arctic challenge

Can we develop the region’s resources and maintain the environmental balance? The Northern Sea Route and drilling in the Arctic

12 On a deadline to 2041

Robert Swan, OBE, polar explorer and environmental leader is on a mission to protect Antarctica

18 New steerage at the IMO Koji Sekimizu, IMO’s new Secretary-General talks about the role of the IMO and his key aims

20 Empowering eco visions

E-idea is helping young eco-entrepreneurs to develop innovative environmental projects and businesses

29 A people discipline

Andrew McCusker, former Operations Director for Hong Kong’s MTR, talks about asset management

Lloyd’s Register works with businesses and organisations around the world to enhance the safety of life and property at sea, on land and in the air. We help our clients face today’s challenges and plan for tomorrow and beyond.

Insight is our magazine for decision-makers working in the marine, energy and transportation sectors. Care is taken to ensure that the information in Insight is accurate and up to date. However, we accept no responsibility for inaccuracies in or changes to such information. The views expressed do not necessarily represent the position of the Lloyd’s Register Group. Copyright © Lloyd’s Register 2012. All rights reserved.

Contents in full: 2 The Arctic challenge: introduction 4 Arctic transit: Northern Sea Route 7 Fram: polar voyager 8 Tackling the cold, hard facts: drilling in the Arctic 10 Governing the ‘polar Mediterranean’: Klaus Dodds, Professor of Geopolitics at Royal Holloway, University of London 12 On a deadline to 2041: Robert Swan 15 Constant innovation: Gearbulk Norway 16 New fuels, new engines & new designs 18 New steerage at the IMO: Koji Sekimizu, IMO’s Secretary-General 20 Empowering eco visions 22 Heading in the right direction: Henry Derwent, President & CEO of IETA 24 The paradox of perfection: James Smith, Chairman of the Carbon Trust 26 What does COP 17 mean for carbon trading and CDM? 27 The long wait for investment grade policy: Joan MacNaughton, Senior VP, Environmental Policies, Alstom 29 A people discipline: Andrew McCusker, former Operations Director, MTR 32 ISO 9001: Business management literature’s most influential work? 34 Engineering the Olympics – Sir John Armitt, Chairman, ODA 37 Is London’s transport network up to the job? Meeting the Olympic challenge 38 A country transformed: Brazil 40 Rise of leisure ships in China 42 Committing to a food safety culture

The magazine is produced by Group Communications, designed by Conran Design Group and printed by Pureprint. Editor: Kathy Davis E kathy.davis@lr.org T + 44 (0)20 7423 2654 www.lr.org


Insight March 2012 1

Welcome To our latest issue of Insight. Richard Sadler, Chief Executive

Once again I am proud to introduce our latest edition of Insight, a title that is becoming increasingly respected among politicians, industrialists and business leaders for its coverage of global issues. This edition covers a wide range of subjects that focus on the critical infrastructure that society relies on to sustain life, and quality of life. It has contributions from people with a unique view and huge depth of expertise in the issues that will be the measure of our collective success in meeting these challenges. We look at the challenge of protecting our Arctic and Antarctic regions, examining the balance between developing the Arctic’s resources and trade routes and protecting our planet’s last great wilderness for future generations. Koji Sekimizu, Secretary-General of the International Maritime Organization discusses his priorities for the protection and regulation of seaborne trade. E-idea is profiled, a new initiative to help young eco-entrepreneurs to

develop innovative environmental projects and businesses. We update our readers on the latest developments from COP 17 and the climate change agenda. We look at the continuing evolution of the international quality standard, ISO 9001. The challenge of engineering the Olympics and creating a transport system to cope with its demands is examined. We also chart the rapid growth and transformation of Brazil and China’s leisure ship market. From food safety to future fuels – we examine the issues that affect our daily lives. The solutions to these challenges require teamwork from everybody involved – transcending geographical and political borders – because, as always, teams make better decisions. We need to be well informed for the best collective outcome. We hope that Insight will help you be better informed and make better decisions.


2 March 2012 Insight

The

Arctic challenge Can we develop the region’s resources and maintain the environmental balance?

The Arctic • North of the Arctic Circle (66° 33’N). Region includes the Arctic Ocean and parts of Canada, Russia, Greenland, USA, Norway, Sweden, Finland and Iceland. • Arctic Ocean has a 45,000-kilometre shoreline with a 14,000-kilometre2 surface; 1.5 x area of USA. • T he Arctic states – members of the Arctic Council – are Canada, Denmark (including Greenland and the Faroe Islands), Finland, Iceland, Norway, Russian Federation, Sweden and the USA.


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The Arctic is opening up. With Arctic sea ice reducing by about 10% per decade and high commodity prices making the vast hydrocarbon reserves more economically attractive, global interest in this region is growing. It is a unique area and the indigenous peoples, flora and fauna have adapted to its cold and extreme conditions. As demands on the region increase, the need for co-operation and negotiation will grow. But who looks after the Arctic? On page 10 Professor Klaus Dodds talks about the geopolitics of the region and argues that the Arctic Council will have a key role to play in developments. The Arctic Council, set up in 1996, is a high-level intergovernmental forum to promote co-operation, co-ordination and interaction among the eight Arctic states, involving the indigenous communities and other Arctic inhabitants on common issues, in particular sustainable development and environmental protection in the Arctic. The increasing economic activity and retreating sea ice has encouraged interest in the Arctic seaways, most notably the Northern Sea Route, as examined on page 4.

Recognising the potential for increased marine activity, the Arctic Council called for an examination of the issues and in 2009 approved the Arctic Marine Shipping Assessment (AMSA) 2009 Report including its recommendations on enhancing marine safety, protecting Arctic people and the environment, and building an Arctic marine infrastructure. The region’s extreme and unique environmental and operational challenges had put the exploitation of the hydrocarbon reserves, estimated at 22% of the world’s recoverable reserves, beyond viable reach. But high commodity prices and growing global demand mean that energy exploration and production is moving further north into these harsh and challenging conditions. ModuSpec, a leading provider of technical services to the offshore drilling sector, talks about operating safely and effectively in the Arctic on page 8. The Arctic is especially vulnerable to the effects of global warming and concerns are mounting about the increasing levels of mercury and other pollutant fallout in the region. The Arctic Council urged all countries at COP 17 to take decisive action to hold the increase in global average temperature below 2C above pre-industrial levels. We look at some of the outcomes of COP 17 on pages 22 to 28. And what about the Antarctic? Polar explorer and environmental leader Robert Swan is focusing his attention on saving the world’s last great wilderness as we report on page 12.


4 March 2012 Insight

Arctic transit: Northern Sea Route The potential for commercial shipping The appeal of a regular trade route from Europe to Asia crossing the Arctic Ocean has been recognised since the fifteenth century. But it is only in the past few decades that this tantalising prospect has become realistic.

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he last two years have seen moves to explore the potential of the Northern Sea Route (NSR) as a summer season trade lane to and from the booming Asia markets. Russia’s NSR is a set of sea routes from the Kara Gate to the Bering Strait. The NSR is navigable along its entire length during the summer and early autumn, depending on the ice conditions. As the sailing distance from a north European port to the Far East using the NSR is approximately 40% shorter than using the Suez Canal, it is no surprise that the commercial potential for this route is in the spotlight. Open to foreign shipping During the Soviet Union era the NSR was a very important national waterway and powerful icebreakers were built to assist merchant ships to reach the various ports in the region. The Russian government opened the route to foreign vessels in 1991 and the first non-Russian flagged vessel used it that summer. However, after 1993, volumes of domestic and transit traffic plummeted, partly because government subsidies dried up. By 1998, transit traffic had stopped altogether. It was not commercially viable under the economic and climatic conditions of the time according to a joint Russian-Norwegian-Japanese research report (INSROP) in 1999.

In 2009, with near record low levels of sea ice in the Arctic, two German vessels were the first foreign flagged ships to sail the NSR from east to west. The voyage sparked renewed international interest in the route. In 2010, Russian nuclear-powered icebreakers enabled four transit voyages, moving 111,000 tonnes of goods to the Asia-Pacific region. And 2011 saw a huge rise in transit traffic. Some 34 vessels and 820,000 tonnes of cargo travelled the route as the further retreat of sea ice doubled the summer transit period to a record 20 weeks, compared to 2009. Demonstrating the advantages “Various shipping and charter companies are pushing the boundaries on the NSR to achieve faster transit times with larger vessels, demonstrating the potential of using the route,” says Boris Ozerov, Lloyd’s Register’s Russia Marine Manager. “One driver is the future development of Russia’s Arctic hydrocarbon resources that will need transport to global markets.” In 2010, the Norwegian company Tschudi Shipping and Denmark’s Nordic Bulk Carriers transported 41,000 tonnes of iron ore concentrate from northern Norway to China on the MV Nordic Barents. Based on this, Tschudi Arctic Transit publicised possible savings of 20.5 days to Yokohama, Japan and 16 days to Shanghai,


Insight March 2012 5

MV Nordic Barents and icebreaker, 50 Years of Victory, in 2010.

China using the NSR compared to the Suez Canal, for a vessel sailing from Kirkenes in Norway or the Russian port of Murmansk.

doubt in our minds that the opening of the NSR has great commercial potential for both cargo and shipowners.”

“The 2011 transit season began unusually early,” says Desmond Upcraft, Ice & Cold Operations Manager, Lloyd’s Register. “In late June Russia’s largest independent gas producer, Novatek, chartered the ice-classed panamax tanker Perseverance to carry 60,000 tonnes of gas condensate from northwest Russia to China. Conditions allowed the tanker to sail north of the New Siberian Islands. This route is deeper which allows larger ships to use the NSR. Two months later, using this deeper northern route, Sovcomflot’s suezmax tanker Vladimir Tikhonov became the largest vessel to complete the NSR, taking 120,000 tonnes of gas condensate from northern Norway to Thailand.”

Cost benefit calculation A lot has changed since the INSROP study in the 1990s. Reductions in voyage times and some dues – let alone in greenhouse gas emissions – have shifted the economics of the NSR, though the equation is still finely balanced.

“This historic sea route has got it all; it is safer, shorter and thereby more eco-friendly”

Nordic Bulk Carriers used the NSR again in 2011, when it chartered the bulk carrier Sanko Odyssey to take the largest iron ore shipment yet, some 72,000 tonnes from Russia to China. At the time the company proclaimed: “This historic sea route has got it all; it is safer, shorter and thereby more eco-friendly. Said in another way – it is good business. The fuel savings alone add up to approximately 750 tons. There is no

“You will need a transit permit,” says Upcraft, “and pay qualified ice pilots, additional insurance premiums and Russian icebreaker fees. Some of these direct costs could be offset, as if the voyage was via the Suez Canal, there would be canal transit fees, piracy insurance and possibly the cost of installing anti-piracy equipment.”

But there are indirect costs too. “Vessels operating on the NSR during the summer season need to have an ice class acceptable to Russia’s Administration of the NSR (ANSR) and meet other Russian regulatory requirements,” says Ozerov. ”The issue of a permit is not routine – in practice a survey may need to be carried out by an ANSR inspector.”


6 March 2012 Insight

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The Northwest Passage (NWP) has not seen the same development as the NSR. There is seasonal traffic on the NWP; one operator is Northern Transportation Company Limited (NTCL) and a reduction in ice conditions would no doubt lengthen its operating season. For transit traffic, although the route has been opened up by the retreat of the sea ice, the conditions are different. Large areas of the NSR had no, or very little sea ice, in the summer of 2011. But hazardous multi-year ice‚ 3–6 metres thick, was still found in the NWP.

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The type of cargo shipped will also have a bearing on the transit viability of the route. Only 22 of the 34 vessels that transited in 2011 carried cargo and 15 of these transported liquid cargo, mainly gas condensate. A 2005 study funded by the Institute of the North concluded it is technically possible for container traffic to use the NSR but did not look at the economic feasibility of the concept. If Russia continues to develop its Arctic hydrocarbon resources, we may see liquefied natural gas (LNG) being shipped along the NSR. To achieve this, the industry will need to develop dedicated high-tech Arctic LNG carriers. The Arctic Marine Shipping Assessment (AMSA) 2009 Report highlighted the need for comprehensive economic studies of the Arctic sea routes, including the NSR, and this is still the case. Russia’s plans The Russian government has announced its intention to transform the NSR into a commercially viable route from Europe to Asia. It is improving safety and communication by building 10 new bases for search, rescue and communication along the route. A new law on the NSR is in the pipeline, part of which will clarify tariffs for icebreaker assistance and other services. Investment is also needed in the ageing nuclear icebreaker fleet. In October 2011, it was reported that construction would begin

The contested sovereignty claims over the waters complicates transit shipping through the NWP and the considerable investment needed in escort vessels and infrastructure needs to make economic sense for government. Interest is growing however. Quebec’s government in particular, is looking to exploit mineral resources in Northern Quebec. Under its Plan Nord programme it is investigating transhipment, ice-classed vessels, and icebreaking capacities.

in 2012 on four new icebreakers, worth €1.8 billion, and two others are planned. Three of the six will be nuclear powered. Key global transport route of the future? One key influence on the future transit use of the NSR is the perceived hurdle of complying with Russian requirements and uncertainty on icebreaker fees and other dues. Companies will want assurance on these before they invest in the route. The demands faced by the maritime shipping industry to reduce carbon emissions may yet emerge as one of the drivers for developing the route: but the environmental consequences of increased shipping in the region also need to be considered. The AMSA 2009 Report concluded that “the uncertainties and complex interactions of many driving forces of trans-Arctic navigation require significant research. While it may be technically feasible to cross the Arctic Ocean today … the operational, environmental and economic implications and challenges for routine trans-Arctic voyages are not yet fully understood”. The competitiveness of the NSR will increase as the Arctic ice recedes and the summer transit period lengthens – and forecasts for this retreat are constantly being revised. But its future as a viable transit route is less clear cut. E desmond.upcraft@lr.org


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Fram: polar voyager Expeditions to the South and North Poles began as early as the 1500s and reached fever pitch in the late 1800s and early 1900s.

Today

March 1895

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he theory of a trans-polar current in the Arctic Ocean was put forward in 1884. Norwegian explorer Fridtjof Nansen reckoned a strengthened ship could use the current to get close to the North Pole. The Fram was the result. Forcing ships through the Arctic ice had failed many times before. But the Fram was designed to be lifted up and move with the ice, with a hull strong enough to withstand the crushing pressure of the pack ice. To provide some comfort for the crew, the ship’s living quarters were insulated with layers of wood, felt, linoleum and reindeer hair. In June 1893 Nansen set out on the courageous first Fram expedition. The ship became locked in the pack ice near the New Siberian Islands in September. She was carried for hundreds of miles but did not get as close to the Pole as Nansen had hoped. Realising this, Nansen and Hjalmar Johansen took to the ice in March 1895 by dog-pulled sled. After reaching a record

northern latitude of 86° 14’ they were forced to turn back and eventually returned to Norway in August 1896. The Fram, with the rest of her crew, continued to drift westwards and in February 1896 the current turned her southwards. She finally emerged from the ice and in September returned in triumph to her port of departure, Oslo, with a significant amount of valuable scientific data – and a healthy crew, unusual for such an expedition at this time.

The Fram later sailed on two more important expeditions; to western Greenland and to Antarctica for Roald Amundsen’s South Pole expedition. The ship is now in the Fram Museum at Oslo. Today there is a new Fram in polar waters; the MS Fram is a 500-passenger capacity cruise ship, owned by expedition cruise specialist Hurtigruten. Built in 2007, this Lloyd’s Register ice classed ship has a reinforced hull for cruising polar waters in the summer months.

“With MS Fram we wanted to honour Fridjof Nansen’s great efforts, as a humanitarian, researcher and polar explorer. We built a ship with qualities for exploring polar waters, sailing in the wake of Nansen. The ship is small enough to bring guests close to nature and big enough for comfort. From day one she has fulfilled her task, sailing both in Antarctic and Arctic waters.” Dag-Arne Wensel, Director of Technical Maritime Operations, Hurtigruten.


8 March 2012 Insight

While activity remains speculative, interest in exploiting the Arctic’s hydrocarbon reserves grows at a rapid pace. Further steps in that direction will mean grappling with the region’s extreme and unique environmental and operational challenges. The very worst conditions demand the very best practices. ModuSpec, the number one provider of offshore drilling rig pre-charter surveys and assessments, and member of the Lloyd’s Register Group, talks to Jason Knights. It is -10C and summer in the Arctic; winter temperatures drop to around -40C. Given the severe cold operators drilling in the region face a number of specific issues. “There must be a full understanding of the environmental conditions in which people, plant and processes are working – the three Ps – given the temperature levels, as well as the hydro-meteorological, bathymetric, seismic and ice conditions,” says Andrew Calderwood, Senior Project Manager at ModuSpec’s Netherlands office. This understanding has led to a heightened awareness that winterisation, preparing for the conditions, is essential for safe, effective Arctic operations, Calderwood explains. The operational landscape is as harsh as the region’s treeless permafrost vista. A number of best practices are critical and the three Ps need to be treated as part of the whole ‘system’. As with the operation of any high-risk capital-intensive assets, the three areas of main concern are the safety of personnel; safety and

Tackling the

effectiveness of plant, equipment and processes; and safeguarding the environment. But the Arctic conditions bring additional challenges. The remoteness, limited hours of daylight and freezing weather hinder search and rescue operations. Long periods in such harsh conditions with extreme periods of day and night can take a psychological toll and increase the risk of human error. The heavy icing of exposed equipment impacts on safety of people and the plant. Other risks to personnel are freezing and non-freezing cold injuries, high levels of ultraviolet light, slippery surfaces, falling ice, impaired visibility and immersion in the Arctic waters. ModuSpec has a seven-step approach in response to these challenges. This begins before the operation even starts, with design and installation. The other steps are establishing a planned maintenance system, winterisation, contingency planning, putting in place management plans and systems, ice protection and removal, and regular in-service inspection. Oil development in sensitive areas, such as the Arctic, is unlikely to be compatible with the view of conservationists. If development is to take place, steps need to be taken to help reduce the risks and impact at the installation and operational phases. Industry also has to appreciate that sourcing energy is rarely totally benign. As valuable as energy has become, some things are worth more.

Jason Knights is Global Communications Manager for Lloyd’s Register’s Energy business. E jason.knights@lr.org Tweet me @saferenergy

cold, hard facts Operating safely and effectively in the Arctic


Insight March 2012 9

The seven-step solution:

1

Forward-thinking design and installation To help mitigate risks, the ModuSpec team considers it imperative to assess a drilling unit during its design. This exercise can be divided into three distinct areas: hazard identification; likelihood and consequences; and mitigation steps. Factors include the need to protect equipment though encasing and appropriate positioning of deck equipment to reduce the likelihood of human error in the harsh conditions. The bottom line is that there needs to be a rigorous, forward-thinking design and installation process, with clear communication between the developer, operator and local communities who occupy the area potentially affected by a proposed project.

2

Establishing a planned maintenance system An important step is to introduce an enhanced planned maintenance system that will address substantial risks before entering cold climate regions. The system should specifically focus on elements that become safety and operation critical when drilling in Arctic conditions, such as heat tracing on fire fighting lines and drain lines.

3

Winterisation “The main challenge is making the environment safe and more comfortable for personnel,” says Calderwood. “This requires a deep understanding of the physiological effects of working in isolation.” Given the extreme conditions, the human factor should not be overlooked. “Thorough assessment is required of crew safety and operations, onboard equipment and fittings, and construction materials,” explains Ad Tange, Global Commissioning Manager for ModuSpec. “The first step must ensure all aspects of drilling unit winterisation meet with the required operating procedures for Arctic conditions, including an ice management programme. Crew need to be trained and provided with appropriate equipment to work in cold climates, work routines should be altered to reduce the time that personnel are exposed to low temperatures, and sheltered and heated locations must be provided for personnel working for extended periods on the open deck.”

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Contingency planning The various types of evacuation and rescue options available should be considered in light of the extreme conditions, which often restrict activity. These include the use of offshore standby vessels, helicopters or a Seascape system of evacuation, and lifeboats designed to operate on ice. “When there is an ice build-up, unlike in warmer open-water operations, the offshore standby vessel may have a higher power requirement than a supply vessel,” emphasises Desmond Upcraft, Ice & Cold Operations Manager, Lloyd’s Register.

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Putting in place management plans and systems “The first thing we ask is, ‘What can go wrong?’” says Meindert Sturm, Business Development Manager, ModuSpec. “This could be anything from loads falling and harming personnel, to a vessel colliding with an offshore structure and blow-outs.” To help prevent disasters, management systems should dictate working methods, in combination with systems that identify possible threats. For example, an ice management plan will give the operating crew a series of step-by-step instructions. In extreme weather situations, the rig operators will have sufficient time to disconnect from the well before an ice floe strikes the rig. Management systems can also incorporate the use of marine radar or more sophisticated equipment, such as radar early warning systems to help prevent collisions. An oil-spill contingency plan is also vital, considering the limited time available for a clean-up operation and the environmentally sensitive area. To this add a couple of facts: “Oil persists for longer in Arctic conditions because it evaporates more slowly, and can be trapped under ice, making it less accessible to bacterial degradation,” says Sturm. It’s essential to fully consider human factors when devising management plans and systems. Where neglected, this has often led to the energy industry having to change the way it operates. In addition, communities are becoming more powerful stakeholders, with clear ideas on how asset owners and operators should prepare, monitor and manage their activities.

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Removal of and protection from ice Breaking up ice with mallets, by hand, is still the main solution. Steam lances and hot water jets are also employed, but the use of electrical equipment remains a moot point (while reducing the amount of manual labour required, there are question marks over maintenance costs). “Care must be taken to prevent damage to equipment,” adds Calderwood. “Controls, in particular, can suffer mechanical damage, and electrical equipment can be damaged through the ingress of water and steam.” Mooring equipment on mobile offshore drilling units are also susceptible to a build-up of ice caused by spray rain, hail and snow, especially the forward moorings of floating storage units. It is not uncommon for machinery to be placed in an enclosed forecastle. It is also important that the mooring drums are covered so that icing can easily be removed.

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Regular in-service inspection Adhering to a careful inspection regime and regular inspection plan is critical.


10 March 2012 Insight

Governing the ‘po A

s the sea ice thins and the Arctic Ocean opens up, the subject of geopolitics rises to the surface. Professor Klaus Dodds from Royal Holloway, University of London, talks to Jason Knights about some key issues and their potential impact on plans to exploit the region’s natural resources.

states can acquire wider rights by providing scientific evidence to the Commission on the Limits of the Continental Shelf (CLCS). In turn, this UN body issues technical recommendations for debate and negotiation among the relevant coastal parties. “All five states have embarked on mapping projects designed to demarcate their extended continental shelves.”

In August 2007, as part of the privately funded Arktika expedition, a Russian flag was deposited on the Arctic Ocean’s seabed, provoking headlines and warming the collar of the then Canadian foreign minister. Symbolic posturing aside, the notion of a scramble to lay claim to the region is not just outdated but also wholly misplaced, explains Professor Klaus Dodds. “Under widely recognised international rules, the entitlements of the five coastal states [Canada, Denmark/Greenland, Norway, Russia and the United States] are well established over a large portion of the Arctic Ocean. There is no need for these five states to scramble.” Location is clearly everything. “Geographical proximity is key in relation to ownership of the Arctic Ocean.”

The Arktika expedition is a case in point. To date, only Norway’s maximum sovereign rights have been pinned down, elsewhere, “a submission deadline in 2009 for materials to be sent to the CLCS encouraged febrile reporting, so if there was ‘a race to the Pole’ it was related to this submission deadline.”

Cloudier waters Where the waters of sovereignty get cloudier is the point at which an extended continental shelf ends. On this matter, the United Nations’ Law of the Sea Convention (LOSC) sets out how coastal

Klaus Dodds is Professor of Geopolitics at Royal Holloway, University of London. He is the editor of The Geographical Journal and his next book will be The Antarctic: A Very Short Introduction (Oxford University Press 2012) followed by A Scramble for the Poles? Contemporary Geopolitics of the Arctic and Antarctic (Polity 2013).

With the CLCS inundated with enough work to last for 40 to 50 years, settling shelf sovereignty among the remaining coastal states may be some way off. Awaiting technical recommendations, in fact, is likely to be the tip of the iceberg. “Negotiations will not be simple when it comes to a region of such strategic and symbolic importance.” Canada and Russia believe that their sovereign rights extend all the way to the central Arctic Ocean. A clear way forward “The good news is there are rules and the coastal states seem to be following these.” Dodds points to the Ilulissat Declaration as one of the most important regional developments so far in settling overlapping extended continental shelves peacefully. “In May 2008, representatives of the five coastal states declared that they were committed to resolving any overlapping claims in the Arctic Region and that the ‘law of the sea’ provided a legal framework for such resolution. Critically, the reference here is to the ‘law of the sea’ and not the LOSC, in recognition of the fact that the United States is not party to the LOSC. The ‘law of sea’ refers to customary international law, which applies to all states.” In addition to this consensus, there is another positive factor for those looking to exploit the region’s oil and gas reserves. “The identified hydrocarbon resources seem to fall within the clear and exclusive economic zones of the five coastal states.” However there are other natural resources that may hinder negotiations between the coastal states, emphasises Dodds. These include fishing potential and a deep seabed which might be rich in manganese nodules and minerals known as ‘The Area’, an area of the Arctic that is not part of the extended continental shelf. How inviting is the Arctic? “A resource-rich, accessible Arctic is an image peddled by journalists and sometimes politicians, but does it pass muster politically and economically?” asks Dodds. Is it yet the ‘polar Mediterranean’ predicted by the Canadian geographer, Viljamur Stefansson?


Insight March 2012 11

lar Mediterranean’ “One can’t view the Arctic as a blank space on a map, emptied of people.” The region is a mosaic of different places. “In the Canadian Arctic, oil and gas companies have found it challenging to operate, with an indigenous population that holds clear rights, is pressing on outstanding land claims and holds diverse views on the exploitation of natural resources. One of the common pitfalls is the erroneous assumption that all indigenous people think the same. This must be avoided. The people want their respective views to be heard and to be treated seriously. While many in the local communities welcome the benefits that industry brings in terms of new jobs and revenue streams, others see the downsides and are weary of being short-changed by the ‘South’ once again.”

“Exploitation of the Arctic’s natural resources may take longer than expected if the recent past proves enlightening” Then there is the wider political debate of whether we should be looking for more sustainable energy sources. “As the Norwegian foreign minister [Jonas Gahr Støre] pointed out, this is a global paradox, not just an issue for the Arctic states.” While Dodds privately hopes that we will have largely ‘de‑carbonised’ by the time anyone gets around to exploiting the Arctic’s most inaccessible resources, he acknowledges that we all want to heat our homes, drive cars and board planes. And “for the indigenous Northern communities, hydrocarbon and mineral resources could prove valuable revenue streams.” What of the broader economics? “Financially, one can’t put a value on 22% of the world’s untapped hydrocarbon resources that the geology of the region suggests. We need to be quite cautious as to how much will be discovered, let alone extracted. Recent Cairn Energy results for exploration wells offshore of Greenland were a bit disappointing.” Uncertainty in the riches may well be reflected in the political wavering of Greenland’s prime minister, Kuupik Kleist, in the push for autonomy from Denmark, points out Dodds. To an unknown total hydrocarbon value, add unpredictable long-term markets, with ever-fluctuating oil and gas prices. “Does diminishing sea ice even open up the region, operationally speaking?” questions Dodds. Ice remains a problem and it is still an inhospitable region in terms of tsunami-like waves, high winds and heavy winter storms. The upturned Russian oil rig, Kolskoye,

200 kilometres from the Sakhalin coast in the Sea of Okhotsk (Russian Far East), is “a timely reminder, albeit in the sub-Arctic, of the extraordinary operating conditions and challenges faced.” All at a time when “reputations travel fast” and companies cannot afford to make mistakes in the Arctic or elsewhere. Later rather than sooner “Exploitation of the Arctic’s natural resources may take longer than expected if the recent past proves enlightening,” says Dodds. He highlights two projects severely delayed by politics and economics. Plans to develop the Shtokman (Stockman) field in the Russian sector of the Barents Sea, one of the world’s largest natural gas fields, began in the early 1990s and was “postponed by stockholders a few years ago because of the sudden oversupply of gas on the market and then hindered by the economic weakness of Russia.” The MacKenzie Valley Natural Gas Project in Canada’s Northwest Territories (connecting northern onshore gas fields with North American markets) also has a long history, dating back some 40 years. “The project has been subject to lengthy negotiations with indigenous communities.” What next? The key players in the Arctic do not want a treaty, as exists in the Antarctic, says Dodds, so “the Arctic Council will play a key role and must to be seen to be effective.” The Council is the most significant soft-law intergovernmental forum for the promotion of co-operation in the Arctic. Members comprise the five coastal states, along with Finland, Iceland and Sweden. “The Arctic Council faces a difficult job ahead. It will need to be more than advisory in the longer term. A legally binding search and rescue agreement and a proposed oil-spill response plan are promising signs, and it must also be seen to be meaningfully championing the rights of indigenous and First Nations communities.” It also needs to be careful that environmental stewardship is not merely regarded as self-interest, cloaked in virtuousness. “Wider interest in the Arctic will only increase, especially with regard to ‘The Area’ and general navigation and access rights. The Council will need to be comfortable with that notion. Being graceful with observers, such as the European Union and China, a major coastal state with a keen sense of its rights of innocent and transit passage, may be the price to be paid to avoid tensions. The list of Arctic Ocean stakeholders will surely only get longer – the geopolitics of the Arctic region will stretch rather than remain fixed.” Jason Knights is Global Communications Manager for Lloyd’s Register’s Energy business. E jason.knights@lr.org Tweet me @saferenergy


12 March 2012 Insight

On a

deadline to 2041 Saving Antarctica: The last great wilderness Robert Swan, OBE, polar explorer and environmental leader is on a mission to protect Antarctica, reports Richard Cook.


Insight March 2012 13

Robert Swan is, as ever, in full ‘attack’ mode. “The world is stuck on words,” he says, “and we need to move on from that. We need to act not just speak. We need to be intelligent with technology. And we need to be positive. If I get sent another gloomy email or video about how the world is going to end, I am going to…” Swan pauses and seems uncharacteristically lost for words. “I am going to…” he pauses again, laughs and shouts in mock horror, “… I am going to shout at someone.” This is classic Swan: serious, passionate, a little scary but also always very quick to turn to humour to drive his point home. He is straight talking to the point of being brusque and he peppers his proclamations with the word ‘attack’, which sums him up well, as Swan’s life can be seen as a series of interconnected attacks – be it when he is running fund-raising marathons or delivering clever, high-tempo motivational lectures to corporations, students and politicians or speaking about his life’s work, Antarctica. The greatest challenge Swan is the first person in history to have walked to both the North and South Poles but while he is justifiably proud of these incredible achievements, today he quickly dismisses the term ‘polar explorer’. “I don’t really know what that means anymore. The only exploration that really matters now is working out this planet’s survival. That’s the greatest challenge.” Spend about a minute with this enigmatic man and you will quickly find the real Robert Swan. Today he is an inspirational environmental leader, a renewable energy champion and, above all, a passionate, engaged, energetic protector of his beloved Antarctica. Swan firmly believes that if we can educate and inspire tomorrow’s leaders into protecting Antarctica through the better use of renewable energy and waste reduction systems, these lessons and actions can be carried back into mainstream communities across the planet.

“We must be positive and we must act,” says Swan. “Once you move from words to action, then you start to build the knowledge that can bring about real change. Then change can become a business opportunity and that is when it actually becomes powerful. Technology and safety is what will save us,” he says. A young explorer Swan grew up obsessed with the early 20th century heroes of Antarctic exploration. In the early 1980s, aged just 21, he started to assemble the first non-government expedition to Antarctica and the South Pole and started to try to raise the not inconsiderable amount of US$5 million to fund the expedition. Swan thought he would do it in a ‘few weeks’ but it actually took him more than seven years. His drive brought him in front of the father of the conservation movement, French marine biologist Jacques Cousteau, who said he could help Swan raise the funds if they would leave not a trace of waste, “just their footsteps in the snow”. Swan agreed – and is still very much driven by this solemn promise today. And as funds began to slowly trickle in, Swan started to build a team and purchase equipment.

The ship they chose to carry them from the UK round the Cape of Good Hope and through the notorious southern oceans was the Southern Quest. Swan’s team found the vessel in Tyneside, UK, where she had been working as a trawler. “We didn’t completely know what we were doing,” says Swan with a selfdeprecating grin. “A lot of people laughed when we said we were going to take the ship to Antarctica but someone said you need to talk to Lloyd’s Register, they’ll tell you what you need to do and that’s exactly what they did. And they were fantastic.” Lloyd’s Register ship surveyors gave Swan advice and certified the ice strengthening work that was carried out on the Southern Quest. Brian Purtle, now Lloyd’s Register’s Technical Performance Group Manager, was one of those surveyors and recalls: “We had started to do a lot of conversions in the early 1980s in the North East as the offshore business was booming – trawlers, supply boats, that type of thing – but there were not many clients like Mr Swan and his team. They were an eccentric group of people and to tell the truth, we did not think they would make it. I remember several issues related to the ship being


14 March 2012 Insight

fit to undertake the journey and the crew certainly made the most of the time in dock. One thing that sticks out is they strapped a beer barrel to the mast… something to do with a sponsorship by a local brewery and maybe some free beer! It was all very novel but they were a good bunch.” Swan’s ‘good bunch’ made it to the South Pole on 11 January 1986. The wholly unassisted expedition (without even radios) comprised three people, each pulling a 160-kilo sled laden with food, fuel, supplies and shelter, for 70 days across 1,400 kilometres. Swan’s team took everything back with them afterwards and repeated this after they reached the North Pole in 1989. It was on these journeys that Swan saw the effects of environmental degradation first hand. In Antarctica, the governmental expeditions left thousands of tonnes of rubbish strewn across the ice. On a more personal level, the team was affected by the then little known effects caused by the hole in the ozone layer. Swan’s eyes first blistered, then turned him temporarily blind and then changed colour permanently, from dark to light blue. On the way to the North Pole, Swan and his comrades found the solid ice that should have been there had melted and the team had to hop from ice floe to ice floe to complete their journey.

This almost killed him, then deeply depressed him and finally galvanized him. 2041 mission In 1992 and 2002, he gave keynote speeches at the World Summit for Sustainable Development and was charged by global leaders to undertake environmental missions with industry, business and students. He has called his organisation 2041 because his overriding life mission has a hard and fast deadline. In less than 30 years’ time, in 2041, there will be a renegotiation on the United Nations moratorium on mining in Antarctica. The continent’s designation as ‘a natural reserve, devoted to peace and science’ could be rolled back and Swan’s singular aim is to stop this happening.

Swan’s overriding mission, to continue the protection of Antarctica, has a 2041 deadline.

Everything he does is aimed at working towards the continuing protection of the Antarctic Treaty so that the last great wilderness on earth is never exploited in the same way that the North Pole has been and continues to be. His strategy is simple – to generate awareness but, more importantly, action among tomorrow’s thought leaders who will be in positions of real responsibility when the critical decisions are being made in three decades’ time. He is relentless in his work. His yacht 2041 has sails made of recycled plastic bottles and travel the oceans on her ‘Voyage for

Cleaner Energy’ that has, to date, connected with 500,000 students from across the world. Swan has just cycled across India to work with India’s youth who, he says “have to be part of the solution rather than the problem.” He currently serves as an UNESCO Goodwill Ambassador with special responsibility for youth, acting as a special envoy for the UN Director-General. And he is now, once again, working closely with Lloyd’s Register. Lloyd’s Register is sending two employees and one E-idealist (see page 20) on Swan’s next annual Antarctic expedition to work on renewable energy and environmental projects. Initially these projects will have application in Antarctica but, over time, should have resonance across the globe. “Lloyd’s Register understands modern technology and checks that it works which means they are an important part of moving things forward” concludes Swan. “It’s fantastic that they care enough about their people to invest in their involvement with 2041. I have had a long and good relationship with Lloyd’s Register and am glad that it is re-kindled and is as strong as ever. We will do very good work together.” For more details of 2041 and Lloyd’s Register’s work on the next Antarctica expedition go to www.lr.org/2041 Richard Cook is Lloyd’s Register Asia’s Communications Manager. E richard.cook@lr.org


Insight March 2012 15

The shipping industry is under pressure to comply with ever stricter environmental regulations and, with oil more expensive than ever, to reduce fuel costs. Nick Brown talks to Bergen-based Gearbulk Norway about the future of shipping.

Gearbulk is the world’s largest operator of open hatch, gantry craned ships – general cargo ships primarily designed for transporting forestry products. And it has led the way in evolving the designs of its ships. The ships’ large cargo holds allow for an efficient stowage and flexibility of cargo type. Gearbulk seeks to maximise cargo opportunities. It has invested in the capability to support other niche trades such as liquid pitch and orange juice. The company is always discussing the next generation of Gearbulk ships. “Right now, for example, we are looking at different engine and hull performance monitoring systems on our newer vessels,” says Sjur Gjerde, Managing Director of Gearbulk Norway. “There are huge savings to be made, better hull forms, better engines – but we need to be able to measure performance – so many claims are being made about performance by suppliers. We want to tie yards and suppliers to the mast on their claims for efficiency gains. Half of the salesmen walk away when we say this – but we can work with the others.” But things are moving in the right direction. “Over recent years the industry had to face a ‘take it or leave it’ situation when ordering new vessels in terms of accepting yard standard volume design. Now we are seeing yards trying to grab competitive advantage by offering more fuel-efficient ships – especially in Japan – and we are seeing the potential for soft funding for environmentally efficient ships, those with a low Energy Efficiency Design Index.”

Fuel type is another area of attention. With conventional heavy fuel oil so expensive and an increasingly high focus on emissions, alternatives are being sought. Gjerde thinks that it’s only a matter of time before we see an increasing use of LNG in the deep sea. “It’s obviously attractive in Norway where there is a ready supply. The likely middle ground for some time is dual fuel engines. “Shipping has been hopelessly conservative. We need fresh views. We probably need to take a fresh approach to recruitment as we need to find the right balance between practical engineering experience and commercial requirements. “We have to sort out the technical issues – and we always can – but it’s the human issues that are the most challenging. As an industrial player with a long-term approach, intending to operate our specialist ships for 35 years or more, we are very interested in finding the right solutions – it’s a constant process of innovation.” A longer version of this interview will appear in the next edition of Lloyd’s Register’s Shipping & the Environment. Nick Brown is Lloyd’s Register’s Marine Communications Manager. E nick.brown@lr.org


16 March 2012 Insight

New fuels, new engines &

new designs Future technology and innovation is needed in shipping as emission regulations and fuel prices drive change, says Tom Boardley, Lloyd’s Register’s Marine Director.

A vision for a sustainable shipping industry in 2040 In November 2011, the heads of some of the most significant players in world shipping put their names to a commitment to make shipping more sustainable. The Sustainable Shipping Initiative (SSI) brings together leading companies from across the industry and around the world, to plan how shipping can contribute to – and thrive in – a sustainable future. Representing Lloyd’s Register as one of the signatories was Marine Director, Tom Boardley. He said “The SSI is an important initiative. At a time when many are struggling to stay in business, investing in a cleaner future is perhaps not everybody’s favourite subject. But what makes a business sustainable is changing. At Lloyd’s Register we are putting ever more resources into helping owners, builders and all marine stakeholders better understand the implications of new regulation and technology in our more complex world.”


Insight March 2012 17

One hundred years ago a Lloyd’s Register surveyor attended the sea trials of the first seagoing diesel-powered merchant ship, the East Asiatic Company’s innovative Selandia. The propulsion technology on trial a century ago now dominates the industry and, for most merchant ships in the last 50 years, there has been a clear orthodoxy in engine room arrangements and the type of fuel used. Nearly all ships now use marine heavy fuel oil in diesel engines.

New technologies and innovation The result is that the shipping world is fast becoming a more complex place. New technologies and innovation will play a vital role in the immediate and long-term future of shipping.

Today we stand on the brink of a new era.

Most new technology being brought into operation now has been developed for relatively small or niche markets such as ferries and inland waterways – sectors where exposure to new regulation is most concentrated and where local emissions and other factors are felt most keenly.

Emissions regulation and higher fuel oil prices are driving change in shipping today. Future fuels, the future for marine engines and tomorrow’s ship designs are key areas that Lloyd’s Register is working on to help the marine industry to reduce emissions and find greater efficiencies. Regulations requiring ships to produce less locally harmful pollutants, such as sulphur oxide (SOx) and nitrogen oxide (NOx), in emission control areas (ECAs) such as the Baltic and North Sea are due to be made stricter from 2015. Ships will need either to switch to different, cleaner, fuels or install abatement systems – ‘scrubbers’ – to extract harmful emissions. Approximately 80–90% of merchant vessels will enter an ECA during their lifetimes and more ECAs are expected – particularly in the Mediterranean and the Far East – in the future. In terms of greenhouse gases (GHG), the International Maritime Organization (IMO) has developed global energy design and energy management regulations that will help reduce the tonne mile GHG impact of shipping. The Ship Energy Efficiency Management Plan (SEEMP) and, for new ships, the Energy Efficiency Design Index (EEDI) will come in to force in 2013. These are the first such global regulations to mitigate GHG emissions made by any United Nations agency.

Lloyd’s Register has talked about this as a ‘new paradigm’. Any evolution will be gradual but already we can see changes happening. New fuels, new engines and new designs are becoming available. The difficulty for shipowners, builders, equipment makers and, do not forget, financiers, is not only what technology to support but when to invest. The future is further clouded by the weak market outlook and the hangover of the biggest boom in new ordering in history – the new ships still being built are, in the main, little different to the ships in demand a decade or more ago.

More clarity needs to be brought to the differences between local air emission benefits and the GHG impacts of shipping and the technologies required. At present the real driver is local air emissions. But, for example, we really need more data on the total energy lifecycle impact of fuels such as LNG. There is plenty of work to be done here. At Lloyd’s Register we constantly strive to provide impartial technical guidance. And as well as guidance, verification is crucial. Many claims are being made about performance, about GHG emissions and about safety of new arrangements. Owners and operators need data and they need it verified – what you cannot measure, you cannot manage. Tom Boardley is Lloyd’s Register Marine Director. E tom.boardley@lr.org

But with the consequences for shipping of the UNFCCC process still not clear after COP 17, a global GHG regime seems as remote as ever. The agreement to the second Kyoto Protocol commitment period, covering mainly EU member states, makes it more likely that the European Union will take action on shipping – indeed it is starting the process of investigating how a regional GHG scheme could work for shipping. As a global industry requires global regulation it is far from clear what the impact of regional imperatives will be. At the same time the price of fuel oil has been rising dramatically. Existing ships were developed to operate in a world where ships’ bunkers were available at US$150 a tonne. Bunker oil is now in the US$700-800 range. So, the economics of ship operations have changed.

Our recent special Horizons supplement looks in more depth at the future challenges for shipping; go to www.lr.org/marine. Our next issue of Shipping & the Environment, due out in March, will look further into the environmental issues, what operators and shipyards are doing, as well as at specific regulatory compliance requirements and tools to help the industry in reducing environmental impact and capturing efficiency gains.


18 March 2012 Insight

New steerage at the IMO Koji Sekimizu talked to Christopher Browne about the role of the IMO and his key aims. Koji Sekimizu of Japan was elected in June 2011 as the Secretary-General of the IMO with effect from 1 January 2012, for an initial term of four years.


Insight March 2012 19

The International Maritime Organization (IMO) should lead the global fight against piracy, says Koji Sekimizu, IMO’s new Secretary-General. “There needs to be a formal mechanism to discuss and tackle piracy and there should be one organisation to govern the problem. IMO, as the UN agency responsible for regulating various aspects of international shipping, is competent and has the relevant expertise to address this,” said Sekimizu, who recently signed an agreement for IMO to fund an anti-piracy training centre in Djibouti, on the border of Somalia. “IMO, in co-operation with the UN, needs to deal with pirates and criminals in Somalia, as well as helping the Somali people to deal with pirates internally, in order to ensure their eradication, for without addressing these issues we cannot eradicate them,” he said. The 59-year-old, who was Director of IMO’s Maritime Safety Division until his recent promotion, is something of an expert on piracy. He has represented IMO on the Contact Group on Piracy Off the Coast of Somalia and was actively involved in the 2009 Seoul high-level meeting on piracy in the region. Shortly after he took office on 1 January 2012, Sekimizu appointed Captain Harmut Hesse, Senior Deputy Director in the Maritime Safety Division, to the position of special representative for maritime security and anti-piracy programmes. Hesse will also co-ordinate the Djibouti Code of Conduct and act as IMO’s representative at conferences and meetings on piracy issues. However, as IMO Secretary-General, Sekimizu’s brief is obviously far wider than piracy. He is known as a highly creative problem-solver and, in his 22-year IMO career, has had extensive experience of handling and helping to draft safety, environmental protection and antiemissions legislation. As Director of IMO’s Environment Division he oversaw the phasing out of single-hull tankers after the Erika and Prestige disasters in 1999 and 2002 respectively.

Role of the IMO We asked Koji Sekimizu what in his view is the IMO’s most important role.

A passionate advocate of sustainability, one of Sekimizu’s first tasks will be to co-ordinate IMO’s presence at the UN Conference on Sustainable Development – known as Rio+20 to mark its 20-year history – in Rio de Janeiro on 20–22 June. On the agenda are the future of the green economy and ways to develop a new framework for sustainable shipping. “Although sustainability of shipping has been widely discussed in the context of sustainable development over the last two decades, we have not yet developed a common concept for the sustainability of the maritime industries and in particular the shipping industry,” he said.

“IMO is a specialised agency of the United Nations and, as such, it is the global standard-setting authority for the safety, security and environmental performance of international shipping. Its main role is to create a regulatory framework for the shipping industry that is fair and effective, universally adopted and universally implemented. To create, in other words, a level playing field so that operators cannot address their financial issues by simply cutting corners and compromising on safety, security and environmental performance. This encourages innovation and efficiency.

Sekimizu wants IMO to play a more proactive, policy-driven role. “The role of IMO is very important and it is up to us to make sure there is more co-operation between individual governments, so the world economy can enjoy a continuous environment-friendly and low-cost supply of goods,” he said.

“Such a performance-based approach was taken by IMO, for example, with regard to climate change and air pollution. Mandatory measures adopted by IMO will require the energy efficiency of new ships to improve incrementally, but leave it to the industry to determine exactly how the targets will be met.

His other goals for the UN agency are to help develop new global goal-based standards for ships; various safety-related issues, including the safety of passenger ships; ensuring that the education, training and recruitment of seafarers provides a continuous supply of quality mariners; drafting new maritime security and anti-piracy legislation; and maritime traffic management in straits and key sea areas. Christopher Browne is Lloyd’s Register’s Marine News Editor. E chris.browne@lr.org

“IMO also works hard to help build the capacity of its Member States to address issues within its purview, and this is a central theme in our continuing work to combat piracy, for example. “I feel very strongly that IMO needs to act in the interests of all those who rely on shipping as the delivery mechanism of global trade – and that means the vast majority of the world’s population. We all need a shipping industry that is safe, secure, environment-friendly and efficient, and it is IMO’s job, as the industry’s regulator, to make sure that is the case.”


20 March 2012 Insight

Empowering eco visions A new initiative called E-idea is helping young eco-entrepreneurs to develop innovative environmental projects and businesses to benefit communities in the Asia-Pacific region. Graham Meller reports.


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T

he British Council and LRQA have formed a highly innovative project called E-idea to encourage and assist young eco-entrepreneurs to develop environmentally beneficial projects and businesses in the Asia-Pacific region. E-idea is providing innovators with the training, support and capital needed to develop projects that will engage the widest audience and have the greatest possible positive effects on sustainability in their communities. Almost 900 applications were received from Australia, China, Indonesia, Japan, South Korea, Thailand and Vietnam. From these, 40 winners (dubbed E-idealists) are receiving seed funding grants as prizes to help address significant local and regional sustainability challenges such as transportation, waste reduction, energy efficiency, and sustainable design. The E-idea has an ambitious target of supporting a new wave of entrepreneurs across Asia who see that profit and environmental sustainability are not mutually exclusive. It provides an outstanding platform that brings people together and what every young entrepreneur with a good idea needs: attention and funding. LRQA and the British Council hope that through E-idea, these eco-entrepreneurs will help create a smarter and cleaner future, and inspire others to follow in their footsteps. Huw Oliphant, British Council Project Manager for E-idea, shared his thoughts on the need for all parties to provide continued support to the winners: “The British Council believes that this is particularly important because these eco-entrepreneurs will be ‘change-agents’ in tackling climate change, leading by example in showcasing the business opportunities available in the green economy, sharing sustainable practices within their communities and engaging with peers and decision-makers at local, national and international levels.” For LRQA, the significant financial contribution to the project is only a part of its commitment. The real value is being able to mobilise the expertise of its people coupled with its global infrastructure and networking opportunities. “Helping organisations to improve their environmental performance has always been a core activity for LRQA, so we are also providing mentoring and guidance for the E-idealists” says Simon Batters, E-idea project director and Vice President LRQA Japan and Korea. In a testament to this pledge, both sponsors hosted a three-day workshop in Indonesia for the winning E-idealists. The event not only gave the E-idealists the opportunity to network with potential business partners but also provided them with valuable mentoring. John Rowley, Director Lloyd’s Register Asia (LRQA is member of the Lloyd’s Register Group) said: “As a not-for-profit organisation, Lloyd’s Register invests time, money and resources to fulfil its charitable mission to enhance the safety of life, property, the environment and make a difference to society. While other organisations do something to make money; we make money to do something. If we can help these young eco-entrepreneurs achieve their goals, by association we achieve ours.”

Successful E-idealists In each country, a jury of climate and sustainability specialists selected the winning initiatives against five key criteria: ability to produce behaviour change among a defined target audience; focus on a specific community or industry; capacity to be replicated or expanded over time; clarity of communications; and prospects for future commercialisation and investor or donor appeal. Arif Nugroho, one of the winners, has developed a company that converts waste coconut husks into biodegradable netting in Indonesia. He says: “E-idea is like a bridge that has enabled me to communicate and promote my coconut fibre waste utilisation programme.” Nugroho’s clients include multinationals such as Chevron and Total and his project employs 100 female workers, reduces waste and mitigates the ecological damage caused by resource extraction. Huang Ke has been creating rooftop gardens in Shanghai to promote local sustainable food production and to enhance the quality of life. By September 2012, her organisation, V-Roof, will have planted rooftop gardens over an area of about 10,000 square metres in three Shanghai Project neighbourhoods. Khwankhao Sinhaseni, an E-idea winner from Thailand, has established an organisation that will convert organic waste into fertiliser. She says: “E-idea is an opportunity for a new generation to embrace environmental protection and winning will enable us to enhance the scope and professionalism of our project.” Winning engineering solutions were submitted by Seungjae Lee of South Korea, for a solar-powered rubbish compaction bin, Michael O’Brien of Australia, for solar-powered medical lights to use in remote field hospitals and Satoshi Yanagisawa from Japan for a hand-cranked power generator called Cyclus to recharge hand‑held digital devices. Roll-out plans In early 2012, one E-idea representative from each country will enjoy a study trip to the UK to foster ties and best practice with British eco-entrepreneurs and community-based groups. A final event staged in November 2012 will bring together successful eco-entrepreneurs to showcase the most notable E-idea achievements. Plans for a wider roll-out of the competition are under way, as British Council CEO Martin Davidson explained: “I think the big challenge for us now is how do we take these fantastic ideas and turn them into something that’s practical, which can go to market and can become used in normal day-to-day life? So what we want to do is work with LRQA to actually find a way to do this.” Paul Phyall, Senior Vice President LRQA Asia, said: “One of the greatest benefits of the E-idea is that it is empowering these young eco-entrepreneurs to realise their dreams. It is also helping society to recognise the contributions that young people can make. We hope that through the experience, these individuals will inspire others so that the benefits of sustainability will be cascaded throughout their communities.” Graham Mellor is an environment journalist. www.e-idea.org E marcomms@lrqa.com


Heading in the

22 March 2012 Insight

d i r e c t i o n t h g i r COP 17 might not have got the UN’s efforts to slow the pace of climate change back on track, Henry Derwent, President and CEO of the International Emissions Trading Association tells Russell Barling. But, he says, it has at least got it back in the direction of the track. Henry Derwent became the President and CEO of the International Emissions Trading Association (IETA) in February 2008 and will step down from the organisation this year. Previously, as international climate change director for the UK government, he oversaw the UK’s role in the international negotiations in the G8 and in other forums. Henry has been closely associated with the development of greenhouse gas trading in the UK and Europe from its earliest days and has been involved in many COP meetings.

RB: How did COP 17 compare with your previous experience of similar events? HD: It was a pleasant surprise. But one was left wondering whether something nicer could have happened. It was a surprise because many people (other than those who are deeply, permanently and passionately committed to the UN’s role in this) had come to the conclusion that the parties (the developed and developing countries in particular), were locked into a sort of deadly embrace. Before the conference, many people thought that no developed country would commit to a new set of Kyoto targets without the larger developing countries formalising targets of their own. This required an overall acknowledgement that there is now a group of developing countries, such as China, for whom a different set of responsibilities and obligations ought to apply. Those countries are not the same as Somalia or Burkina Faso. For their part, the developing countries collectively – and with a great display of solidarity – have consistently said that the developed countries have not kept their side of the bargain regarding the first set of Kyoto commitments. So why should they agree to change the terms of the agreement? In the run-up to Durban it was difficult to see anything changing.


Insight March 2012 23 RB: Expectations were low weren’t they? HD: Very low. Some people felt that there could be a complete meltdown. But in fact – and surprisingly – there was a major shift on the part of the developing side, and movement too among some of the developed countries. Two things happened. First, the solidarity of the G77 finally seems to have broken. There are now deep fissures between sub-groups, and the EU was able to claim common cause with the least developed countries, as distinct from the rapidly industrialising nations such China, India, Brazil and South Africa. That shifted the overall position of the developing countries. The second big change was that China actually did what most developed countries had been insisting that they do: accept that economic realities had changed so much since Kyoto in 1997, that they could no longer pretend that their obligations were no different than other developing nations. China actually said: ‘We will accept emission-reduction targets’. RB: What caused this shift? HD: In part, I think it was due to the basic implausibility of a country so economically powerful as China suggesting that its position on the issues should be similar to that taken by a country such as Mali. But there were also two significant strands of global realpolitik. Firstly, the Chinese wanted to maintain a position of leadership among developing countries – upon whom their own economic development depends – particularly those who give them access to raw resources. These countries in turn wanted assurance that China’s position on climate change was in their interests, too. Secondly, again from a geopolitical perspective, China saw an opportunity to demonstrate their ability to be positioned among the big boys: they could claim on this issue at least to be taking a more globally responsible position than many developed countries – especially the United States.

RB: The Green Climate Fund was another positive outcome from Durban. What do you think of it? HD: Well, there was agreement on the structure and governance of the fund. But one of the dogs which didn’t bark in Durban, was [public discussions about] when developed countries were going to put money into it, and how those contributions would relate to the promises made in Copenhagen [COP 15]. The fund is supposed to contain US$100 billion a year by 2020. But the public sector debt crisis in many developed countries means that it’s unlikely that all the money will be provided by new taxes or borrowing. So the assumption is that a significant proportion is going to have to come from the private sector, and quite a number of countries have made that clear. What we didn’t get was more clarity about what that proportion might be. Besides which, many developing countries are deeply suspicious of any private-sector involvement, preferring no-strings grants to the fund by the developed countries. Nor do we have any greater understanding of how these substantial sums of privatesector money will arrive in the fund. What’s the incentive? I think we remain a long way from answers to these questions. RB: How have the markets been affected by what came out of Durban? HD: Not an awful lot. There is improved sentiment around the prospect of stronger action by the countries of the world – which will ultimately lead to an increasing carbon price. However, there isn’t actually much of a connection between any possible international agreements and the various national and regional emissions trading schemes (ETS) that are in place or in prospect. Essentially, the market is interested in what actually gives value to the emissionreduction units. And that’s not the Kyoto Protocol.

RB: Is the ETS the preferred solution, or do we need different solutions for different situations, uses and industries? If so, how do you co-ordinate them? HD: Basic economic theory strongly suggests that you need some form of trading to smooth the edges of any major new obligation on private companies. Without it, you are in danger of achieving emissions reductions at far higher cost than needs be. There are plenty of economic models that have addressed this issue, and everybody comes to the same conclusion: that the best way to achieve global reductions cheaply is to make sure that you can buy and sell across the world. However, it is very complicated to work out exactly where in the value chain is the best place to impose the obligation in order to achieve the greatest overall efficiency. It depends on a whole host of extraneous circumstances. Take private motor cars as an example. If those combustion units require permits and those permits are traded, you’d be talking about individual owners of individual cars having their own carbon budgets and trading between each other. Some economists believe that is exactly what should happen. But most politicians think that quickly gets far too complicated. So the best approach could be to introduce a tax or some form of regulation a long way upstream, in order that the transaction costs of introducing the trading don’t overwhelm the efficiencies that you ought to be getting. It is also really complicated to work out how trading best relates to the host of taxes, regulations and subsidies that are already in place. On the whole, countries ought to be trying to reduce the number of overlapping and mutually inconsistent support and regulatory regimes. Unfortunately the European Union appears to be adding to them. Russell Barling is Lloyd’s Register’s Group Media Manager. E russell.barling@lr.org


24 March 2012 Insight James Smith is a practical man. He’s not looking for perfect solutions. He’s looking for things that work. Consider, for example, his view of the COP process itself. “It’s messy. But this is a process that involves 190 countries, each with their own perspectives. So what can you expect?” In selecting the technologies to deliver a low carbon economy he is concerned about the paradox of perfection. He sees nuclear power generation and carbon capture and storage as two of the leading contenders to move us to a low carbon economy. “They are not attractive options. But they work. Disqualifying both of them would mean that we probably don’t have a solution at all. For the coming critical 20 or 30 years, there are no perfect solutions.” On the need to establish an effective system for the measurement, verification and reporting (MVR) of carbon emissions, he says: “The approach to MVR needs to be practical. Good reporting and transparency are important for collaboration. But let’s not make it a deal breaker at this stage.”

The paradox of perfection James Smith, Chairman of the Carbon Trust, talks to Insight on his approach to tackling climate change and the outcomes from COP 17.


Insight March 2012 25 Positives from COP 17 Although COP 17 did not come up with a clear, clean ‘solution’ on climate change, Smith feels that the agreement that was reached should be seen in a positive light. “The most significant outcome of the conference,” he says, “was that the parties were determined to reach an agreement. The major emitters knew that they had to reach a deal – and they rejected the option of walking away.” He acknowledges nonetheless that much still needs to be done to agree a plan for action and that time is very short. The agreement, he says, should reassure the energy industry that “ultimately governments will stick to the task” – which should give the sector the confidence it needs to rise to the huge challenge it faces. This comes in the shape of the phenomenal growth in energy demand and the need to “ensure that there is sufficient, low carbon supply. Economic and population growth means that global demand for energy will grow by 50% in the first half of the century. This needs to be delivered while producing 50% lower carbon dioxide.” Although Smith did not go to Durban, he knows what his three key messages for the delegates would have been: • Bring industry into the process of tackling climate change “Industry knows about markets and technology”. • The problem is not one of technology or economic resource “The technology exists, even if not perfect, to get the job done.” • The politics of climate change are running behind the technology. Political agreement and market changes are needed so the technology can be commercially deployed. “The technology is clear. We need much improved energy efficiency in every nook and cranny of the economy –

more energy-efficient houses, appliances, cars, offices and industrial processes. This is by far the cheapest way of mitigating carbon and could deliver a major part of the UK’s 80% emission reduction commitment.

with substantial financial resources and the necessary skills. There is, however, considerable scope for smaller companies with high-tech capabilities to benefit and prosper as the low carbon economy takes shape.”

“We need to invest in each of the big electricity generating technologies that can make a difference: nuclear and wind – and carbon capture and storage (CCS). When you are faced with risk and uncertainty the sensible thing to do is diversify.”

But we need to get on with it. “Time is not on our side,” Smith says. “The rate of emissions growth first has to be slowed, then stopped, then reversed” – and we are some way from this. “We need to decarbonise our economies at a rate of 7% a year in order to avoid the tipping point in 2040 beyond which we will not be able to keep global temperature rises below 2C. Yet we are currently decarbonising at a rate of just 2% a year. So we have to more than treble our current performance.

“Our society has been built around the high energy density of fossil fuels. Replicating this through the use of renewables will require major engineering works if we are to harvest what are much more diffuse sources of energy. For northern latitudes, wind is the most efficient renewable – and preferably onshore wind as this is the most cost-effective. In the southern parts of both Europe and the USA solar panels can be effective. By mid century, concentrated solar power could be significant in regions with strong sunlight. “While CCS is a relatively new technology, the constituent parts are proven: we know how to do scrubbing and how to pipe the gas and how to put it in reservoirs. The decision of COP 17 to include CCS in the Clean Development Mechanism provides economic levers to get CCS more widely deployed.” He also points out that the use of CCS in combination with power generation based on sustainable biomass, is one of the few ways we have of producing negative emissions. The time for low carbon technologies Smith believes that the resources to solve the problem are affordable. “The Stern Report estimated that 1–2% of the economy needs to be directed towards mitigating climate change. It is therefore affordable. The cost of the damage from climate change would be higher.” He feels that there is a “natural ownership” of the low carbon technologies. “The scale of the engineering and investment that is needed means it will be the existing large engineering, power and oil companies which drive this – companies

“The longer we delay, the steeper the reductions will need to be, the greater the technical and engineering challenges, the greater the financial cost, and the lower the chances of us avoiding significant climate shocks.” Getting on with it is a political issue. Governments need to alter the terms of trade for energy, Smith says, in order to create the right incentives for energy efficiency and low carbon energy production. “Companies can only deliver if their costs can be recovered.” Ensuring that politicians do the right thing at the right time is everyone’s responsibility. “We, as citizens, must make clear we want politicians to tackle climate change. And industry has to speak out too, with a common message.” It does not have to be perfect – but it does need to work.

J ames Smith was appointed Chairman of the Carbon Trust in September 2011. He has over 30 years of experience in the energy industry and was Chairman of Shell UK from 2004–2011. The Carbon Trust is a not-for-profit company with the mission to accelerate the move to a low carbon economy.


26 March 2012 Insight

What does COP 17 mean for carbon trading and CDM? Robert Hansor, LRQA’s Head of Climate Change & CSR – Asia, looks at the implications of COP 17 for the carbon trading and CDM markets in Asia. Prior to Durban, the Kyoto Protocol’s future was unclear with many believing it might not survive beyond its first commitment period. Consequently, uncertainty over the future of the Clean Development Mechanism (CDM) had been growing, but by the end of COP 17 and to the surprise of many the Kyoto Protocol was given a reprieve. The international climate negotiations took a major step forward in Durban with all major emitters committed to a new legal instrument to be agreed by 2015 and implemented by 2020. The new agreement will have a major impact on businesses around the world; however the impact on today’s carbon market has been muted with the price of carbon credits continuing to fall. Agreeing a new global deal that commits the US, China and India to cut emissions was a major breakthrough and enabled the extension of the Kyoto Protocol (with its second commitment period to start from 2013). This means the CDM will continue to be available to project developers. This is good news for the carbon market, or at least better news than the lack of any commitment. The main problem of Kyoto’s new commitment period though is the same as its first, which is that major emitters (apart from the EU) have not committed to reduce their greenhouse gas emissions. The key market for Certified Emissions Reductions (CERs) –

the UN-backed carbon credits issued under the CDM – will therefore remain the EU Emissions Trading Scheme (ETS) whose third commitment period runs from 2013 to 2020. However according to the International Emissions Trading Association (IETA) the basic supply and demand dynamics of the EU ETS market are unchanged as economic activity is weighed down by the debt crisis, falling oil prices and an oversupply of emission allowances. Another problem facing the Asian carbon market is the EU’s restriction on CERs after 2012. Projects in Asia registered before 2012 can continue to supply carbon credits but after 2012 the only new projects eligible to supply CERs will be those registered in least developing countries (LDC). Consequently there is a rush to register projects in non-LDCs before the end of this year. Nevertheless, Durban has delivered hope for the carbon market. By the time the new agreement is finalised, businesses, in addition to the EU ETS, may well already be operating in national carbon markets in Australia, China, Japan and Korea as well as a host of regional schemes from California to Rio de Janeiro. The fact that the Kyoto Protocol and CDM have been extended is a positive signal and provides a potential link between these markets. The key challenge remains though which is for governments to show ambition and set reduction targets that stimulate the demand for carbon credits and release greater levels of low carbon investment. E robert.hansor@lrqa.com


Insight March 2012 27

The long wait for investmentgrade policy

Joan MacNaughton, Senior Vice-President, Environmental Policies and Global Advocacy at Alstom, talks to Martin Beaver about COP 17, CCS and power plant production efficiency. Joan MacNaughton knows her stuff. She is an influential figure in the world of energy and climate policy, having worked in a variety of UK, EU and international roles. She was Director General of Energy at the UK’s Department of Trade and Industry (2002–06), has chaired the governing body of the International Energy Agency, is the current President of The Energy Institute and works as a senior adviser to the engineering giant Alstom. And her verdict on COP 17? “Quite encouraging” – which is not exactly a ringing endorsement. On the plus side, she says: “All of the major emitters accepted for the first time that they need to make legally binding commitments. But not until 2020. “The establishment of a mechanism to transfer clean technologies and expertise to developing countries was a step in the right direction, as was the creation of the Green Climate Fund – though there were no real pledges of funding. “The previous COP agreements made at Copenhagen and Cancún have still not been implemented. From an industry perspective, we need to make these legally binding as soon as possible, otherwise we don’t have the certainty we need to guarantee investment.” However, making carbon capture and storage (CCS) eligible for Clean Development Mechanism (CDM) funding was a very important advance, she feels. “CCS is key to tackling climate change – and having it excluded from the CDM sent the wrong message.”


28 March 2012 Insight The carbon capture option Global energy demand is predicted to double by 2030. And while both nuclear and renewables have important roles to play in the move to a low carbon energy supply, they will not be able to provide sufficient reliable and affordable energy for the foreseeable future. Fossil fuels will still account for 60% of power generation in 2030, according to the International Energy Agency (IEA). “As a result we will have to deal with the CO2”, MacNaughton says. “And CCS works – there are no insuperable barriers, either technical or financial.”

several hundred million pounds for a single CCS project seems indigestible, even if it is clearly cost-effective over its lifecycle.

Europe and the US. This not only reduces the amount of resources (coal) that they have to import and their carbon emissions, but also increases their industrial competitiveness.

“Progress from demonstration plant to commercial scale is slow everywhere,” MacNaughton says. “Canada is nearest “The EU, on the other hand, is only to having commercial-scale operations, now considering moves to drive up the though the Chinese efficiency of are now piloting European plants. CCS. And once the these are still “It’s essential we increase And Chinese decide to at an early stage.” the efficiency of power move, they tend The logic behind to move quickly.” plants by improving the improving the Achieving power equipment they contain and efficiency of coal CCS is not a cheap option. But, she says, plant efficiency plants is equally whether or not it is expensive depends on performance they deliver.” applicable to The Chinese are also what you are comparing it with. “It is of leading in another renewable course an extra cost compared to simply area that can have a technologies. putting the CO2 into the atmosphere – significant impact on the causes of Generators “must continue to invest in though by the mid 2020s, the cost of CCS, climate change – production efficiency. R&D and must continually innovate over in terms of CO2 avoided, would be offset the ways in which renewables are deployed According to the IEA, 60% of the total by the payments required under the EU’s – because they must drive out costs,” of CO2 emissions in 2030 will come from emissions trading scheme. Alstom’s own MacNaughton says. “There is huge studies suggest that using CCS with fossil power plants that already exist today. potential for efficiency gains in hydro fuel generation is already cheaper than Therefore it is essential, MacNaughton plants, for example, where retro-fitting offshore wind and solar power, and says, that we continually increase the is something of a ‘no brainer’. It enables comparable with onshore wind. efficiency of these plants by improving you to generate more electricity without the equipment they contain and the using more land or more rivers.” “The real limitation is whether there performance they deliver. will be a market: and this depends on But attracting the necessary private whether governments will require power The World Coal Association says that investment and innovation to the generators to install it and make abatement the average global efficiency of coal-fired development and deployment of clean mandatory. At the moment there is an power plants is 28% compared to 45% for technologies requires “investment-grade absence of policy.” the most efficient. The significance of this policy”. And for that, we are still waiting. is that these highly efficient plants not Yet this is a bullet that needs to be bitten. only use less fuel, but also emit almost If climate change is to be tackled, electricity Martin Beaver is a freelance writer who 40% less CO2 than the average. For each will cost more as a result of the colossal specialises in health and safety, and energy 1% improvement in efficiency there is a investment needed in nuclear power, industry issues. 2% reduction in CO2 emissions. And, as renewables or CCS – whichever approach part of its Clean Power Today! strategy, is taken. Alstom is working The technology of on innovations that CCS is proven. “We to achieve 50% “CCS works – there are no aim [Alstom] have done plant efficiency insuperable barriers, either and beyond. it in the 30–50MW range, and have, for technical or financial.” MacNaughton example, retro-fitted points out that a chilled ammonia some of the biggest system to a 58MW improvements have come in the so-called coal plant in the US.” But no one has BRICS countries – particularly in India and yet stepped up from demonstration scale China. “They have made concerted efforts to a fully commercial installation of several to increase the efficiency of their plants. In hundred megawatts. China this has often meant closing smaller Funding is a significant issue. “It seems and dirtier plants and opening new ones. that you can find the money for small-scale In fact, the efficiency of the Chinese coal renewable projects quite easily. But finding fleet is now higher than that of both


29

A people discipline During his time at MTR Corporation in Hong Kong, Andrew McCusker oversaw a doubling of passenger numbers and a fivefold improvement in service performance. But, as he tells Claire Ruggiero, the assets he was most focused on were people not equipment.


30 March 2012 Insight Yet its origins date back only to the late 1970s and the system has spent most of the 30 years since trying to keep pace with the city’s rapid growth. Even by the mid 1980s, when the population was around five million, MTR’s system still only consisted of three lines and pressure was mounting to deliver an extended, high-quality network that matched the city’s ambitions.

Andrew McCusker is adamant: At its heart, asset management is a people discipline.

Following 24 years at the delivery-end of the rail industry – most recently as Operations Director for MTR, the company that runs Hong Kong’s rail services – McCusker is better placed than most to appreciate how railway businesses must adapt in order to remain successful. McCusker’s time at MTR coincided with a period of dramatic change, one that saw unprecedented growth in passenger numbers from two million to some 4.5 million per day; the consolidation of the city’s railways into one organisation; the opening of new lines and extensions that more than doubled the network size; and the replacement of the entire signalling system. But of the many changes he brought to the business, he believes his most important legacy is more cultural than physical. And the rationale is simple: McCusker felt the priority was to change the business’s own outlook from one that was intuitively technical to one that was customer-led.

A cultural shift requiring the ‘buy-in’ of every area of the business. “It is critical that businesses bring their people with them every step of the way” he says, “it’s a mistake I fear many companies make because they are out of tune with today’s needs”. A city wedded to its transport network As one of the most densely populated corners of the planet, Hong Kong relies heavily on its transportation system. Ninety per cent of all journeys across the city are made by public transport – one of the highest ratios anywhere in the world. The backbone of this network is an extensive urban rail system that stretches across a complex geography of islands and mountainous terrain. Today the MTR Corporation operates metro and light rail services, as well as connections to mainland China and the airport express link.

It was at this point that McCusker was brought in from a background in the energy industry. His brief was to bring new ideas to all aspects of the business and help craft a smarter, more efficient operation. Such a challenging, multifaceted brief required a clear-minded, strategic approach: “I have always followed a practice of looking ahead at regular intervals and constructing a vision of what the business would look like in 10 to 15 years”, he explains “then asking the question: how can I support my staff to be ready to meet the new challenges. “As an ‘outsider’ to the industry it was important that I understood the nature of a business that moves large numbers of people from A to B on time at an affordable cost. “Railways are asset-intensive, lowreturn businesses that require enormous investments in infrastructure and significant land use. Leaving aside initial build costs, few railways cover their long-term operational costs or earn sufficient revenues to fund regular programmes of modernisation or replace assets. “I quickly came to the conclusion that the key to unlocking our potential lay with the people and the culture. It is a view that remained a constant throughout my 24 years in the rail environment.” Creating a shared understanding “We needed to break down silos and give staff the confidence to embrace change.


Insight March 2012 31 Much of my initial attention was invested on driving a cultural shift and building competencies across the majority of staff – not just an isolated cadre such as management or the leadership pipeline. “We launched a number of programmes to get the business thinking how it could provide a better quality of service for the customer. One of the most successful was an incentive scheme for frontline staff based on rewards and recognition – uncommon within the industry at the time.

maximising value from their assets while meeting the demands of the market and customers.” Having established a new customer-led culture giving the business direction, McCusker turned his attentions towards managing the physical assets: how the trains were serviced; how the control room was managed; handover times between maintenance and operations.

“We also introduced annual training to give people the skills to view their work from different perspectives, from those of both colleagues and passengers, and have the confidence to suggest their own ideas.”

“We recognised that we had valuable assets and needed them to deliver for the company through better deployment. This meant being smarter about how we operated, how we approached system safety and how we dealt with integrating new and old assets.

A new internal ‘language’ took hold across the business, one that cut through silos and provided a shared understanding for when decision-makers in disparate parts of the organisation met to resolve conflicts and agree priorities. It’s a culture of openness so successful that it has been exported to MTR’s interests abroad such as in Melbourne and London.

“Such major challenges were successfully overcome largely due to my introduction of systems assurance, and the first application of systems engineering within the company”: essentially dealing with the assets as an integrated system and recognising the interactions between the different parts of that system throughout the lifecycle of the asset – in brief ‘asset management’.

McCusker feels such an approach will become more important than ever for any business as a new generation steps in.

The benefits of this systems approach were quick to fruition: trains were released earlier by the maintenance teams; rolling stock was no longer stuck in the workshops during peak times; and the purchase of new rolling stock could be delayed by, in some cases, up to seven years.

“With Generation Y coming in, employers in any sector will be dealing with different mindsets and personalities. Will future staff be so committed to one organisation? Will they be prepared to go the extra mile? How will they be motivated? These are questions that managers everywhere will have to address.” Engaging these new people in the business and retaining knowledge from the experienced leavers will become a major challenge in the coming years. Still about the bottom line As in any railway business, there is still a bottom line to deliver. “Operations managers live in a profit and loss world,” he explained, “they have to focus on

The business also became a fast learner within construction projects and particularly their influence on current or future operations. In a period of just two to three years McCusker and his team delivered a turnaround in train performance of some 250%. Yet he believes that across the wider rail industry there is insufficient understanding of just how pivotal asset management is. “The overall lifecycle of a train is about 40 years, with a refurbishment around the 20-year mark. It’s a major challenge

to keep those trains in continual service – securing parts, reducing unplanned maintenance – while ensuring they can adapt to changes in society, such as improved access for passengers with limited mobility or extended WiFi connectivity. Today’s demand must be served by major investments made several years ago. Trains can’t be replaced every five years. “How you manage assets in the railway environment can make the difference between success and failure in this business.” But, he warns, “Asset management fails when we only think of maintenance.” Solving tomorrow’s problems After more than 20 years in Hong Kong McCusker has moved to a new role as Director of Rail Infrastructure at the University of Wollongong’s SMART Infrastructure Facility, which provides various industries with powerful modelling, research and analysis tools. In addition he is supporting Lloyd’s Register Transportation to develop a leading-edge asset management philosophy. McCusker is currently building up a new rail division bringing his deep operations and business experience to projects such as helping freight operators work more efficiently on lines shared with passenger services. “Helping them do more with what they have” he says, a phrase that will be familiar across many industry sectors. More details about the SMART Infrastructure Facility can be found at www.smart.uow.edu.au/ Claire Ruggiero is Lloyd’s Register’s Transportation Growth & Innovation Manager. E transportation@lr.org


32 March 2012 Insight

T

o remain the valuable business system that it currently is, ISO 9001 needs to continue to evolve, ensuring that organisations of all sizes, complexities and location see a clear connection between their strategic objectives and their quality management system (QMS). It is not just about meeting the requirements of a standard to get certification; it needs to be embedded in everything that the organisation does.

Mike James, LRQA’s Managing Director, looks at the need to evolve the international quality standard

ISO 9001:2000 – a defining moment In 2000, there were far-reaching changes made to ISO 9001, the international quality management system standard. These changes were based upon an extensive International Organization for Standardization (ISO) user survey but were also made at a time of widespread criticism of the standard and the third-party certification industry. The resulting changes proved to be a defining moment, resulting in a clear ‘before and after’. Prior to 2000, ISO 9001 was purely a conformity assessment standard; however following the changes, which were rooted in key quality management principles, the standard became not only this but also a framework for managing and assessing organisations against accepted management best practice. In fact, given that now over one million organisations in over 150 countries use the standard to manage their key value-creating processes, it’s arguably the most influential piece of business management literature ever written. Uncovering an organisation's self-knowledge These changes not only raised the bar for the companies using the standard but also for the third-party certification industry that conducts the independent assessments.

ISO 9001:

Business management literature’s most influential work?


Insight March 2012 33 Assessor competence defines the certification industry. Assessors not only need to understand the industries they work in and the businesses they assess but they also need to be able to apply this knowledge in a way that unlocks the intrinsic value in the assessment process. They need to be able to speak both the language of the shop floor and that of the boardroom. Independence and transparency are of pivotal importance to the certification industry; as providers of certification we add value through structured and measured questioning, known as Socratic questioning. This provides assurance to our clients, their customers and wider stakeholders in society. This is not the same as consultancy which strives to add value through the provision of expert advice. The role of accreditation Transparent and credible governance of certification bodies through the accreditation process needs to remain at the heart of independent assessment and certification. It is central to stakeholder confidence by ensuring the competence of assessors and the impartiality of the decision-making process are maintained. The speed and growth of ISO 9001 certification coupled with the evolution of management systems standards have also required changes in the accreditation process – changes which are reflected in today’s accreditation system. ISO/IEC 17021: 2011 is the standard for certification bodies. It ensures that the regional or country-specific accreditation bodies, such as the United Kingdom Accreditation Service (UKAS) and ANSI-ASQ National Accreditation Board (ANAB), assess the certification industry against a consistent standard. It has also extended the competence requirements to encompass all staff engaged in the certification process. For these reasons ISO/IEC 17021 offers tangible, consistent benefits that translate into increased trust and confidence for all stakeholder groups. Matching business developments When ISO 9001:2000 was revised, one of the key changes was more generic language to extend its use into service activities as well as manufacturing. This change, particularly in industries which are highly concentrated and where there is a high degree of specialisation, has meant that customised versions of the ISO 9001 standard have become more attractive. Rather than point to any deficiencies in ISO 9001, sector-specific versions for the automotive, food and aerospace industries are a testament to the management principles that underpin the standard, supported by its acknowledged capability to solve quality problems. The revision process for ISO 9001 is just beginning and will be subject to a number of different influences including the latest ISO user’s survey and the inevitable tension in the voting phase between those who want radical change versus a more evolutionary approach. Given the minimal nature of the changes in 2008 there needs to be some meaningful change. Otherwise, come 2015, the standard will not have significantly changed in 1 Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers http://www.hbs.edu/research/pdf/09-018.pdf

15 years. This could mean that it lags so far behind today’s modern business practice that its relevance could be called into question. Possible changes ahead With the existing agreement on the common structure and text for future revisions on all ISO management systems standards, there is room for speculation about likely changes for the next version of ISO 9001. For instance, acknowledging the fundamental purpose of all management systems standards, currently numbering in excess of 40, is to prevent things from going wrong. Therefore, if prevention is to become the defining purpose of an ISO 9001 management system, this must inevitably lead to the consideration of risk; not a risk management system which focuses solely on risk, but the systematic control of risk through the management system, which is subtly different. Another area links into the changes in modern organisational design. One of the changes in the modern business world has been the breaking down of traditional organisational boundaries from vertically integrated companies to whole industries characterised by outsourcing, thereby creating ‘demand networks’ commonly referred to as supply chains. The collaborative, interdependent nature of the way in which these relationships are managed should be addressed in the new version of the standard. Finally, the common text and structure needs to define the need for an organisation to consider changes relative to both its external and internal environment. This will focus the organisation and its certification body on the alignment of its quality objectives within its overall strategic goals. Into the future There have been numerous independent studies over the years demonstrating the benefits from implementing ISO 9001; one of these is a recent article published in a prestigious peer-reviewed academic journal from Harvard Business School. The article1 encapsulates some of the key organisational benefits for ISO 9001 certification stating: ‘ISO adopters have higher rates of corporate survival, sales and employment growth.’ The ISO 9001:2000 update was the most significant evolutionary step to date. Internal and external QMS stakeholders eagerly await the direction the next ISO 9001 update will take. Robust and relevant services and products that inspire confidence and drive organisational resilience, competitive advantage and growth are the real value in independent assessment. With that goal in mind, the certification industry, through innovation, independence, training and the technical expertise of assessors represents a valuable service to the business world and society at large both today and into the future. E mike.james @lrqa.com A version of this article first appeared in Quality World.


34 March 2012 Insight

A patch of East London wasteland has been transformed into the hub for the 2012 Olympic and Paralympic Games.

London’s bid to host the 2012 Olympic and Paralympic Games promised to deliver the best games ever. At the Royal Academy of Engineering’s 2011 Lloyd’s Register Educational Trust Lecture, and later to Insight, Sir John Armitt, Chairman of the Olympic Delivery Authority (ODA), described how the ODA has helped to meet that promise. The construction work for the Olympics has been compared to building two Heathrow Terminal 5s in half the time. Having to build 2,818 apartments in just two years was in itself an enormous exercise. This was just one element of the project which required the ODA, set up in 2006, to deliver the site’s infrastructure, venues, Olympic Village and transport links, as well as devise and implement effective transport plans. All this had to be done to deadline, on budget and in a sustainable manner to leave a lasting legacy. Around 17,000 athletes and officials will take part in 302 events covering 26 sports in the Olympics; the Paralympics will offer

499 events across 20 sports. And for each event the ODA determined whether existing facilities could be used – the Games will make use of many pre-bid venues in and outside London – or, if not, whether to build a temporary or a permanent new venue. The scale and complexity of the project might have seemed overwhelming. But John Armitt exudes the quiet authority of someone who is used to getting things done according to plan. Before joining the ODA in 2007, a succession of posts as chief executive of Union Railways, Costain, Railtrack plc and lastly Network Rail, and 27 years working for John Laing, had given

him wide experience in civil engineering and industrial construction projects. Raising the bar The Olympic project was recognised as an opportunity to raise the bar in the construction industry. The ODA set standards across six key themes: health, safety and security; employment and skills; sustainability; equality, diversity and inclusion; legacy; and design and accessibility. An early challenge to the ODA’s sustainability credentials was the heavy contamination of the 600-acre site of the Olympic Park in Stratford, the result of hundreds of years of waste from industry.


Insight March 2012 35 “Traditionally such soil would be dug up and transported to landfill and clean material imported,” said Armitt. This, however, would have meant extensive lorry movements on the local roads, landfill, and the use of raw materials. So it was decided to clean and recover the contaminated soil. Two million tonnes was treated primarily by soil washing; 95% of the soil was recovered with only 5% going to licensed landfill. “The health and safety of site workers is the top priority in everything we do – that culture was established at the outset,” said Armitt. “Good management and leadership has resulted in our accident frequency rate being far lower than the industry average across what is one of the largest construction projects in Europe. “The accident rate is 0.15 accidents per 100,000 hours worked. To put this in perspective, only 120 reports have been received by the Health and Safety Executive in relation to over 75 million hours of work on the project to date, equating to one incident every 77,000 days. Around two thirds of these incidents relate to common injuries such as twisted ankles and sprained backs.” He said the project thus far has been delivered without a fatality, a major achievement, illustrating the robust health and safety culture.

Engineering challenges Preparing the Stratford site posed a series of engineering challenges. Bound and criss-crossed by roads, railway lines and a canal, it is also bisected by the River Lee. Across the site, 52 pylons supported National Grid power lines; a project to bury these lines in two six-kilometre tunnels, alone, cost £300 million. A network of roads and bridges was constructed, a site-wide sewage system has been installed and a combined cycle energy centre provides 90MV of heating, 52MV of cooling and 12.3 MVA of electricity. “In fact we’ve spent more money on infrastructure than stadia,“ said Armitt. The Aquatics Centre proved to be “quite a challenging building,” said Armitt. At the bid stage, the iconic design by Zaha Hadid captured the imagination. The original design was scaled down to cater for 2,500 spectators with two temporary wings to seat another 15,000 during the Games. The wings are not airtight, which caused a significant challenge for the engineers to meet very strict environmental requirements. The huge roof structure, weighing 2,800 tonnes, was built before the construction of the pools and main building. Later it had to be raised as a whole to enable additional work to reduce the load on underground power lines. “A tense moment,” recalled Armitt.

challenge. A capacity of at least 80,000 is required for the Games, but afterwards only a few events or premiership football clubs could fill this number of seats. Wembley could have been used, but moving hundreds of athletes and officials across London made it impracticable. The London bid had promised that part of the legacy would be a new international-standard athletics stadium. A unique decision was made to build an 80,000-seat stadium, which could later be reduced to a 25,000-seat athletics facility. The 2017 World Athletics Championships will now be held there, so a 60,000– 80,000-seat stadium is likely to be the immediate legacy.

One of the main goals in the design and build was to leave a legacy.

“The 6,000-seat velodrome is the most energy-efficient and, for many, the most beautiful building in the Olympic Park,” said Armitt. Its compact design minimises the heated volume of air in the main cycling arena and uses entirely natural ventilation. Plenty of natural light reduces the need for electric lighting. The designer is confident it will be one of the fastest cycling tracks in the world.

Legacy One of the main goals in the design and build of the Olympic site was to leave a legacy for the benefit of the local and wider community. The main stadium was a major

The ODA has published some 300 separate papers that identify the lessons learnt from this major programme across 10 industry themes such as health and safety, sustainability and project management. These can be found at www.london2012. com/learninglegacy; this data bank will continue to be developed after the ODA has completely wound up.


36 March 2012 Insight

On time and under budget The delivery of the venues and infrastructure for the Games has been on or ahead of schedule and under budget. Armitt considers one of the ODA’s greatest achievements was establishing a realistic budget from government. Everything else then followed; for example, a robust financial and contracting platform/system was established to go with it. “The ODA has saved over £910 million to date, with our anticipated final cost having gone from £8.1 billion to £6.85 billion. This has helped keep the remainder of the project in line with the £9.3 billion public-sector budget,” said Armitt. It was not without its problems, unsurprising given its scale and complexity. But all the challenges have been surmountable, according to Armitt. “I don’t do sleepless nights,” he said. The financing of the Olympic Village caused the most anxiety because the ODA had to step in when the 2008 financial crisis upset plans for it to be built by the private sector. “The rest has gone

remarkably smoothly; a credit to the UK engineering and construction industry. The Aquatics Centre was the most difficult, and that came in on time. Maybe everyone put their ‘A’ teams in – no one wanted to be the one who failed.”

programme management – for example, provision of centrally sourced concrete, aggregates, fuels and waste services helped to ensure that the ODA exceeded the target of at least 50% of bulk materials being transported by rail or water freight.

Clear client leadership was another important factor. The ODA appointed a delivery partner, CLM, to manage the construction projects. In its client role, the ODA set the specification for the venues and infrastructure, let the main contacts, set the standards required across six key themes from safety to employment to sustainability, dealt with the external stakeholders, and delivered the transport plan.

The final countdown The ODA handed over the site to LOCOG, the London 2012 organising committee, on 9 January. For LOCOG, an intense period of activity includes installing 16,500 fixed telephones and 7,000 internet stations across 894 locations; 75,000 volunteers will need to be recruited and trained; and 65 hectares of tents erected for retail, catering and back-of-house facilities.

Armitt also attributes the success to cross-party political support, a rigorous approach to programme control and change management, and strong assurance and risk management. The procurement strategy and operation also helped to keep the project on track and within budget. A contract packaging strategy supported the delivery and

“There is much to be done,” said Armitt. “But I am confident that in July London will be ready to host the greatest show on earth.” Sir John Armitt was a member of Lloyd’s Register’s General Committee from 2003-2006. E kathy.davis@lr.org


Insight March 2012 37

Is London’s transport network up to the Olympic job? Andrew Foulkes asked our Transportation team in London for their thoughts on this question. Transport was always the worry for organisers of London’s Olympic bid. Even after it was awarded the Games, whenever the International Olympic Committee delegations were in town to check on progress there would be a collective holding of breath that the city’s maligned transport networks would be on their best behaviour. Given the demand placed upon it, London’s transport is never as bad as its residents would have visitors believe. However it is currently enjoying a period of almost unparalleled transport investment. So much so, in fact, that the building works themselves have eclipsed service levels as the commuter’s favourite antagonist-in-chief. Some projects have been driven by the July 2012 deadline, but much was happening in any case. The Underground, for example, had already embarked on a substantial modernisation programme to bring improved services, new trains and refurbished stations across the network. The works, which must fit around the 3.5 million journeys the network carries each day, will take up to 30 years to complete, but the initial fruits are bearing through. Anyone visiting for the first time in, say, five years will not fail to notice the shiny new fleets and improved ambience on some previously notorious lines.

That same visitor may also be struck by improvements to some of the main stations too. International services were moved from Waterloo to the gloriously refurbished St Pancras station in 2007, and when neighbouring King’s Cross pulls down the scaffolding later this year to reveal its stunning new concourse, London will boast two grand, historic stations the equal of any in the world. With more than 80% of spectators expected to arrive by train, most Olympicscentred developments were concentrated around Stratford, which will act as the gateway to the Olympic Park. New platforms, ticket halls and entrances have been added to the existing stations, along with improved walkways and disabled access. A special ‘Javelin’ service will zip between Stratford International and St Pancras during the Games themselves, carrying around 25,000 people per hour. There will doubtless be the occasional disruption that makes headlines, but as home to two national sports stadiums and host to large events almost every weekend, London will be better prepared than most. The biggest disruption could be the Olympic Route Network – the stretches of reserved lanes and restricted roads that will allow athletes, officials and media to dash across the city’s main thoroughfares. Organisers have spent several years trying to raise awareness of the routes and impact on daily routines but no one has really yet been paying attention so you can expect plenty of Londoners to take to the radio phone-ins to vent their frustrations this summer. Most importantly for London, however, is that these projects are not solely about the Games, with the improvements continuing long after the athletes have left. Currently popping up across central London are the building sites for a new East-West line that has been talked about since the 1970s. Too late for 2012, but it’s a substantial transport investment and one that will be integral to the city’s long-term success. Andrew Foulkes is Lloyd’s Register’s Transportation Communications Manager. E andrew.foulkes@lr.org


38 March 2012 Insight

A country transformed Brazil’s rapid economic growth and prospects is charted by Rebecca Moran.

B

razil has been a popular tourist destination for many years. It boasts a diverse cultural heritage with celebrations and festivals that have become known around the world, dazzling beaches and rainforests, and travel friendly weather. But as an economic power, Brazil seemed to be headed in a direction that few countries would envy. Just 40 years ago, the country was essentially a closed economy and Brazilian debt to the International Monetary Fund (IMF) and other international lenders was spiralling. Inflation was the untameable ‘dragon’, as it was called in Portuguese slang, and totalled an approximate quadrillion per cent cumulatively in the 20th century. But today, as many countries in the developing world struggle, Brazil is rapidly emerging as an economic powerhouse possessing some long-term advantages over other countries. Most importantly, the country’s disciplined, market-friendly macroeconomic policy and its stable democratic governance have created a foundation for steady and predictable

growth over the next several years – a perfect environment for an emerging economic giant. Today, Brazil ranks as the world’s sixth largest economy and the eighth largest in purchasing power parity. And, for the first time in history, an increasing number of Brazilians are in the middle class as others move from extreme poverty to low-income status, and domestic consumerism has become an important driver of Brazilian growth. Contributing to the country’s booming economy is one of the most advanced industrial sectors in Latin America boasting involvement in industries such as automobile and parts manufacturing, machinery and equipment, textiles, shoes, cement, computers, aircraft and consumer durables. The agriculture sector is also remarkably dynamic. For two decades, this sector has kept Brazil among the most highly productive countries in areas related to the rural sector and it is believed that Brazil has not yet tapped its potential for food production. More farmland can easily be created and the climate allows for the rotation of three crops per year, instead of the usual two.

In the financial industry, opportunities for massive growth abound as the growing middle class seeks out banking services. Experts expect a rise in the number of investor accounts in Brazil, from 800,000 to five million in the next five years. The country is also a major manufacturer and exporter of petrochemicals and provides significant quantities of lumber, iron ore, tin and other natural minerals to the global market. Potential for oil Since deregulation of the oil industry began in 1995, oil production in Brazil has increased from 800,000 barrels per day to 2.1 million barrels per day. More recently, the discovery of major offshore oil reserves 300 kilometres off the country’s Atlantic coast could propel it into the top league of oil-exporting nations. “The find lies in what all Brazilians now know as the ‘pre-salt area’ – so called because the oil and gas is located beneath several thousand meters of water, rock and salt,” says José Ferreira, Lloyd’s Register’s Brazil Country Manager. “Brazil has discovered billions of barrels of oil in the last few years, mostly in these deep, pre-salt fields off its south-eastern coast.” “Petrobràs, Brazil’s majority owned oil company, explores in this deep water hoping to boost Brazil’s production of oil to five million barrels per day by 2020. The Brazilian oil company raised US$70 billion in 2010 to develop the new fields in the world’s largest ever public share offering.” Today, there are approximately 77 companies, 36 of them foreign, involved in exploration and production activities in Brazil where ‘local content rules’ are integral to success. Local content rules call for companies to procure a minimum percentage of goods and services from local sources. Government officials believe that these rules will ensure the development of jobs and economic growth while fortifying domestic industry since many companies and suppliers will be tempted to establish manufacturing operations within the country. But Brazil’s economic boom is not without its blemishes. Brazil’s growth rate remains the lowest of the four BRIC countries – Brazil, Russia, India and China; the country


Insight March 2012 39 is plagued with a tax burden of nearly 35% of GDP and the government has moved at a slow pace to implement key economic reforms. Additionally, government spending is growing faster than the overall economy and many argue that the money is being spent on the wrong things. Federal government payrolls, social security and pension spending are increasing but the investment in education and infrastructure is lacking. Can the country maintain its momentum and overcome the existing roadblocks towards growth? Only time can accurately answer the question. But there are strong indicators that Brazil has just begun its ascent as a global economic giant. Platform for business The government plans to invest billions of dollars in offshore oil, hydropower, and other infrastructure sectors over the next few years. Preparation for the World Cup in 2014 and the 2016 Rio Olympics is prompting improvements to roads, airports, sports facilities and other areas. The government is encouraging families to keep children in school by paying them a monthly stipend. Policies are being set in place to tighten fiscal spending. Foreign direct investment flows are second only to those of China, and the country’s international reserves exceed US$350 billion – which serve as a cushion to protect the country against economic crisis. Employment and wages are on the rise and there has been significant improvement in income distribution. These and many more investments, as well as proactive policy management by the government shows a relatively stable, growing platform for business. Predicted to be one of the five largest economies in the world in the decades to come, there is little doubt that key players from all industries will be contemplating their future role within this emerging economy as Brazil continues to transform from an unenviable member of the global market to a top competitor in the economic world. Rebecca Moran is Lloyd’s Register Americas’ Communication Manager. E rebecca.moran@lr.org

“Brazil has discovered billions of barrels of oil in the last few years, mostly in these deep, pre-salt fields off its south-eastern coast.”

“There are strong indicators that Brazil has just begun its ascent as a global economic giant.”


40 March 2012 Insight

CHINA Rise of leisure ships in

The country’s cruise ship and yacht markets are taking off.


Insight March 2012 41

Multiple berth: (left to right) Royal Caribbean Cruises International (RCCI) owned Rhapsody of the Seas; Xin Jian Zhen, ferry owned by China-Japan International Ferry Company; Dawn Princess, owned by Princess Cruise and classed by Lloyd’s Register; and the Fred Olsen Cruise Lines-owned Balmoral line up at Shanghai Cruise Terminal

Across Asia many see cruising as a key target area for future tourism. Shanghai, with its population of 23 million – and growing, could soon become a leading global cruise terminal. Several major companies are eyeing its cruise terminal’s huge potential and both Costa Cruises and Royal Caribbean Cruises International (RCCI) have been using it as a home port. In fact many Chinese companies want to enter the cruise market, but it is not easy to find the right cruise ship formula, which is likely to involve shopping facilities, attractive excursions and an onboard casino, all of which need development time. Because of the complexities involved, the Chinese domestic market will need to evolve its own business models and approach. With the Shanghai Cruise Terminal now an established cruise hub and with other Chinese ports already following its lead, the country’s shipyards are keen to diversify

their business into cruise vessel building. This may be for the Chinese market to start with but they will aim for the US and European markets as builders and designers gain experience in this specialist shipping segment. As the world’s leading classification society for cruise ships, Lloyd’s Register is in discussion with several Chinese and foreign industry partners to support the development of this unique market in China. It’s not just the cruise market that is taking off in China. A booming economy, a spate of wealthy local entrepreneurs with a taste for luxury yachts and growing demand from global owners and operators for more construction outlets, has led to a rapidly expanding network of Chinese yacht builders. One of these is Kingship Marine based at Zhongshan city in Guangdong province, southern China. Company founder, Roger Liang, said he opted to base the company in China after looking at potential sites in Vietnam, Malaysia and Australia. “China is very mature as a shipbuilding nation, the workers are well trained and it has the largest number of engineers graduating each year from university. This provides a solid foundation for a

skilled labour force and brings key knowledge and techniques to the industry. In China, there is also a very good support network of specialist manufacturers of marble, glass, woodwork and furniture,” said Liang. “Most Chinese-built yachts are exported rather than sold to the domestic market,” says Zoe Zhou, of Lloyd’s Register’s Marine Business Development team. “However, rising average income per capita and demand for leisure and high-end luxury products in China – yacht tourism is considered the golf of the sea – could well guarantee a bright future for the internal market. “Chinese yachtbuilding is expanding. China’s builders have a slightly different approach to other countries in terms of finance and business plans. The infrastructure is there and it is only a matter of time before yachtbuilding starts to catch up with other types of Chinese ship construction.” E china-bdt@lr.org


42 March 2012 Insight

Committing to a food safety culture

Training employees and transforming the individual Vel Pillay, Food Safety Program Manager – Americas, LRQA


Insight March 2012 43 Safe food is key. Consumers want reassurance, organisations are worried about brand reputation and shareholder value, and governments lack sufficient resources to thoroughly inspect every morsel of the food supply chain. And, the media ensures that every incident and outbreak is reported as front page news.

genuine food safety culture, “[behaviourbased] food safety managers have figured out a way to go beyond accountability. They’ve figured out a way to get employees at all levels of the organisation to do the right things, not because they’re being held accountable, but because they believe in and are committed to food safety. They create a food safety culture.”

The industry has come a long way in its practices to ensure that the supply of food is safe, and organisations such as the Global Food Safety Initiative (GFSI) have been instrumental in promulgating and benchmarking food safety programmes to ensure consistent application. However, E.Coli and salmonella have become common household words, and the number of food recalls continues to grow year-on-year. More needs to be done to gain confidence and trust in the supply chain.

The collective food safety practices used within an organisation are achieved by taking into account both food safety culture and food safety management according to Professor C J Griffith, Emeritus Professor Cardiff School Health Sciences, Operational Food Safety Performance. Griffith defines food safety culture as ”the aggregation of the prevailing relatively constant, learned, shared attitudes, values and beliefs contributing to the hygiene behaviours used in a particular food handling environment” and one must “provide staff with a common sense of food safety purpose.”

Could a culture-based approach to educating and training employees help change this landscape? Food safety culture Training plays a critical role in enhancing food safety. We can take our cues from recent work done by the GFSI. In an attempt to raise the bar on food safety programmes across the globe, the GFSI developed a tool kit to help food suppliers meet GFSI benchmarked schemes. During several pilots conducted in Egypt and other countries, 65% of participating food companies failed to meet basic requirements established by the GFSI; however, after a dedicated training period with employees of those same food companies, 45% of the previously failed organisations met the requirements set out in the pilots. There are other factors that we need to consider when we look at how to enhance training. Two critical components are food safety culture and food safety management. In an article that appeared in the December 2010 edition of the GFSI newsletter, Frank Yiannas, Vice-President Food Safety at Walmart, talked about the importance of creating a behaviour-based food safety culture rather than focusing on just implementing a food safety programme. Yiannas described the critical difference in an organisation that has adopted a

Considering both perspectives, it must be understood that for training to truly support a food safety culture, it needs to be delivered in a format that enables an individual to contribute to his or her employer’s business strategy and food safety objectives. The whole picture The food sector is at a crossroads. The current method of teaching rarely takes into consideration the holistic approach. Many organisations still operate in silos and in a compartmentalised way. In numerous cases, we see disconnect between corporate, business units and manufacturing sites in writing policies and procedures without consulting each other. To raise the bar, training must evolve to a deeper level of understanding ‘the whole’. Employees must not only be made aware of the big picture, but must also understand the vision and objectives of the organisation and their responsibility vis-à-vis food safety. A well-thought-out management system to help achieve this objective is crucial. A good starting point is to understand how a well-planned management system can help bring focus on a holistic approach that transforms the culture.

It is critical to understand that the effectiveness of any training programme is contingent upon getting buy-in from all employees, and the first step is to understand the inner workings of the organisation, its vision and objectives, strengths and weaknesses. Experience shows that where such an approach has been taken, the system is more robust and effective. The organisations that engage employees in their food safety management system (FSMS), such as FSSC 22000, are better able to obtain buy-in and are more likely to succeed in creating a food safety culture driven by awareness. “Cargill’s approach to the deployment of FSSC 22000 across over 850 plants in 67 countries has been to engage employees from the beginning,” says Roger Bont, Global Quality Assurance Director at Cargill. “Our approach, supported by a strong internal training programme, has fostered an environment where employees think about and justify their actions. This awareness has helped improve our food safety systems and strengthen our food safety culture around the world.” An effective training plan An organisation’s training implementation plan is absolutely important. From the start, an organisation must leverage first-hand knowledge of its employees and managers who will be directly involved in implementing and maintaining the FSMS. A solid training implementation plan that is reviewed and revised along the journey is critical, and the ability to gear training accordingly is an absolute necessity. For this to happen, training and education must be raised to a higher level. When designing a plan for training, one must consider ‘the whole rather than the parts’; employee involvement and buy-in are crucial at instilling a food safety culture, and because of the holistic approach taken while designing the FSMS standard, one should model training to mimic the FSMS approach. E enquiries@lrqa.com


News update

44 March 2012 Insight

Northern Rail’s energy efficiency from ISO 50001 Following Northern Rail’s 2011 certification by LRQA to the new international energy management system standard ISO 50001, preliminary figures have demonstrated reductions in electricity use by over 11% and gas consumption by over 15%. Since implementing ISO 50001, one of the key initiatives has seen the UK's Northern Rail undertaking a large amount of work on data collection with the installation of a metering programme at almost 300 sites across its network. As Gareth Williams, Northern Rail’s Energy Solutions Manager explained: “The metering programme provides Northern Rail with accurate monthly invoice data and access to half-hourly information which in turn has allowed better management at site level. ISO 50001 helps us to establish a systematic approach by embedding processes to improve energy performance, including energy efficiency across the whole of the organisation.” E enquiries@lrqa.com

Support to Valemon topside EPC project The engineering phase of the Valemon topside EPC (engineering, procurement and construction) project has moved to Kuala Lumpur and our Scandpower team based there is now continuing its safety integrity level (SIL) study work for the project. Scandpower has supported the Grenland Group and Technip project from its initial stages, with involvement from the

Sandvika, Trondheim and Kuala Lumpur offices. So when the project left for Kuala Lumpur, the organisation accepted our proposal to keep supporting them in managing the functional safety for the platform until August 2012. Valemon is a gas and condensate field in the Norwegian North Sea. The Valemon field will feature a fixed steel platform to separate gas, condensate and water in the well stream, and will be predominantly unmanned after the drilling phase. E fadlina.zainal@scandpower.com


Insight March 2012 45

John Wishart is new Energy Director

Nuclear industry personnel swap

Our new Energy Director is John Wishart who joined the organisation in December 2011 from GL Noble Denton. Wishart is based in London and brings a wealth of experience to the job, having spent more than 30 years in the industry. “Rising energy prices, stricter emission standards and the complexities of exploring new energy sources are increasing the technical assurance needs of companies operating in the energy supply chain,” Wishart said. “I am very much looking forward to the challenge of growing the energy business of the Lloyd’s Register Group in all its dimensions – upstream, downstream and the conventional, nuclear and renewables sectors.”

He joins our energy team at a time when the division is enjoying strong income growth – 15% in the last fiscal year – by enhancing its specialist technical expertise in the traditional sectors through acquisitions and further expanding its capabilities in the renewable and nuclear energy sectors. E energy@lr.org

ISA role for new railway in UAE

Ras Al Khaimah Port Saqr Sharjah Dubai Jebel Ali Abu Dhabi Khalifa Port Abu Dhabi Musaffah Abu Dhabi ICAD

Lloyd’s Register’s new agreement with Magnox Ltd paves the way for the transfer of qualified personnel between our two leading organisations of the UK’s civil nuclear sector. It will help ensure we will both have access to expertise appropriate to our work-cycles. New-build companies and the nuclear supply chain are anticipating an increased demand for people at a time when Magnox is entering a decommissioning programme that will affect many of its skilled and talented people. Our alliance will help to ensure that we will continue to have the safety engineers we need to support our clients’ global growth ambitions while allowing Magnox to transition its workforce from power generation to the various decommissioning projects it has on the horizon. E energy@lr.org

Khor Fakkan Fujairah

Lloyd’s Register has been appointed as the Ghweifat Ruwais independent safety Al Ain assessor (ISA) for the To Saudi Arabia To Oman extensive new 1,200-kilometre rail Liwa line to be constructed Shah across the UAE, stretching from the Arabian Gulf to the Indian Ocean. As the ISA, we will help to ensure the safety of passengers, operating staff and members of the public at every stage of the development of Etihad Rail, from design through to the start of freight services in 2014 and passenger services soon after that. Mike Elliott, Middle East Rail Business Manager, said the award reinforced our position as a leading ISA in the Middle East, having fulfilled similar roles recently for the Dubai Metro, the Al Mashaaer Al Mugaddassah Metro in Mecca and the Personal Rapid Transport system at Masdar City, Abu Dhabi.

New bulk carrier’s 14% drop in fuel oil The MV Aquila is the first in a new series of supramax bulk carrier designs optimised to burn less fuel oil. The efficiency improvements have been achieved by carrying out a number of straightforward – but effective – changes including: derating the main engine, a new propeller design optimised for the derated engine, and fitting a mewis duct. The ship was delivered in China in January 2012 to operator Delphin at Jiangsu Hantong (HTS).

“We have built a strong understanding of the safety processes that support the planning, implementation and commissioning of new railways in the Middle East, experience that will be invaluable to this project.”

Lloyd’s Register supervised the design appraisal, build and sea trials, verifying the performance of the 57,000 dwt ship, based on ship designer’s SDARI design.

E transportation@lr.org

E nick.brown@lr.org


Driving sustainability for a safer world.

How do you create a truly sustainable future for your business? For us, it’s all about seeing the big picture. We offer intelligent, balanced advice that will help you meet your operational and commercial challenges, as well as environmental and regulatory obligations. Learn more about our global network – go to www.lr.org Lloyd’s Register, LRQA, Scandpower and ModuSpec are trading names of the Lloyd’s Register Group of entities. Services are provided by members of the Lloyd’s Register Group. For further details please see our web site www.lr.org/entities

Insight issue 4, 1/2012  

Insight is a business-level magazine for decision makers in the marine, energy, transportation and management systems sectors. It covers a w...

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