Setting Sail for a Decarbonized Maritime Industry

Climate change is increasingly becoming the business of alliance professionals (see “The New Imperative: Business Responds to Climate Change,” Strategic Alliance Quarterly, Q2 2021), and at the 2021 ASAP European Alliance Summit held earlier this month, a veteran of the shipbuilding industry, which has traditionally been underrepresented in alliance management circles, laid out a fresh and ambitious plan for reducing greenhouse gases in this vertical that others may just be able to replicate in their sectors. 

In his session “Partnerships to Decarbonize Maritime: A Hard-to-Abate Sector,” Paolo Guglia, innovation manager at Fincantieri, the first large Western ship designer and manufacturer, presented a complex web of collaborations aimed at remaking how companies in this sector approach R&D, innovation, and go-to-market activities.

In over a century of Fincantieri’s existence, cruise and naval ships have gotten bigger and more complex—the largest ship accommodates more than six times more people today than the 1,000-person-capacity ocean liners of 1919. 

“The product is complex but also fast-evolving,” said Guglia. “If we want to decarbonize maritime, we have, from the perspective of the ship designer and shipbuilder, a problem that extends by far the usual boundaries and horizons that we were used to.”

A Plus-Sized Revamp of R&D Processes

How do large shipbuilders create a sustainable operation and avoid what is expected to be a 130 percent increase in emissions by 2050? Guglia started by proffering his “plus model” for overhauling the industry’s R&D processes, which he depicted with a diagram that placed shipbuilders at the center, flanked on each of its four sides by suppliers, customers, competitors, and incumbent business processes, respectively. The underlying premise of the plus model: ship-design reform will require a major transformation in how manufacturers work with each of these entities.

Like all vehicle manufacturing industries, collaboration across the supply chain is essential to doing business. But to integrate “green” manufacturing standards, the supply chain ecosystem has to take into account unique constraints around salinity, volumes, weights, and industry-specific regulations that apply to marine ships. The increasing digitization of ship parts via IoT- and cloud-based solutions has only complicated shipbuilding even more. 

“The integration of these components is not trivial. It requires special competencies,” said Guglia.

These products must be designed in concert with customers to fit the latter’s needs without compromising environmental integrity. And, yes, shipbuilders are going to have to work with their competitors—Guglia urged companies to at least conduct “pre-competitive research” together around the “development of technologies where the risk was very high.” Organizations would ultimately integrate resulting innovations into their products differently, but they would start with the “same seed.” If the industry can accomplish this while bringing new solutions to market that are differentiated from incumbent offerings, Guglia’s plus model will have come to life.

How and “Y”: Creating and Meeting Valleys of Demand

However, although shipbuilders are comfortable working with the plus model’s stakeholders, they only represent one degree of separation. The industry’s challenge is to extend that model beyond the familiar workings of its own industry. Its leaders will need to work together not only to create new vessels that run on hydrogen, ammonia, or other carbon-neutral fuels, but to identify and aggregate demand for them in specific geographies, which logically should come from similar sectors—trains, cars, aviation, etc. It is only then that there would be enough demand to fund the complex infrastructure needed to convert renewables into fuel and distribute that fuel source to public and private industry. Guglia termed these pockets of matching supply and demand “valley ecosystems.”

If done right, these vehicle industries could collaborate with port authorities, electrical grid networks, fuel distribution companies, and fuel conversion outfits to form valley ecosystems all over the world that would “boost the production of sufficient quantities of this fuel because they will match sufficient demand. This isn’t coming for free because all of these stakeholders are very wide and different, but if we want to start with this solution, we need to link all of these elements,” according to Guglia.

In other words, it won’t be enough to form these valleys of matched supply and demand; they will need the actual funds to scale up environmentally friendly manufacturing processes and fuel. 

“The players in this valley ecosystem can’t do everything alone, and they need to receive external funding sources in order to deploy not only this innovation but this infrastructure development,” said Guglia.

A massive cash infusion is needed for both the creation and deployment of green solutions. Guglia carefully noted that deployment needs to be thought of on a project and ecosystem level. This convergence of the supply, demand, and funds formed Guglia’s “Y” model for going to market.

New perspectives that challenge and disrupt the norm often come from new stakeholders. ASAP European Alliance Summit attendees were privileged to benefit from Guglia’s knowledge, which comes from an industry not necessarily known for its alliance management practices. Registrants can still watch “Partnerships to Decarbonize Maritime: A Hard-to-Abate Sector” in full and hear more about the government policies and alliances cropping up across the EU that seek to put the principles of the plus, valley ecosystem, and Y models in place.