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Getting there, but still all at sea? Royal Caribbean Cruises Ltd Sustainability Report 2015

By Alex Nichols on March 24, 2017 at 12:19pm.
Context
The industry context for this will of course feature the Costa Concordia’s tragic accident in 2012 as well as recent news about TUI Travel’s 48 fines for breaching ABTA’s code of conduct1. Not very rosy then. But we have to remember the joy that people have on a relaxing cruise, and the benefits it affords by bringing families together. 

I was very interested to look at Royal Caribbean Cruises Ltd (“RCL”); I have worked with hospitality sector clients (hotels), interviewed Thomas Cook (very nice bunch), and even done a bit of eco-tourism on my travels. My work with shipping clients means I am familiar with maritime environmental legislation, and in 2014 I reviewed sustainability reports of Ports (Rotterdam and Gothenburg were good if I recall correctly). 

I always start a Review with a quick research task on the company background, sector issues, trends, stories etc. Now, I know that some NGOs can be a little “strident” in their critique of corporations, but Tourism Concern’s 2015 review of RCL is a little alarming, even so (try googling “Floating Abomination”). Friends of the Earth ranked cruises in 2015 and much loved brand Disney was the worst (Disney Cruises)2. RCL got grade D (google “2016 Cruise Ship Report Card”). One source states, “The global cruise ship industry earns upwards of $36 billion each year… [and] hides a host of human rights abuses … and an appalling environmental record”.

In the interest of balance we must note that MARPOL VI (International Convention for the Prevention of Pollution from Ships) requires ships to be equipped with an approved sewage treatment/disinfecting/holding system; so all cruise and cargo (>400GT) ships have sewage treatment capabilities. Ships are allowed to discharge untreated sewage when 12 nautical miles (NM) from the coast (except in special regions such as the Great Barrier Reef or Antarctica), however most use the sewage treatment plant. To note, ballast water discharge is a significant issue that is apparently under-reported. 

Then we must be aware of sail-in, sail-out cruisers that allegedly distort the local economy and culture. The tours and the shopping may allegedly be pre-arranged events that involve local corruption and kickbacks, so most of the money generated does not filter through the local economy. 

More can be done to protect the environment and society, naturally, but marine industry legislation is well enforced despite the complexities of monitoring ships registered in one country (for tax reasons), under another country’s flag, owned by a company from yet another…  That all being said, most maritime professionals you’ll meet do care about the marine environment and society. 

So, what about RCL specifically? Their website/GRI Index tells us they are a publicly-traded company (97 USD/share on NYSE today), comprising six distinctive companies. They operate 44 ships globally. They like “wow factor” attractions on board, eg, skydiving simulator, bumper cars, a roller rink, circus school…. They operate Labadee in Haiti and CocoCay in the Bahamas; both are private and eco-certified destinations. Things are going well: 2015 saw a 42% increase in adjusted earnings to $1.1 billion.

They have, however, had some negative coverage in the specialist media. They are not alone in being fined for breaches of labour practices. Page 93 of their Annual Report 2015 describes litigation involving RCL (labour conditions, environmental). Allegations against RCL range from poor employment conditions comparable to slave labour, bypassing US labour codes and benefits, exploitation in Haiti, little change in the face of pressure3, high emissions per capita, environmental pollution (eg, oil seepage4), and inadequate sewage treatment technology. Friends of the Earth Hong Kong “recently denounced Royal Caribbean, estimating that the company committed upwards of thirty violations between 1992 and 2009, receiving fines of more than $30 million” (Tourism Concern, 2015). These are allegations, of course. Having said that I couldn’t believe that shark fin was still sold on board in 2015. 

Content
So, what’s in the report? 

An introductory preface section presents senior statements, commitments, goals, and some ‘features’ on recycling, economic contribution, and values. Then we get to the Contents page. They have four sections: how they operate, where they operate, who they are; at the end is a reporting section on governance, stakeholder engagement, GRI and data etc.

Senior management statements seem to show they understand and recognise impacts on the oceans (“profoundly conscious”). They have a Commitment to the Oceans, in partnership with WWF: “a five-year [and $5m] global partnership that is a big leap for both of us”.

They seem to cover most relevant material issues. Their partnership with WWF doubtless updated their list. It looks like it helped formulate their new targets to 2020.

The targets look OK. Although they raise some small questions. Why not use 2015 as a baseline, instead of 2005?  And what does “ALBDO x km2” mean, as a unit of measure for Carbon? Something about occupancy I guess, but it’s not defined.  Sustainable seafood targets look credible. They’re also looking closely at other commodity supply chains, a 2020 target is forthcoming. Sustainable tourism operations and destinations target relating to ‘GSTC’ certification (a coalition with UN pedigree) is also good. Their zero waste ambition is in sight – their new 2020 goal to reduce waste-to-landfill by 85% from a 2007 baseline is in place.

We are then taken on a tour through the “How we operate” section about performance on key HSSE, supply chain, risk and compliance issues. Interesting stuff: on scrubbers, retrofits and energy management, including a button to a Vimeo.com video (38 views in 7 months – who is the target user?) with ‘comments disabled’. They’re working to meet EU emissions regulations and claim to go beyond compliance. A two-page embedded download on environmental data is provided. I did wonder if the ‘download’ was really necessary: couldn’t the content be woven into the core report?
 
Then we get some infographics about waste reduction (and downloadable factsheet) and water use (and downloadable factsheet). They’re doing a lot right according to the report data – recycling is up, landfill is down to zero on just under half of their 44 ships. Water use per day is favourable compared to the US average (a generous benchmark). Wastewater treatment is also being well managed according to the data.

The supply chain section discusses how Jamie’s Italian (for the benefit of non-UK readers, Jamie is a celebrity chef) on board two cruise ships is pushing responsible supply chain standards. This is followed by ship maintenance (where suppliers are vital of course), and then a recyclable beer keg feature by a supplier. The factsheet download gives more: Principles of their supply chain approach, a new screening process, sourcing goals. The new targets to 2020 on seafood and other commodities appear to be joined by some specific goals to 2022 on cage-free eggs and crate-free pork. Bringing the targets together in one place will help in future reports. 

We then dive into HSSE: health on board focusing on topics such as novovirus, dialysis at sea, guest security, anti-sexual abuse, port security checks, recruitment processes, and crime prevention. The risk section then flows from that on how company risk processes support delivery and governance of sustainability efforts. Governance and ethics come next, with a snapshot and some downloadable factsheets with information on a partnership with Trace International on anti-corruption. We also get a useful download about the relevant standards and regulations with which they must comply. 

The next port of call in our tour through RCL’s report is “Where we operate”. They take on a bit more of a “story” style here, about where their performers rehearse for on-board shows. Is it tongue in cheek that the subsection is called “Our offices”? Community giving programmes (eg “Make a wish”) are covered here. The accompanying download has slightly mixed content, for example, children’s charity, mentoring, ocean conservation, destination communities, and executive leadership. 

To be honest I am not sure where we really are in the report. Is it a community investment section? It does seem to have that flavour. The story style continues (“The sound of basketballs hitting the ground never sounded so good for the kids” p28). We float through the section and moor up to a material issue – sustainable destinations. RCL describe the Sustainable Tourism Education Program’s Sustainable Shore Excursion Standard that they worked on. Although they don’t say if they applied it in RCL operations. And there’s a dizzying array of other sustainable tourism organisations to which RCL affiliate in different ways (p29). 

And so, logically it seems, we drift into a section entitled “Oceans”. Perfectly in line with their new partner’s interests. WWF have received RCL funding for a whale shark marine reserve. We then jump into a section on oceanographic climate research in view of the impacts of climate change on ecosystems. There’s another Vimeo video (138 views in 12 months).

The next leg of our report tour brings us to information on “Who we are”: Leadership, employees and guests. In similar presentational style we get information on workforce (download an infographic), talent management, employee benefits, diversity, rights and wellness. This is followed by a “guests” section with two case studies and a feature on data privacy (no breaches in 2015). The guest factsheet goes into detail about engagement with guest and RCL’s response to what they say.

The last leg of the tour is the “About this report” section. Good that it’s at the back, so the rest of the report can get on with key messages. We get a good message about strategy, with safety a strong component, unsurprisingly. 

Their materiality matrix appears surprisingly useful, in fact. Where many matrices have a horizontal axis for “internal perspectives” on what sustainability impacts are important, this one abides by best practice and plots “Degree of economic, social or environmental impact of RCL’s operations (actual or potential)”. That said, we are told that many stakeholders took part in materiality interviews (p40) but the stakeholder wheel on p42 has “materiality interviews” in only the NGO segment. 

The only other comment about the materiality section is how it drives the report contents (its primary aim). RCL don’t describe how it relates to content – so I am guessing that all “High importance” issues from an external perspective are included in the report. If I am right then that’s to be applauded because it means RCL are including such issues (important to external stakeholders) regardless of the perceived impact of their own operations on the environment and society. Evidence for this assertion: “water withdrawals” is in a low impact, high importance position. (And I guess they mean water use).  

It does raise some questions though: “Sustainable food sourcing” is low impact, medium importance in the matrix. Yet it’s in a dominant place in the new targets and headline position in the report. 

We are shown some performance tables (p43) although they do not assemble all the KPIs for the material issues. And water use data is “pending” (with no explanation) – was there to be a ‘real-time’ update in 2016? I didn’t see one. 
RCL’s report “follows” the Global Reporting Initiative G4 framework, with no declaration of core or comprehensive level. They’re evidently not quite able to declare this yet. They do, however, indicate when an indicator is partially reported, which is useful. RCL’s greenhouse gas data are assured.  

Communications
It’s reasonably well designed. Simple, clean. 53 pages long. A little dense in places. But there’s lots to say and it’s quite approachable. It’s a massive file: 35MB, due to the embedded pdfs inside the “mother” pdf. 

They’re having a fair stab at Web 2.0 interactivity and modern funky devices in the pdf. Good for them. They have a creative streak. They use video eg the WWF partnership one (4m 25s, comments disabled). This is great to see, although it is a bit “PR-twinkly”, glib and platitudinous, despite my admiration of WWF. I think that careful use of video is required. Perhaps reserve it for specific issue campaigns, rather than for corporate PR (and such videos often come across wrongly; it seems like the company is taking themselves too seriously?). 

Their web content is modern, with ‘scrolling’ pages. It’s a useful overview. Many will, of course, go straight to the “report downloads” section, which actually took about 3 clicks and scrolling.

Now, those additional embedded downloadable fact sheets: I am not sure they work. I would turn it round and put the material issue management approach (DMA) and performance in the core “mother” report, using a magazine/journo style perhaps, and then put the case study stuff in an additional appendix, perhaps online, organised by chapter. You can also download their graphics as a jpeg file, eg, p12. I quite like this, but I am not sure anyone is going to make use of it.

Finally, while I like RCL’s infographic pull-out devices (such as the one on p20), I think other communications devices are beneficial, such as stakeholder voices, or an external unedited commentary from a guru figure (from WWF?), value chain impacts graphic, or icons…

Credibility
RCL demonstrate some credible reporting practices: A new set of goals, an apparent review of key issues, transparency about cost details of their partnership with WWF, openness about a performance shortfall (GHG emissions since 2005).

As one reads this report one gets the impression of being “between two stools”. The new “WWF era” of sustainability programmes and efforts is nigh, but RCL are still reporting on some legacy programmes some of which may not be material. My view of their materiality process makes me think that some streamlining is required. 
I sort of believe them, despite the unsettling context I found for this company. I do have some questions, such as why do they need another 3 years to ‘develop’ strategies on sustainable sourcing? (They worked with WWF in 2015 to prioritize the food sourcing issues following which “RCL and WWF will work to develop strategies to improve sustainable sourcing practices by 2020” What does that actually mean? Surely they just need to buy alternatives and re-do their restaurant menus?).

Further, they are going to label tour operations as “GSTC Certified” because RCL endorses the Global Sustainable Tourism Council (GSTC) standards for sustainable tourism. Many of us in this profession have reservations about certification. And we are hesitant about the logic of leaving consumers to use such labels effectively, in a way that creates change.

There some strong statements, but they make the reader reflect in wonder… for example, “As our own company grows, and our geographic reach expands, supporting local economic development projects is top of mind.” Really? I don’t believe that. And it repeats the phrase at the bottom of the page (methinks they doth protest too much). Top of mind is profitability and ROI. And I am not sure that the port investment in Roatan, Honduras was anything other than pure business – making the port bigger to accommodate larger cruise ships? Am I being unfair?
All credit to RCL and WWF for using a science-based target to reduce CO2 emissions. Their CDP experience is probably guiding them all on that too. 

Good to see their 2014 Scope 1 and 2 greenhouse gas emissions have been verified, too.  And hats off to them for using a Safety, Environment and Health Committee, chaired by a member of the RCL Board. (The Board or any committee are not listed as stakeholders though, neither do we get any detail about the validation process of the materiality assessment).

As with many reports out there, this one lacks balance. Set the scene of the challenges faced by the sector. There is no mention of anything that’s gone wrong, apart from the GHG emissions target shortfall 2005-2015. Everything is rosy in their garden (or reef)! There’s no clear reporting of H&S data. And I don’t think embedded downloadable sheets are searchable via the “mother” pdf. So it is unclear that I will get a complete search result, if I search on a term such as “fatalities”, for instance.

What happens when a ship comes to the end of its life? Is it going to happen again soon – could it be a fascinating ‘webcam-live’ online case study of the circular economy in action!? 
So, whilst there are some creditable reporting practices, I cannot say it’s a credible piece of reporting overall. 

Recommendations
Use GRI with conviction, it’s a great framework; if you can’t meet Core level then say so
Give us some context – the challenges in the sector etc
Balance – talk about the challenges: How you’re dealing with them is riveting stuff
Allow your materiality process to really drive the content, don’t be afraid to leave out the immaterial 
Refine the structure: Use the ample available management approach information in the core report, don’t over-rely on the case studies to tell the story (cf. supply chain section)
Bring the targets together in one place (eg Coca Cola Enterprises 2015 report)
Follow-up missing data (water)
Re-think the internal downloadable pdfs: They’re not commonly used (BAT do something similar but more ‘lite’ touch)
Use real stakeholder quotes and pics
Videos: Brilliant to be using them, but cut the glibness, make them more “real” 
Move the content online: Better for interactivity such as videos, and then produce a short “performance review” in pdf?

4 it is estimated that nearly one-third of the more than 300 million gallons of petroleum products that reach the world’s oceans each year is the result of marine transportation discharges unrelated to collisions and other accidents.

Alex Nichols runs international consulting projects for business on sustainability reporting, strategy, materiality assessment, stakeholder engagement, assurance and training. Alex is also Associate Director at Paia Consulting, Singapore, Senior Associate Consultant with IMS plc, Bristol, and a Senior Associate Consultant with Gorham & Partners mining strategy and research firm. www.alexnicholsconsulting.com   |  www.paiaconsulting.com.sg