Environment

Business Model & Innovation

  • Product Design & Lifecycle Management
  • Business Model Resilience
  • Supply Chain Management
  • Materials Sourcing & Efficiency
  • Physical Impacts of Climate Change
General Issue Category
(industry agnostic)

Disclosure Topics (industry specific) for:
Cruise Lines

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GHG Emissions

Greenhouse Gas Emissions

Cruise lines generate emissions mainly from the combustion of diesel in ship engines. The industry’s reliance on heavy fuel oil (“bunker fuel”) is of material concern due to rising fuel costs and intensifying greenhouse gas (GHG) regulations. Evolving environmental regulations are driving the adoption of more fuel-efficient engines, engine retrofits, and the use of cleaner-burning fuels. Fuel constitutes a major expense for industry players, providing a further incentive for investing in upgrades or retrofits to boost fuel efficiency. In addition, violation of GHG regulations can lead to fines and compliance costs.

Air Quality

Air Quality

Fuel use by cruise lines generates air pollutants such as sulfur oxides (SOx), nitrogen oxides (NOx), and particulate matter (PM10). These pollutants tend to have localized environmental and health impacts and are especially a concern at port cities and other restricted areas where companies may be penalized for exceeding emissions limits. Companies are managing these risks by commissioning more energy-efficient vessels, retrofitting existing fleets, and using onshore power when it is available at ports.

Ecological Impacts

Discharge Management & Ecological Impacts

Cruise vacations offer unique access to pristine ocean waters and destinations with delicate ecosystems. These sensitive ecosystems can be threatened by the size of the ships, the influx of tourists, and the scale of the resources consumed and waste generated on board. Cruise ships discharge many types of treated and untreated wastewater at sea and non-degradable solid wastes on land. Careful management of ship discharge and mitigation of the ecological impacts of cruise line operations will ensure continued access to key ports and will help preserve the natural beauty that guests wish to experience, both of which are key for companies to maintain market share as well as attract new customers.

Product Quality & Safety

Customer Health & Safety

Cruise lines offer a variety of luxury experiences and activities to their customers, including elaborate shows, casinos, fine dining, indoor skydiving, spa treatments, swimming, and fitness facilities. Each activity comes with its own set of health risks and safety challenges and liabilities that cruise companies must navigate. Consumer expectations for safety and comfort are high, so issues such as health risks and physical safety risks are especially important to avoid. Highly publicized cases of crimes, injuries, and illnesses onboard cruise ships can have serious impacts on brand value and ticket sales. There may also be high costs associated with customer lawsuits. While crime rates are low when compared to crime statistics in most developed countries, law enforcement is much trickier, and cases are not as easy to resolve as it is common for ships to take passengers to international waters and to fly a foreign flag, creating uncertainty about which jurisdictions are responsible for law enforcement needs. Companies can protect customer health and safety through implementation of a robust safety management system.

Labor Practices

Labor Practices

Cruise lines employ thousands of workers onboard each large vessel. Most ships are registered in countries where labor laws allow flexibility in many dimensions including pay, hours, fair treatment, and termination. Ship crews are multinational, and many are hired on a contract basis. Workers often put in long hours for months at a stretch and stay in shared quarters, which can make it difficult to recuperate. Some companies offer a gratuity-based wage structure to reduce payroll costs. Language barriers and the complexity of flag-state laws and the laws in workers’ home countries can make it difficult for workers to file charges in the case of labor law violations. Low morale among workers can impact their ability to meet customer service expectations, reducing a company’s revenues and market share.

Employee Health & Safety

Employee Health & Safety

Cruise companies operate a uniquely transitory service that requires them to provide all the safety oversight of a small city, including addressing all medical and security needs. A commitment to providing a clean and sanitary environment on board is important for protecting crew health, which can affect customer health and thus a company’s reputation and market share. Additionally, there can be several governing bodies—including the flag state, port state, and home country of a crew member—involved in both providing and enforcing safety regulations for the industry. These regulations can create confusion regarding the protections afforded to crew members. Companies that fail to protect crew health and safety may also face higher turnover and difficulties in employee recruitment and retention.

Critical Incident Risk Management

Accident Management

Although cruising is statistically one of the safest forms of travel for vacationing, the industry competes largely on customer experience and satisfaction, making safety management a top priority. Given the scale of cruise vessels and the vulnerability of passengers at sea, it may only take one mismanaged accident to shake consumer confidence in a company. While major accidents are rare, they have the potential to affect not only a company’s revenue and reputation, but those of the Cruise Lines industry as a whole. Proper equipment maintenance, staff training, and use of the latest safety technologies and practices across the entire fleet can protect a company’s safety record and ensure high customer satisfaction while lowering a company’s risk profile and cost of capital.

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