Ports of the future: Navigating the climate and cyber risk landscape

Demand for logistics services has risen exponentially in the last decade. An unwavering need for freight-forwarding services across multiple industries, alongside consumer-led surges in e-commerce, have driven this growth. Transportation businesses of all modes are consequently setting climate-change and innovation plans to gain and maintain commercial advantage. With 95% of UK goods being moved by sea, port operators play a critical role in pioneering these strategies to create future-fit terminals for intermodal users.

In the UK, the transport sector emits the largest quantity of greenhouse gas, with 2022 witnessing a 4% increase in emissions. As hubs of interconnectivity, ports are uniquely positioned to influence the sector’s decarbonisation. Electrifying port-handling equipment and adopting energy-efficient warehousing facilities on-site are good foundations for reducing direct carbon emissions. Nevertheless, the broader maritime transition is underway. Part-battery operated ships are already operational and governmental funding has been allocated to deliver zero-emission vessels. A modal shift towards domestic inland shipping is also gaining traction, as one fully-loaded freight-barge could take an estimated 17 HGVs off the road.

Sound infrastructure investment is a prerequisite for successfully integrating these net-zero practices. Installing docking station charge-points, providing access to hydrogen or ammonia fuel, and supplying berthed vessels with ‘shore power’ to maintain standby functions are all actions port operators can take today to meet the intermodal needs of tomorrow. Automation, machine learning, and robotics are being leveraged as reliable, cost-efficient solutions to alleviate labour shortages, improve safety, and prevent supply chain disruption. Digitalisation, freight-movement visualisation, and Smart Ports’ evolution will undoubtedly complement climate-change management efforts to holistically shape the future landscape.

Ostensibly, ports of the future will undergo net-zero and digital transformations to satisfy stakeholder and investor expectations, adhere to climate mandates, and streamline operations. However, these solutions are not without risk. Thorough resilience planning is essential to protect ports and their users from various emerging threats and uncertainty.

Overcoming challenges and mitigating risk

Net-zero transition

Port operators should assess the viability of storing alternative energy on-site before investing in green infrastructure as solutions require significant capital investment. The combustible nature of evolving electric and hydrogen fuels exacerbates fire risk. This could threaten port employee safety, causes significant operational disruption, and potentially increases the cost of future insurance cover. Additionally, as operators focus on the immediate reduction of a port’s environmental impact, they should keep in mind that not all alternative fuels are currently fully zero-emission.

Carbon accounting – providing an ‘inventory’ of a port’s Scope 1, 2, and 3 emissions – is mandatory under both Taskforce on Climate-related Financial Disclosure and Streamlined Energy & Carbon reporting requirements. These requirements also offer a valuable perspective on where net-zero efforts should be focused. Identifying which party carries liability for environmental pollution risks throughout the freight journey is another critical preventative risk management tactic. Visibility over such environmental exposures enables port operators to proactively manage risk, avoid litigation, and holistically transition terminals for a sustainable future.

Physical climate risk

The physical effects of climate change present material risks to ports in the immediate, short, and medium term. For example, coastal erosion and rising global temperatures exacerbate the risk of warehouse flooding, heat stress to key machinery, or temporary inaccessibility of inland transport links. Climate risk modelling solutions can analyse a port’s resilience against increasingly frequent and disruptive extreme weather events. Such evaluations provide insight into the necessity of additional safeguarding measures for the protection of a site and its assets.

Cyber and technology risk

The use of technology, interconnected systems, and data-sharing platforms between multiple operators in the supply chain is increasing. This renders ports and their users vulnerable to both internal and external attack. Cyber consistently ranks as a top-priority risk for port operators. Consequently, most businesses are now unlikely to enter contracts with counterparties not displaying robust risk management practices.

Cyberattacks not only threaten operational downtime and revenue disruption, but also raise reputation, safety, and litigation concerns. For example, autonomous machinery could be hijacked, or data-protection requirements may be breached. Ports should consider stress-testing encrypted systems, performing regular data back-ups, and ensuring that appropriate staff training is provided, to evaluate their preparedness in the event of an attack. The International Maritime Organisation has outlined regulatory Guidelines on cyber risk management to promote the safety and soundness of the maritime sector, which can help to frame a port’s roadmap to cyber-security excellence.

What does the future hold?

Future opportunities are plentiful for port operators. Therefore, long-term strategies, such as potential partnerships and priority areas for investment, should be carefully scoped to gain commercial advantage. However, operational risk management and logistical challenges must remain at the forefront of management’s attention.

A risk management advisor, such as Marsh, can provide support in:

Evaluating on-site vulnerabilities, identifying the most robust risk management practices, and liaising with insurers to safeguard your net-zero and digital journeys.
Quantifying and qualifying your direct and indirect emissions via a bespoke carbon accounting programme and improvement roadmap.
Modelling physical and climate risk resilience projections to protect your assets and intermodal infrastructure portfolio.
Self-assessing your cyber risk to provide a comprehensive, insurer-approved evaluation of your cyber risk management practices.

Collaboration is essential for navigating these crucial considerations. This can not only promote innovation, but also further the resilience of your ports as they become sustainable, interconnected transportation hubs of the future.

Truck transport container on the road to the port.

Podcast

Ports of the future: Navigating the climate and cyber risk landscape