Accurate reporting can save shippers millions in carbon offsetting credits, says Vesselbot CEO Constantine Komodromos

The stresses and strains on global supply chains today have come at a time when the need to balance efficiency, cost-effectiveness, and environmental responsibility has arguably never been higher. In the opinion of Constantine Komodromos, founder and CEO of VesselBot, precise emissions data, as well as the accurate emissions reporting that comes with it, can quickly yield significant reductions in both cost and greenhouse gas emissions.

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VesselBot, established in 2015, initially offered digital solutions to the maritime industry for chartering processes. Since then, the Athens-based company has moved on to use its data for the purposes of calculating accurate carbon footprints. According to Komodromos, the change came about amid a period of wildfires and floods that had the company thinking their tech could be harnessed to track emissions more precisely.

In this exclusive interview with Trans.INFO, Komodromos claims that the assumptions made in some methodologies used to calculate carbon emissions are leading to inaccurate reports. This, in turn, can result in shippers paying for more carbon offsetting permits than is actually required.

The VesselBot CEO also expands on the following:

  • The limitations of using broad average emissions data
  • How digital twins can be harnessed to calculate emissions
  • The regulatory framework in the EU and the US that will make emissions reporting increasingly important

The pitfalls of emissions data based on broad averages

One of the issues that Komodromos talked about in length was the use of broad average data for emissions calculations – something the VesselBot CEO stressed is still commonplace.

In Komodromos’ opinion, the use of these figures in calculations can cost companies a small fortune if they end up purchasing more carbon offsetting permits than is actually needed.

“Even today, I’d say a majority of organisations use ‘broad average data’,” says Komodromos.

The VesselBot CEO refers to ‘broad average data’ as data that assumes all vessels in a particular size category consume the same amounts of fuel, move at the same speed, same TEU utilization and have the same kilometres to emissions conversion factor.

The issue here, according to Komodromos, is that such assumptions don’t take into account enough key factors.

“What we’ve done to improve on those broad emission calculations is to create a digital twin. We have all the characteristics of all the container fleet, as well as dry bulk and liquid bulk containers. We have engine data, propeller data, hull design data, the TEU, the deadweight, everything,” Komodromos tells Trans.INFO.

Komodromos claims the digital twin is able to simulate what power a particular ship’s engine requires to propel a vessel at a given speed based on the ship’s design, the resistance that it creates, and the weather conditions en route among other things.

Taking this data, it is then possible to reverse engineer so as to identify how much fuel a vessel consumes on a given voyage.

“We collect real-time AIS and weather data, as well live data on the speed that the vessel has at different waypoints,” says Komodromos.

Other factors taken into account are the total distance of the voyage, the time the vessel spent in anchorages, whether it be when waiting outside Suez or Panama or at the entrance to a port, as well as the actual TEU utilisation of the vessel. Similar data is also available for other modes such as road, rail and air.

With regards to the latter, Komodromos states that a “majority of calculations today assume that all vessels sail with 70% capacity utilisation”. This, he says, can lead to incorrect cargo emissions being allocated to containers that were transported on vessels whose capacity utilisation differs from that average.

In addition to this, Komodromos states that the use of assumed averages over real time data can lead to other inaccuracies.

“Some estimations assume an average speed over a period of time. That may be a period of 3 months, 6 months, a year or whatever. The issue with this is that average speed cancels out the non-linear relationship that speed and fuel consumption have. If we take a vessel moving at 12.5 knots, with 17 knots for containers, using average speed will most likely lead you to either underestimation or overestimation, because the vessel might have been sailing in a totally different pattern from what the average was over the last 12 months,” adds Komodromos.

To exemplify how such data can be acted on, Komodromos notes the case of a CPG industry customer that had been using the GHG protocol and considered it sufficient.

“When we measured their emissions, they realised that they had over-reported 190,000 kilos in intermodal transportation emissions. There was a 26% difference in the calculation. For road transport, the difference was as much as 60%. Moreover, due to the fact they were over-reporting, they were over-buying credits to offset their emissions. The average cost of the credit settlements they were buying was around $5, and they ended up purchasing $1.25 million cost of extra credits,” says the VesselBot CEO, who maintains a majority of shippers have not yet understood they can take advantage of more accurate data.

Emissions reporting and significant regulatory changes in the EU and the US

The big regulatory change in shipping this year that many will be aware of concerns the expansion of the European Union’s Emissions Trading Scheme (ETS), which now covers maritime transport.

Thanks to the expansion of ETS, ferry operators and shipping lines must now buy allowances for their carbon emissions. This year allowances are required for 40% of emissions. The figure rises significantly to 70% in 2025 and then to 100% the year after that.

The revisions are part of the EU’s ‘Fit for 55′ package, which aims to achieve a 55 % reduction in EU net greenhouse gas (GHG) emissions by 2030 compared to 1990 levels.

Due to the fact that many shipping lines only confirmed the value of their ETS surcharges towards the tail end of 2023, it had been difficult for most of last year to get an idea of the inflationary impact of ETS.

Komodromos nonetheless claims that VesselBot were able to calculate the estimated impact prior to surcharges being officially announced for an automotive customer:

“We used the average cost of EUA [EU Allowance climate credits] at the time to estimate their exposure to EU ETS before the container surcharges were announced. This was a proactive exercise to identify the level of risk exposure that the EU ETS would present. We knew the volumes they were shipping with each carrier. Then we measured all the shipments they had, as well as the emissions intensity of the carriers. That enabled us to identify the total amount of emissions and therefore the ETS cost that would be incurred.”

According to the VesselBot CEO, the additional costs may be significant, but can also potentially be mitigated by choosing the right carrier.

“We found that their exposure from 25,000 shipments would amount to an additional cost of around €2m. For all their shipments it would be €4m extra. However, we were able to identify that one of the carriers they had been using extensively actually had one of the highest emissions intensities. By switching to an alternative, they could save €1.2m per year.”

What data should one consider when looking for an alternative carrier then?

In the case of spot bookings, Komodromos says VesselBot starts by factoring in shipment commercial parameters such as dispatch point, ETA and/or dispatch date, arrival point and so on. Then, taking into consideration the specifics of the shipment, the carrier schedules that could be used to execute the shipment are identified. Finally, based on the specifics of each schedule, the emissions and distance for each schedule are estimated, and each Carrier service schedule is ranked based on emissions intensity, ETA, distance, and emissions shadow price.

When it comes to contracts, Komodromos tells Trans.INFO that historical data is used to provide carrier emissions, along with the volumes shipped with every carrier. This enables customers to identify how shifting volumes from one carrier to another with lower emissions intensities can reduce their emissions.

Moreover, Komodromos adds that the shadow pricing of emissions is also a mechanism that’s factored into the equation to make it possible to compare apples to apples.

“By providing data related to the volumes shipped using each mode, shippers can recognise if they can ship goods using alternative modes of transportation,” adds Komodromos.

Besides ETS, the spotlight is on the European Union’s Corporate Sustainability Reporting Directive (CSRD), which applies from this year.

The CSRD requires all large companies and all listed companies (except listed micro-enterprises) to disclose information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment.

The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025.

Komodromos thus sees this year as the one where things will start to happen. “It shall be important for companies to prove the methodology they’ve used,” he says.

“They will need to show how they’ve made their calculations and enable the auditors to ensure those calculations are correct. This means more and more organisations will need to report scope 3 emissions and do so properly. If they haven’t already started looking at it, shippers should be working out how to measure their material scope 3 emissions. Usually transportation, in the majority of the market verticals, is important here,” the VesselBot CEO told Trans.INFO.

Additionally, Komodromos notes the anticipated legislation from the Securities and Exchange Commission (SEC) in the United States.

The Securities and Exchange Commission itself states that registrants shall be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3), if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions.

The legislation is expected to address scope 3 emissions reporting by April of the current year, though some doubts about this have emerged of late.

Regardless of whether Scope 3 is included in the April legislation, it appears a question of when rather than if more comprehensive emissions reporting will be required in the US. That could see emissions reporting, and the effectiveness methodologies behind emissions calculations, thrust further into the spotlight.