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The Importance of Developing an ESG policy in Shipping Companies in Nigeria

  1. What is ESG?

The letters E-S-G mean Environment, Social and Corporate Governance.[1] The phrase “ESG”, on the other hand, refers to “the active corporate involvement and the establishment of strategies and corporate practices that focus on environmental, social and corporate governance issues.”[2]  An ESG Policy document depicts the company’s planned strategy to reduce the risks associated with the business’s environmental impact, social, and governance structure.[3] It also portrays the company’s performance scorecard when it comes to addressing sustainable development goals within the business.

Every company’s ESG strategy has become a key component in attracting investors in all businesses, over the past few years, including businesses operating in Nigeria’s shipping industry. Increased focus and pressure from investors, regulators, employees, and other stakeholders make ESG a topic that must be critically addressed at the board level and must cascade throughout the company’s operational structure.

  1. ESG Laws and Regulations in Nigeria

Some of the laws and regulations implementing ESG-related obligations on companies in Nigeria are listed below:

  1. The Corporate and Allied Matters Act 2020 (‘CAMA’).
  2. Nigerian Code of Corporate Governance 2018.
  3. NGX Guidelines for Good Corporate Governance
  4. The Securities and Exchange Commission’s (‘SEC’) Code of Corporate Governance.
  5. The Petroleum Industry Act 2021.
  6. The Central Bank of Nigeria’s (‘CBN’) Nigerian Sustainable Finance Principles.
  7. Environmental Impact Assessment Act 1992.
  8. National Environmental Standards and Regulations Enforcement Agency Act 2007.
  9. Employee Compensation Act 2010; and
  10. Nigerian Maritime Administration and Safety Agency Act 2007.
  11. Marine Environment (Sea Protection Levy) Regulations 2012
  1. ESG and the Shipping Industry

Until recently, the phrase “ESG” did not signify much to many companies and boards in the shipping industry and their financiers. Today, however, many shipping companies have come to realize that their finance partners want to see that the company is considering its ESG impact, alongside almost every business decision; from shipyard selection to chartering decisions, trading routes, crewing policies and resourcing, to bunkering and ship-recycling.  This is because investors and financiers alike are now encouraged to ensure that the businesses, they choose to fund can show the sustainable impact they are making in every part of the shipping value chain. International Shipping Companies are now under pressure from banks to provide ESG-driven solutions[4] and some banks are lending to fund the purchase of assets which have sustainability targets i.e., the reduction of CO2 emissions[5]. On the side of the regulators, the International Maritime Organization (IMO) vide its regulation, MARPOL Annex VI, set new Sulphur limits and fuel oil standards by advocating, that the global Sulphur limit be reduced from 3.50% to 0.50%.[6] MARPOL Annex VI also aims to reduce overall greenhouse gas (GHG) emissions from ships by 50% from 2008 levels by 2050. This has also influenced financier’s decision-making when considering the credit risk of the shipping companies they want to lend to.[7]

Consequently, it has become vital that shipping companies have a well-set-out ESG Policy document which will portray the company’s strategic plans to improve its impact and ESG performance in every aspect of the business, thereby making the company attractive to investors and financiers.

The series of steps for including ESG considerations in day-to-day business decisions and access to reliable data varies amongst different organizations. Though it has progressed in recent years, it remains a challenge for many shipping companies. This article aims to address each of the ESG yardsticks and how shipping companies in Nigeria, can depict the impact of their business activities in a well-set-out blueprint, without appearing to be greenwashing.


The environmental impact of shipping covers a wide variety of factors, including air pollution, water pollution, acoustic, and oil pollution all of which have varied degrees of impact.  According to, the shipping transportation sector contributes 1.7% to global greenhouse emissions.[8] Aside from greenhouse gas emissions, there are other environmental risk factors which are regulated by different regulatory bodies. They are as follows:

  • Energy Efficiency
  • Marine Pollution
  • Biodiversity & invasion species
  • Climate Risk
  • Scrapping/Recycling

Shipping companies who wish to report on their performance in reducing negative environmental impact must set out the targets they want to achieve in the ESG Policy Document and monitor their progress in this regard. One of how this can be done is by ensuring that before, any developmental projects are undertaken, (such as the construction of a port, terminal or expansion of a port) a project proposal is prepared and submitted to the Environmental Assessment Department of the Federal Ministry of Environment, for processing an Environmental Impact Assessment Report.[9] There may also be a need to apply for operational permits in instances where some of the project equipment are the source of GHG emissions and  CO2e emissions. Once the report has been approved, and the project commissioned, the company shall ensure that periodic assessments of the positive and negative impacts of the project are carried out through an environmental audit.[10]

Shipping companies who own vessels and are already in business can also carry out environmental audits, keep track of their CO2e emissions and apply for permits through the office of the National Environmental Standards & Regulations Enforcement Agency (NESREA).[11] This audit shall thereafter be recorded, transparently, accurately, and consistently on an annual basis in the company’s ESG Policy Document.


The social impact aspect of shipping is portrayed through the company’s treatment of its people and the surrounding community. This has to do with the company’s workplace culture, employment practices, anti-corruption and labour standards. The other key social risk factors which should feature in the ESG Policy document are the company’s stands on employee benefits; career development opportunities, talent attraction and retention, human capital management, and employee turnover.[12]

Under Nigerian law, there are a few agencies which already require companies to report employment practices and employee benefits. For example, CAMA requires Directors to have regard for the interests of the company’s employees in general in the performance of their functions.[13] The Nigerian Maritime Administration and Safety Agency (NIMASA) require Crew Management Companies and Seafarer Employers to document and report seafarer welfare and career development monthly under Section 27 of the NIMASA Act.[14] NIMASA’s Maritime Labour Department also encourages vessel owners to take on cadets on board vessels for sea-time training. The cadets can be from the vessel’s operating host communities or recommended by NIMASA. The Employees’ Compensation Act 2010 also requires every employer to report to the Board of the Nigeria Social Insurance Trust Fund, every death or injury of an employee within seven (7) days of its occurrence, failure of which constitutes an offence.[15] This Act also provides compensation for mental stress.

Shipping companies who wish to report their performance regarding workplace culture and labour standards within their organization can use these mandatory reports to track their improvements and set realistic targets to support their workforce standards and promote the company’s social impact within the organization both at sea and onshore.



The ‘corporate governance’ aspect of the ‘ESG’ policy document is regulated by CAMA and the Nigerian Code of Corporate Governance 2018. These apply to all companies in Nigeria (including shipping companies). For shipping companies listed in the Nigerian stock exchange, there is also the SEC’s Code of Corporate Governance and the SEC’s Guidelines on Sustainable Disclosure.

The key factors which a company’s Board must take into consideration when documenting their compliance, we governance principles are their level of adherence to their fiduciary duties, board structure, tax compliance policies, board diversity, shareholder rights, and executive pay. This list of key factors is not exhaustive and companies putting together the policy document will follow the guidelines of the governance rules put in place by the above-stated laws.

CAMA requires Directors to consider ESG matters and the impact of the company’s activities on the environment in the community where it carries on business. This is covered by section 305(3) of CAMA.

Principle 28 of the Nigerian Code of Corporate Governance, also requires the Board to disclose all matters material to investors and ensure proper checking of the company’s general practices which impact on their surrounding community and the environment.[16] The said Principle also encourages the board to highlight all its “sustainability policies and programs covering social issues such as corruption, community service, including environmental protection, serious diseases and matters of general environmental, social and governance (ESG) initiatives”[17].

The principle even suggests that a section of the company’s annual report on its application of the Code[18], be designated to portray the company’s ESG practices and a Board committee be tasked with reviewing that section.

The need for this report as stated in the Code of Corporate Governance is another reason all companies must have an ESG policy document, which is constantly updated and available for investors and stakeholders to check on the company’s general practices.


Shipping Companies, who wish to stay ahead and relevant, are encouraged to ensure that they monitor and report their sustainability goals and related practices through the development of an ESG policy document that is readily available to investors and stakeholders.

Shipping Companies need to do this to meet the rising demands of regulatory authorities and other stakeholders in the industry to ensure that the shipping business is driven by sustainable business decisions.

This will require the effort of all members of the company and importantly, buy-in from the Board members and management, in general, to deliberately contribute to the required changes and commit the necessary time and funds to map out and achieve a sustainable business organization.

[1] Introduction to ESG: Environmental, Social and Governance by Fulya Kocak Gin September 16 2022 .

[2] Elias Makris and Michalis Stergiou “ESG in Shipping Sector: The role of ESG in the evaluation of shipping companies” Deloitte accessed 28 February 2023.

[3]Ibid at 1

[4] Jonathan Saul “Shipping Industry Faces ESG hear from Lenders” Reuters 19 October 2021

[5] Ibid.

[6] MARPOL Annex VI – “Prevention of Air Pollution from Ships” International Maritime Organization,ozone%20depleting%20substances%20(ODS).

[7] Isabelle Gerretsen “Who is financing Green Shipping” China Dialogue Ocean 2 November 2022

[8] Global Green House Gas Emissions by Sector –

[9] Regulation 2(1) Environmental Impact Assessment Procedures and Charges Regulations 2021.

[10] Regulation 18 Environmental Impact Assessment Procedures and Charges Regulations 2021.

[11] National Environmental Standards and Regulations Enforcement Agency Act 2007

[12]  Introduction to ESG: Environmental, Social and Governance by Fulya Kocak Gin September 16 2022 .

[13] Section 305(4) of the CAMA 2020

[14] Section 27 Nigerian Maritime Administration and Safety Agency Act 2007

[15] Section 5 Employees’ Compensation Act 2010

[16] Principle 28 of the Nigerian Code of Corporate Governance 2018

[17] Principle 28.8 of the Nigerian Code of Corporate Governance 2018

[18] Nigerian Code of Corporate Governance 2018.

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