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2018

Annual report

Being your trusted business partner

Being your trusted business partner is about efficient operations and conducting business in the right way, and it’s important not only to suppliers and customers, but also to partners such as industry peers. Ethical business conduct is the foundation of Wallenius Wilhelmsen’s operations and activities, while operational efficiency, and the company’s ability to deliver as agreed, is key to creating value for the client. 

Wallenius Wilhelmsen is committed to fair competition, anti-corruption and anti-bribery through the entire value chain. The company’s Code of Conduct is applicable to all employees and outlines the top management’s commitment to and expectations of sustainable, compliant and responsible business conduct. 

Ethical business conduct

That all business should be transacted in an ethical manner is a fundamental requirement in Wallenius Wilhelmsen. It applies to all the company’s activities, everywhere and all the time. The company and its Board ensure that this requirement is fulfilled directly; all employees have a responsibility in this regard. Ultimate responsibility for ethical business conduct rests with Board and the CEO.

Wallenius Wilhelmsen see ethical business conduct as a basic ticket to trade. The various stakeholders of Wallenius Wilhelmsen, including its investors, customers and employees, take a similar view. 

The Wallenius Wilhelmsen compliance program

The company conducts a variety of activities to ensure compliance with applicable laws and regulations through its governance and compliance programme. The main components are: to ensure top level commitment; to have in place adequate policies and instructions; to communicate polices and instructions to the organisation, provide training; to carry out risk assessments and proactively monitor the organisation’s activities; and to background-check partners. The company is an active member of the Maritime Anti-Corruption Network, where it takes part in actions to improve industry compliance standards. The overall programme is run by the company’s Legal & Compliance department, which appointed a dedicated group compliance resource during 2018.

Evaluation of results

In 2018, the company commissioned an external review of its governance and compliance programme, which helpfully identified several areas that can be matured further, including prevention, detection and reaction. To develop the compliance programme further, various improvement initiatives have been launched, such as establishing a common channel for reporting of compliance issues throughout the group. The company is also working to strengthen its oversight over remote facilities through improved instructions to board members, clear reporting lines, training, and internal audits. A project has also been initiated to bolster the internal control framework, and an internal audit function is in the process of being established. 

Ambitions and next steps

The company will continue to work on improving its governance and compliance programme with a One group – One governance perspective. This involves a review of the company’s key steering documents to improve clarity and measures, including training, to raise the visibility of governance within the organisation. 

 

Quality of service

The interrelation between environmental, social and corporate governance (ESG) issues on the one hand, and quality of service on the other, is the focus of this topic. The scope of the issue extends to all services provided by the Wallenius Wilhelmsen group and is particularly relevant for its operations and commercial divisions. The focus for this report is three areas: uptime of the owned fleet, achieving data liberation’ (or ‘digitisation’) of the owned-fleet, and compliance with environmental regulation. The former applies to ocean operations only, while the latter applies to all operations on land and at sea. The company always has a direct supervisory role in ensuring the quality of its service, however, the actual performance of the service is not necessarily carried out by direct employees. 

In the fiercely competitive markets in which Wallenius Wilhelmsen operates, quality of service is a key commercial differentiator and the cornerstone for customer growth and retention. Best practice in ESG is equated with supply chain risk mitigation, efficiency, and is increasingly demanded by customers to drive their own ESG agendas.

Quality Management

The uptime of the owned fleet is primarily built on trust and effective communication between ship and shore, such that requests for additional time in port to undertake necessary repairs, refurbishment or maintenance are granted. The metric for uptime of the fleet is its opposite: unscheduled off-hire. Data on this is reported to the Marine Operations Management team monthly and followed up as required. Good risk management is essential in maintaining fleet uptime, which in practical terms has meant applying preventative maintenance techniques to critical equipment.

Vessel data liberation, known internally as the ‘One Operation’ initiative, involves linking the thousands of onboard sensors to the vessel’s satellite communications system, transmitting the sensor data to a cloud and then running analytics on the data. The benefit of data liberation is that it facilitates a more intensively data-driven approach to managing and optimising vessel performance. The data analysis can be used for to optimise many the performance of many different processes and pieces of equipment. Examples include optimisation of the amount of ballast carried onboard to optimisation of engine performance by identifying outlying data from turbochargers, coolers or cylinders.

In terms of environmental regulation, the commitment for ocean and land-based businesses is the same: full compliance with all applicable regulation. Compliance is maintained through strict adherence to company procedures and processes. In the case of the owned fleet, these are complemented by regular inspections by vessel crew, ship management and the relevant authorities. For land-based facilities, site staff follow routines to identify and prevent potential non-compliance issues, and many sites are subject to periodic external audits to ISO 14001 or similar quality standards.  

All ship managers are required to be ISO 14001 certified and at corporate level, the company is implementing an ISO 14001 certified environmental management system during 2019. All WW Solutions’ EMEA facilities are ISO 14001 certified and those in the Americas and APAC follow other EMS standards. The aim is to standardise to ISO 14001, and a target date will be set following an implementation review. The ISO 14001 approach is also being applied to the management of social and governance issues, making it an ESG sustainability management system.

Evaluation of results

The data liberation initiative proceeded rapidly in 2018 with four vessels being retrofitted, which was two more than planned. The analysis work is just getting underway, but the merit of the approach is already sufficiently clear to warrant retrofitting more of the owned fleet.

Average unplanned off-hire across the entire owned fleet in 2018 was 21.2 hrs, which is a deterioration on the figure reported for 2017 of 16.0 hrs. Furthermore, the target of less than 24hrs of off-hire result for each individual ship manager wasn’t met. Both results were mainly due to main engine issues in the WSM UK and ARC fleets.

During 2018 there were no cases of environmental regulation non-compliance from ocean operations and all vessel managers maintained their ISO14001 certification. There were also no cases of environmental regulatory non-compliance at any of Wallenius Wilhelmsen Solutions’ facilities. All of its EMEA facilities are  ISO14001 certified while those in the Americas and APAC also have similar EMS in place.

Ambitions and next steps

The ambition for unscheduled off-hire for 2019 is unchanged from 2018, which is to achieve an average of under 24hrs for the fleet as well as for each individual ship manager. For the One Operation data liberation initiative, the aim is to have the technology deployed across the entire owned fleet during 2019. It is anticipated that the project will contribute to improving unscheduled off-hire performance, but it is too early to estimate by how much.

On environmental compliance, 2018’s results demonstrate existing processes and measures are achieving the desired results, so the focus for 2019 will be on maintaining performance. That said, work on the corporate ISO 14001 EMS will be completed, and attention will be given to ensuring it and WW Solutions’ facility level EMS are aligned. Additionally, WW Solutions will evaluate incorporating Environmental Regulation into Way-of-Working , a uniform framework used by operations to effectively manage health & safety, environment, quality, cost, and ISO compliance. 

 

ESG customer management

Wallenius Wilhelmsen’s customers make regular enquiries and demands in relation to the company’s Environmental, Social and Governance (ESG) performance and practices. It is also in the group’s interest to determine certain ESG aspects in relation to its business with customers.

Ensuring that services provided to customers always comply with international sanctions, laws and regulations goes with the right to trade in certain countries and is therefore essential to the company’s global operations. As Wallenius Wilhelmsen’s services form a vital part of the supply chains of its customers, compliance with the rules and conditions of international sanctions is paramount for them too. Furthermore, several recent high-profile cases against companies for breaching sanctions have raised awareness and vigilance for the issue among the investor community.

ESG approach and ESG Customer management  responsibilities

Wallenius Wilhelmsen has established an internal procedure to ensure compliance with the rules associated with international sanctions laws and regulations. The group’s commercial teams are responsible for engaging the support of in-house legal expertise on any case where a concern exists about possible sanction compliance. Conversely, the company’s legal and compliance team keep the commercial teams updated on development in relation to international sanctions. If a case of non-compliance occurs the compliance resources will make sure that the activity is stopped.

Evaluation of results

In 2018, there were no cases in which the group’s companies were found in breach of international sanction laws and regulations, which continues the same positive performance as achieved in 2017. In 2018, the company finalised and disseminated a clear aligned group sanctions policy.

Ambitions and next steps

The company has an ambition to constantly improve and make sure that employees and other stakeholders are aware of the implemented sanction policy and intend to work further with awareness raising and training, in 2019.

 

Tax Practices

Interest in multinational corporations’ global tax planning has increased over recent years. The Organisation for Economic Cooperation and Development (OECD) and the G-20 countries, have worked out 15 actions relating to global tax planning strategies by multinationals in the so-called Base Erosion and Profit Shifting (BEPS) project. The project aims to ensure that income is taxed in the countries where value is created and prevent multinationals from shifting profit from high tax countries to low tax countries. The group is committed to comply with all changes in local tax regulations following the BEPS project in all countries in which it operates. That includes reporting according to the country-by country reporting (CbCR) requirements to tax authorities in Norway, as well as making a Transfer Pricing Master file. The CbCR information is shared among tax authorities globally.

The group is committed to being a responsible taxpayer, combining professionally executed tax compliance with legitimate tax planning based on valid business purposes. It is committed to ensuring compliance with local requirements and practices, and disclosure of all relevant facts to the tax authorities. It also commits to adopting a justifiable and defendable tax position where tax regulations are open to interpretation or choices. The tax position taken in all significant transactions is supported by obtaining an external tax opinion.

The Wallenius Wilhelmsen group do not utilize any tax incentives or have any special tax agreements with tax authorities in any country it operates.

At Wallenius Wilhelmsen corporate tax affairs fall within the responsibilities of the CFO and extend to all jurisdictions where the company operates.

Wallenius Wilhelmsen’s business units and how they are taxed
WW Ocean

WW Ocean operates 55 vessels, of which 45 are owned. WW Ocean is centrally taxed in the ship owning companies in Sweden, Malta, UK and Singapore. All companies are taxed according to shipping-specific tonnage tax regimes. Companies not qualifying for tonnage tax are ordinarily taxed. A special freight tax is also paid in some jurisdictions.

EUKOR

EUKOR operates 66 vessels, of which 23 are owned. EUKOR is taxed according to the shipping-specific tonnage tax regime in Korea.

ARC

ARC operates 6 vessels but is the owner of 8 vessels (2 have been chartered out). The vessels are owned by Fidelio Limited Partnership and the partners are ordinarily taxed in the US and Norway. ARC is a Limited Liability Corporation (LLC) and disregarded for US tax purposes. The owners of ARC LLC in Sweden and Norway are ordinarily taxed on the result or dividend distributions.

WW Solutions

All companies in WW Solutions are ordinarily taxed in the countries they operate. Disregarded US LLC’s are taxed on owner level.

Management of tax in Wallenius Wilhelmsen group

The company is committed to full compliance with local tax laws and international tax regulations. Internal resources in Head Office in Oslo as well as local resources and external advisors are involved in the preparation and filing of all corporate tax returns as wells as VAT/GST filing.   

Evaluation of results

Wallenius Wilhelmsen have filed all applicable tax and VAT/GST returns in 2018 in a timely manner. The group has also made a 2017 Transfer Pricing Master file documentation which has been submitted to tax authorities in countries where it is mandatory. The CbCR for 2017 was submitted on time to the tax authorities in Norway.

Ambitions and next steps

The tax laws and regulations that apply to multinational companies are becoming increasingly complex and the interpretation of them can change rapidly, which can significantly increase the risk of unintentional non-compliance. Hence, the Wallenius Wilhelmsen group’s primary focus is to maintain full compliance in this dynamic environment. The current approach to this challenge, which is to closely follow development in local tax laws and international tax regulations, has proven to be effective and will be continued.

 

Security at landbased facilities

Wallenius Wilhelmsen has operations at landbased facilities across the globe. Facilities include ocean terminals, distribution centres and vehicles processing centres. All landbased facilities fall within the scope of WW Solutions. Accordingly, the overall responsibility for security on landbased facilities rests with the President of WW Solutions. On an individual facility level, security is among the direct responsibilities of the respective facility managers.

Landbased facility security is materially significant to Wallenius Wilhelmsen for a variety of reasons ranging from its close connection to safety to its role in providing industry-leading quality of service. For its customers, a high focus on security protects and contributes to the integrity and efficiency of their outbound supply chains as well as their own product quality.

Zero-tolerance policy

The group has a zero-tolerance policy for security infractions and for theft units from any facility within our network. At port facilities, the company partners with the local Port Authority staff and security companies to ensure the implementation of the most appropriate and best possible security measures. At plant facilities, where Original Equipment Manufacturers (OEM’s) typically manage security, the company works closely with the contracted security companies to ensure yard areas within the responsibility of WW Solutions are secure. For yards other than those in ports or at manufacturing plants, local security companies are hired to manage the locations and secure the flow of vehicles both in and out of the yards. At all facilities operated by WW Solutions, scanning systems and regular yard inventories are used to track vehicles and prevent loss or theft.

Evaluation of results

Monitoring, registering and managing data on theft of units takes place at a local and regional level. In 2018, one unit was reported stolen from the company’s terminal in Zeebrugge, Belgium. The item, which was not in the care of the company, and not from our quay, passed the shared security gate.  

A study was run in 2018 to assess the potential of Radio Frequency Identification (RFID) technology to provide an even higher level of visibility and security throughout the company’s facilities. Although RFID technology is not specifically designed for security purposes, the study identified two criteria which could justify deploying RFID at a facility to boost security. Those criteria are where facilities both have RFID readers are in place and where many different parties are driving units off the site. The number of facilities that fit those criteria are few, but they have now been equipped with RFID systems.

Ambitions and next steps

During 2019 security incidents will be added to the global KPI register for WW Solutions and manually reported on a SharePoint based system. A project will also be run to select a global mobile-device based Plan-Do-Check-Act (PDCA) reporting solution, which by the end of the year will have replaced the manual system.

 

Security of vessels

The security of the fleet involves the prevention of interference with or harm to vessels, their crew or their cargo. The group has a reputation for high-quality and dependable services. Vessel security breaches could potentially endanger or harm vessels, crew and cargo or disrupt services, all of which would have a corrosive effect on the group’s reputation.

Managing fleet security

Responsibility for fleet security lies with the Marine Operations Management team. They set the targets, define the initiatives and assess the performance on security for all vessels in the fleet. The practical implementation of the security measures set by the Marine Operations Management team is undertaken by the Company Security Officer of each of the ship management companies. All owned or controlled vessels must follow the company’s Ship Security Policy, which includes the basic requirement that ship managers adhere to all rules and regulations applicable to each vessel.

To mitigate the threat of piracy, each vessel’s Ship Security Officer (SSO) must be familiar with the vessel specific Ship Security Plan ( SSP ) and the equipment relating to it. Regular drills are carried out to ensure that all officers and crew are fully aware of procedures within the SSP. Under certain conditions a vessel may use the services of a Private Maritime Security Company (PMSC), however only in accordance with the strict requirements of the Ship Security Policy, including that the PMSC has been subject to due diligence.

Emphasis is put on stowaway prevention by providing vessels with relevant information on upcoming ports of call. The company also works with the terminals in ports where stowaways are known to be a problem to assist them in improving routines, detection equipment, fencing and other deterrent measures. 

Evaluation of results

In all there were six security breaches across the fleet in 2018, all of which were stowaways. These occurred in EU and African ports and compare with five such events in 2017. The volume of activity was broadly similar for both years and such small numbers have a negligible impact on the quality of our service. Ten stowaway attempts were thwarted at the terminals used by the company during 2018, which compares to three in 2017. The improved capture rate is due to streamlined communications linked to the fact that all vessels have common ownership.

Ambitions and next steps

During 2019, the company will support efforts to influence the EU to have ports looked upon as ‘protection objects’, which would make stowaway attempts a criminal offence. Currently, there are very few countries in which attempting to stowaway is a criminal offence with the result that deterrent is low in many ports.

 

ESG supplier management

Each of Wallenius Wilhelmsen group’s operating companies procure products and services from a varied and globally distributed supplier base. As a significant buyer, the company can influence broader aspects of suppliers and their offerings, including those relating to Environmental, Social and Governance (ESG) performance.

Wallenius Wilhelmsen sees effective ESG management and performance as a sound proxy indicator of the general fitness of its supplier base. It is also a reflection of what is expected of the company by its customers. It is in the interest of society in general that ESG factors be considered in supplier selection at all stages in the value chain. Ultimately, demand is the most effective driver of progress. 

Wallenius Wilhelmsen actively uses ESG supplier evaluation criteria and processes in some business areas, such as vessel recycling. However, it does not yet have a group-wide policy or approach at this point.

Evaluation of results

During 2018, the case for a group-wide approach to ESG supplier management was presented to the top executive team and authorisation was given to proceed with the implementation.  Although the intention was to have implemented the programme during 2018, the Ship Recycling Transparency Initiative, which addresses the most significant supplier sustainability issue across the industry, was prioritised instead. Since the ESG supplier management programme is not in place there is no data to report.

Ambitions and next steps

During 2019 a supplier sustainability management policy and system will be defined and implemented. The requirements for an individual supplier basis will likely vary according to the sustainability materiality of the product or service they provide and will be adapted to the needs of individual business areas. Once the system is in place a performance baseline will be recorded and based on that an appropriate set of goals will be set. A minimum requirement will be compliance with all applicable rules and regulations in all cases. Recording the baseline and setting targets (other than compliance) are 2020 ambitions.

 

Privacy and data security

In recent years there have been numerous high-profile cases of lapses in data security and privacy. Many resulted in serious operational, reputational and customer costs or losses. The EU’s far-reaching General Data Protection Regulation (GDPR) demonstrates officialdom’s level of concern with the issue and emphasises the need for close attention by industry.

As a large, modern and global organisation Wallenius Wilhelmsen maintains electronic records and relationships with its stakeholder groups, including customers and employees. The interests of the company and its stakeholders are aligned in ensuring the security and privacy of such information is not compromised and or exploited by third parties.

Information Security Management

Wallenius Wilhelmsen will comply with the 2018 GDPR regulation through its structured and strategic approach to information security, which includes the implementation of a related set of policies and procedures. For example, routines for escalation of issues and reporting to authorities have been implemented. Responsibility and ownership of the process lies with the Data Privacy Officer (DPO), who cooperates closely with internal information security, IT, HR and other resources.

Management of privacy and data security will also interface with ongoing projects and initiatives in information security in general and specifically in relation to the strengthening of the company’s Information Security Management system (ISMS).

Evaluation of results

The requirements of GDPR took effect from 25 May 2018. Wallenius Wilhelmsen experienced one incident relating to a breached email account that warranted being handled in accordance with the regulation’s reporting requirements. As this is the first year of reporting, it is not possible to infer much from this result. The occurrence of events and any associated reporting requirements will reflect the nature of the attacks and the robustness of the company’s security system going forward. The implementation of processes to further safeguard the privacy of employees’ data is still in progress. 

Ambitions and next steps

Wallenius Wilhelmsen submitted its binding corporate rules (BCR) application in 2018 in accordance with the regulations. The company will act in line with the regulations while the application is being formally processed by the Norwegian Data Protection Authority. Riskreducing measures associated with GDPR remain a focus area for 2019, and are one reason why the ISMS will be reinforced: to reflect industry best practice and policies and to increase the overall maturity level.


Green innovation

Wallenius Wilhelmsen’s ‘Lean:Green’ sustainability strategy is centred on the belief that the economical and the sustainable can and must be the same thing. Furthermore, Lean:Green embraces the beliefs that sustainability will increasingly be a business driver and that it will be possible for the company to offer its logistics services with zero emissions by 2050.

Lean:Green innovations are already in use across the company, however, more innovations are needed to meet the increasing demands of environmental regulation, maintain competitiveness and ensure control of the business’ future. In short, for the group to create and capitalise on future opportunities, Lean:Green innovation is a must. To innovate is in the aligned current and future interests of the company and its stakeholders, including employees, investors and customers. 

Wallenius Wilhelmsen takes a two-pronged approach to Lean:Green innovation. The first is to partner with innovators and other industry stakeholders to trial and refine innovative and sustainable solutions. The company regularly partners with innovators to develop and trial innovative products and services.  

The second approach is to actively seek new Lean:Green solutions and to attract innovators to the shipping industry. The main initiative in that respect is the www.OceanExchange.org website, which is a sustainable innovation forum of which the company is a sponsor. The forum hosts Wallenius Wilhelmsen’s annual USD 100 000 Orcelle Award. The company’s overall collaboration with the Ocean Exchange is led by the President of WW Solutions, who also serves as Chair of its board. Engaging the relevant functional groups of Wallenius Wilhelmsen is the responsibility of the Head of Sustainability.  

 

 

Evaluation of results

There were a record number of submissions to Ocean Exchange in 2018 and the strength of the 12 finalists was unprecedented. The winner of the Orcelle Award was Jolt Energy Systems, a company with a novel flow battery technology with the potential to become an alternative power source for vessels at berth. Subject to commercial and technical realities, industry interest in such a solution would likely be significant because it would enable a vessel to be self-reliant, thereby avoiding the severe operational drawbacks of current at-berth compliance solutions. The main sustainable benefit would be the potential to reduce emissions to zero while the vessel is closest to centres of population i.e. while in port. Wallenius Wilhelmsen continues to support Jolt Energy Systems in their development. 

Ambitions and next steps

For the ninth annual Ocean Exchange, the event will move to Fort Lauderdale, Florida and will partner with the Marine Research Hub of South Florida. It will be held on October 28-30, at the same time as the Fort Lauderdale International Boat Show. Wallenius Wilhelmsen will continue to be a global sponsor of Ocean Exchange and anticipates that it will become a world-class sustainable innovation event in the years to come 

To broaden the scope of the solutions it attracts, the Orcelle Award definition has been updated. It will be presented to the innovation that creates greatest environmental and business value for any of our activities as they relate to any of the six UN SDGs applicable to us.

 

Biosecurity

This is a new addition to the Wallenius Wilhelmsen GRI Standard Sustainability Report 2018. It has arisen due to the increased awareness of cargo as a vector for invasive species transfer, which has most recently been linked to the exceptionally warm and long summer in Europe in 2018. The main biosecurity threat has long been the Brown Marmorated Stink Bug (BMSB or stink bug) and there are established measures in place in Australia and New Zealand to prevent its establishment. More recently, requirements to address other species have been introduced too. 

The issue is of great significance to Wallenius Wilhelmsen due to its threat to Australian and New Zealand economies, potential to interfere with vessel schedules and operations, as well as harm the company’s reputation. For similar reasons, the issue has the potential to heavily impact customers too. 

The company’s response has evolved over the course of the year in line with changes in the requirements of the authorities, and as a result of experience gained. It is the responsibility of the cargo owner to ensure that any product to be imported to Australia or New Zealand is free from any biosecurity threats. The point of origin, which is not necessarily the load port, is what determines whether the cargo must be treated to exterminate any hibernating bugs. The treatment process prescribed by authorities uses either chemical means or elevated temperatures.  

Wallenius Wilhelmsen only accepts certified treated cargo from regulated countries, and thoroughly inspects each vessel before departure. At the last port of load, cargo on-board is `fogged´ in order to wake any hibernating bugs, which will then perish. Regular inspections take place and prior to arrival in Australian and New Zealand waters, vessels report any live bug activity to biosecurity regulators. 

Management of customer compliance with the regulation, treatment procedures and response to incidents lies with several of the organisation’s functional groups.

Evaluation of results

2018 saw several incidents of BMSB discovered on cargo shipped from Europe. It is clear that, despite regulations and clean cargo requirements, contaminated cargo still is being presented for shipment, placing all stakeholders at risk. Wallenius Wilhelmsen is together with industry peers calling on authorities to provide consistent regulation that identifies all countries in Europe as high risk. BMSB contamination can then be handled at the source and appropriate treatment for cargo enforced before shipping. 

Ambitions and next steps

Wallenius Wilhelmsen will continue its work for more robust regulation of BMSB. At the same time, the company will work to further improve its ability to detect and control invasive species. Tests will be conducted on different types of trap for BMSB and other pests. Inspection procedures will be reviewed and revised as necessary, and a common biosecurity management plan across the whole fleet will be developed and implemented.