SUSTAINABLE DEVELOPMENT REPORT for the year 2013 Index

03 Organisational and Operational Boundaries of Report Labour 40 Employment 43 Occupational Health and Safety Summary 46 Training and Education 47 Diversity and Equal Opportunity 05 Introduction 07 Managing Director’s Message Human Rights 08 Agenda and KPIs achieved in 2013 and set for 2014 48 Non-Discrimination

Society 49 Anti-Competitive Behaviour Detail 50 Compliance

16 Sustainable Development Policy 17 Governance 19 Materiality Matrix Data

Economic Performance Summary 52 Reporting Philosophy, Methodology and Scope 20 2013 Financial Summary 53 Fleet Breakdown 55 Labour Data and Tables Economic 56 Abbreviations 21 Risks and Opportunities Due to Climate Change 58 GRI Assurance Statement 24 Financial Assistance from Government 60 G3.1 Content Index GRI Application Level C 25 Local Purchasing Policy 71 Contact

Environment 26 2013 Environmental Summary 39 Other Environmental Indicators

The China Navigation Company / Sustainable Development Report 2013 Organisational and Operational Boundaries of Report (as at 31 Dec 2013) 3

TE INA NAVIATION OMPAN LTD

HEAD OFFICE SWIRE SHIPPING SWIRE SHIPPING SWIRE BULK MAJOR JV and ASSOCIATES (owned fleet) (chartered fleet) (owned fleet)

CNCo Pte Ltd 8 X Challenger Class Tonnage as detailed 2 X B.Delta 39 Handysize 25% - Mandarin Shipping Group Limited Singapore 5 X Mihos in Fleet Profile 50% - Swire CTM Bulk Logistics Limited 50% - Tradco Shipping Limited includes: 6 X S 31 Class 60% - Swire Shipping Agencies New Caledonia 3 X N Class, B170 see page 53 Swire Bulk 67% - Quadrant Pacific Limited Swire Bulk Logistics 60% - Guadalcanal Travel Services Swire Shipping and Swire Shipping Agencies (HK) Swire Shipping Agencies (PRC) Swire Shipping Agencies (Taiwan)

Organisational Boundaries Polynesia Line Limited

Scope 1 GHG Office Vehicular Vessel HFC and Petrol / Diesel / LPG etc HCFC consumption

Vessel HFO, MDO and LO consumption

Scope 2 GHG Office Electricity Usage

Scope 3 GHG Management Air Travel Operational Boundries

Crew Air Travel

The China Navigation Company / Sustainable Development Report 2013 Summary 4

This section gives a summary of what CNCo achieved in 2013, where we plan to make progress in 2014 and beyond and the global and local issues that we believe could affect our business and operations going forward.

We also define our Organisational and Operational Boundaries that this report uses herein, in accordance with ISO 14064 and the Greenhouse Gas Guidelines.

In this section:

05 Introduction 07 Managing Director’s Message 08 Sustainable Development Plan 2014

The China Navigation Company / Sustainable Development Report 2013 Summary 5 Introduction

Welcome to the second externally assured (GRI C+) Sustainable Development Summary of 2013 Highlights We have taken delivery of 6 “S” Class Report for The China Navigation Company Pte Ltd. (“CNCo”). CNCo has 31,000dwt MPV (S-Class). Very significant continued its commitment to detail its full performance in the areas covered In the area of the Health and Safety of our resources have been devoted to ensuring that employees and stakeholders, the safety these S-Class ships are the most fuel and by the Social Responsibility Standard: ISO 26000:2010, viz. Governance, initiatives introduced in 2011 and 2012 have operationally efficient designs for the trade Human Rights, Labour Practices, the Environment, Fair Operating Practices, started to show a sustained improvement for routes for which they are planned, and their Consumer Issues and Community Involvement and Development. personnel safety in 2013. There were 3 LTI’s for replacing our older D-Class ships allows us 2013, one fewer than in 2012. This decrease to make a step change in the GHG footprint is especially welcome given that CNCo’s fleet for the cargo moved on these vessels. The We are having this report externally assured in accordance with the most expanded by 6 new ships. RightShip’s Existing Vessel Design Index (EVDI) widely used reporting framework, GRI, version 3.1, to level C+ to assure our rating for S-Class vessels was reassigned stakeholders and readers that what is reported is truthful and complete, and 4-Box Alert: The 4-Box concept has proven a from initial “D” rating to “A+” or “B+” following significantly powerful tool in helping to deliver the review of their actual performance and in a way that will permit comparison to be made between our performance a very strong safety message to the Fleet in taking into account consideration of the and those of our peer group who are also open and transparent about the a very short time frame. A Number of NGO’s enhancements and class measurements of way they operate. have asked to use CNCo’s 4-Box concept, and Energy Efficiency Design Index (EEDI). More this permission has of course been freely given. details on this class can be found on page 53.

We are also pleased to be able to report that The same level of attention to “eco-design” we have made some big strides in 2013 to and then testing and retesting of models prior meet our commitment to progress towards to approval for construction being signed CNCo having “net zero environmental impact”. has also resulted in our “W” Class B.Delta

About this report This SD Report has been designed from the outset to be read in soft copy (although as with any web site, the pages can of course be printed if required). It is in three sections: Summary, Detail and Data. All the content can be accessed through the three relevant drop-down menus, and as hyperlinks within each section. It is not intended that our stakeholders might start at page 1 and read all the way through to the end (however this is obviously possible if required), rather that the areas of particular interest to our wide range of stakeholders are each accessible with the fewest number of mouse clicks.

If any readers have any comments, please contact the General Manager, Sustainable Development. All feedback, positive and negative, is welcome and helps make this document of ever more relevance to our stakeholders. (see page 60 for contact details)

The China Navigation Company / Sustainable Development Report 2013 Summary: Introduction 6

39,000dwt (W-Class) Bulk Carriers being very CNCo will “only send vessels for recycling to We are pleased to advise that there were zero Around 130 of CNCo’s seafarers and their energy efficient with EEDI of 4.71 to 4.77 (with yards that have valid and verified accreditation acts of discrimination or harassment reported families live in this area, and the Anscor Swire EVDI assessed at B+). The first two of the eight issued by a reputable, independent, third party on any grounds to, or by, any CNCo personnel Ship Management Dependents’ Association ordered were delivered within 2013, and the against all standards: ISO 9001:2008, ISO during the calendar year 2013. CNCo also provided immediate aid and assistance. balance will be delivered in 2014. 14001:2004, OHSAS 18001:1999 (or alternately made a positive move between 2013 and ISO 30000:2009) and fully meet the relevant 2012 in closing the gender gap at both the CNCo immediately sent USD 12,500 to support The introduction of the new S-Class to replace provisions of both the Hong Kong International management and support level. ASSMDA’s purchase of aid and transport. D-Class resulted in a lower GHG footprint per Convention for the Safe and Environmentally The entire workforce of CNCo ashore and at tonne of cargo carried. We have set ourselves Sound Recycling of Ships and the EU Ship The largest Community Investment / Corporate sea also pledged support raising USD 10,000 a number of short and medium term targets Recycling Regulations (notwithstanding that we Philanthropy issue in 2013 involved Category which was matched by the Company. Once the in this area so that a) all in the company have understand that neither of these are adopted / 5 Super Typhoon Yolanda / Haiyan that struck need for immediate aid support had subsided, ownership of this crucial strategic target and in place yet) and preferably be an “A” member the Visayas region in the central Philippines on ASSMDA began working with the Sailors b) we can monitor our progress towards it, and of International Ship Recycling Association”. Fri 08th November. The strongest typhoon ever Society to build/rebuild much need community make “mid-course corrections” if we begin to make landfall with gusts reaching 235mph, infrastructure in the Tacloban area. to fall short. In particular we aim to reduce CNCo is working with the Sustainable Shipping resulted in the loss of over 7,300 people, the our Fleet Energy Operating Efficiency (the Initiative to assist the industry where possible injury of nearly 30,000 and the destruction of average energy we expend moving one tonne to raise the standards of its operations, as we most of the buildings and infrastructure over a of cargo, one nautical mile) to 20% below our see this as a more proactive route to reduce wide area. baseline by the end of 2016 and 50% below negative health, safety and environmental our baseline by the end of 2020. This is a key issues than black-listing and walking away from goal to help us reach “Net Zero Environmental specific ship recycling facilities. This will be a Impact”. journey, and we will be continuing this in 2014 and beyond. We reported in our 2012 report that our 4 D-Class ships were recycled at a Green and In the area of Fair Operating Practices, we We are pleased to advise that there were zero acts Safe recycling yard in China. Our Panamax issued a new Code of Conduct at the beginning trans-shipper in PNG, MV Erawan, also of the year and commenced coaching our of discrimination or harassment reported on any reached the end of her operating life in 2013, employees to ensure that they are all familiar and she too was sent to a yard that practices with the contents, their meaning, the reasoning grounds to, or by, any CNCo personnel during the auditably “Green and Safe” operations. All of behind having the code and the (internal calendar year 2013 these are in accordance with our Sustainable and external) sanctions for contravening the Ship Recycling policy: requirements of the Code of Conduct. This coaching will continue going forward, to ensure that familiarity is maintained, and we will be measuring progress in this area.

The China Navigation Company / Sustainable Development Report 2013 Summary 7 Managing Director’s Message

The China Navigation Company The 2013 Sustainable Development Report specifically designed with CNCo’s long term Established in 1872, we recognise the value highlights the progress we have made over the sustainability objectives in mind. These ships of long term thinking. In collaboration with (CNCo) is committed to promoting last 12 months towards achieving “Net Zero” represent the most fuel efficient designs Forum For the Future, CNCo continues to sustainable development within the environmental impact. We are determined to currently on the water, fitted with systems to conduct regular “Futures Scenario Planning” shipping industry. This Sustainable reduce harmful emissions through technological optimise speed and consumption ratios to exercises to identify long term strategic risks Development Report for the innovation and we have made substantial capital minimise their environmental impact. and opportunities which will have a significant investments in modern, highly fuel efficient ships impact on our strategic plans. The Report year 2013 has been prepared for deployment in our regional liner and global We continue to contribute to our communities. for the year 2013 highlights some of the key in accordance with the Global dry bulk divisions. Our bulk logistics division In Madang, Papua New Guinea, we cooperate outcomes and their contribution to CNCo’s Reporting Initiative’s Sustainability continues to develop customised and innovative closely with the Maritime College to raise the sustainable development performance. seaborne logistics solutions for customers in the standards of health, safety and environmental Reporting Guidelines (GRI 3.1 C+), Asia-Pacific region. practices in the marine sector. In the I would like to recognise the significant with standardised data for ease of Philippines, following Typhoon Haiyan which contribution of the team involved in preparing comparison with industry peers. CNCo’s progress towards the development of struck the Visayas region on 8th November this comprehensive report. On behalf of The a diverse, industry leading workforce continues 2013, CNCo worked closely with Anscor Swire China Navigation Company thank you for your to build momentum. Significant resources Ship Management Dependents’ Association interest in our journey towards sustainability. have been allocated to provide training and (ASSMDA) to raise funds to provide emergency I am pleased to report that there was development opportunities to develop a aid and to rebuild much needed basic no incidence of non-compliance with professional and skilled workforce at sea and infrastructure. environmental laws and regulations during the ashore. While our safety performance continues period covered by this report. to improve (25% year on year), it is regrettable CNCo remains a signatory to Hong Kong’s Fair that 3 loss time injuries (LTIs) were reported in Winds charter as well as a founding member Our vision is to be the “leading provider 2013. As the fleet expands, we will continue to of the Sustainable Shipping Initiative (SSI). of sustainable shipping solutions and our develop a just culture to support our long term The SSI was founded in 2011 to address three customers’ partner of choice”. With operational commitment to the principles of “Zero Harm”. principal challenges facing our industry: volatile excellence as its guiding principle, the vision oil prices, structural shifts in world trade and sets out clear objectives which, combined with We pride ourselves on being original and the growing scrutiny of the industry’s social and our values, will help to guide the Company forward-looking. We continue to seek environmental performance. CNCo continues and our employees in all our operational and innovative ways to minimise the impact of to play an active role in supporting the SSI and business activities. Our vision serves as the our business on the environment. In 2013 we is a key sponsor of the “Closed Loop Materials framework for our strategy and describes took delivery of six S31-Class (31,000dwt) Management” workstream. what we need to achieve in order to grow and multipurpose vessels and two B.Delta39 develop our business along sustainable lines. (39,000dwt) handysize bulk carriers. Our newbuilding programme now extends to over 40 ships, including 12 multipurpose and 28 handysize vessels, which have been

The China Navigation Company / Sustainable Development Report 2013 Summary 8 Sustainable Development Plan 2014

Our 2014 SD Plan was developed at the end of 2013 to guide our 1.3 For the past 5 years prior to 2013, CNCo produced an annual Environmental Report. With sustainability activities during 2014. In this section we report both historically effect from 2013 report, we will build upon these and align them with the increased use of on the RESULTS we achieved against our 2013 TARGETS, and then look management metrics to produce a more detailed Sustainable Development Report that reports issues material to our key stakeholders. forward to detail the TARGETS we planned to undertake during 2014. In the few cases in which we missed some targets in 2013, we carried them 2013 TARGET: A CNCo SD Report is to be produced to GRI 3.1 level C+ by June forward to remain as targets in 2014. 2014.

This is to be used as the basis for formal Stakeholder Engagement during the early half of 2014 (and then annually thereafter) to Agenda and KPIs achieved in 2013 and set for 2014 determine whether our stakeholders feel that there are more (or less) material issues that should be reported, and thus whether subsequent reports should produced be to level B+ (or A+) in future years. 1 STRUCTURAL This is to be used as the basis for formal Stakeholder Engagement 1.1 CNCo and its stakeholders will operate more sustainably and in a more integrated manner during the early half of 2014 (and then annually thereafter) to if they are working within a clear set of established policies and guidelines. In 2012, CNCo determine whether our stakeholders feel that there are more (or less) issued a Supply Chain Sustainability Code of Conduct. This is posted on our web site at: material issues that should be reported. http://bit.ly/1GDKoJt 2013 RESULT: The CNCo 2013 SD Report has been produced according to GRI3 C+. 2013 TARGET: see Supply Chain Management below The 2012 report was used to inform internal stakeholder engagement. 1.2 CNCo Head Office in Singapore has established both a top level Sustainable Development (“SD”) Steering Group and implemented a SD Working Group. Similar groups have been / 2014 TARGET: CNCo’s SD Report detailing 2014 performance will be produced to will be established in Australia and New Zealand. We have also established a pan-company GRI 4 (Core) by mid 2015. operations Shore Safety Committee that meets monthly to review Health and Safety issues involved in onshore port operations. Formal engagement with external stakeholders will be undertaken in 2015, in accordance with our Stakeholder Communications Plan, to 2013 TARGET: The establishment of these groups will be extended to CNCo’s office in inform the scope of our 2015 reporting. PNG and in New Zealand in 2013.

2013 RESULT: The establishment of these groups in New Zealand and PNG will be 1.4 In 2012, CNCo undertook a workshop-based Future Scenario Planning initiative, facilitated undertaken in 2015. by Forum for the Future, to review a wide range of external factors that might influence our business going forward and our fleet renewal programme in particular. This process was 2014 TARGET: Increased support will be provided to Sustainable Development designed to form the basis of an ongoing annual review of corporate strategies against Steering Groups in our outports, following findings of our Alignment sustainability risks and opportunities. and Engagement Report, which found that SD initiatives may be overly focussed around Singapore.

The China Navigation Company / Sustainable Development Report 2013 Summary: Agenda and KPIs achieved in 2013 and set for 2014 9

2013 TARGET: Hold a “20420” offsite meeting annually, inviting the 20 managers 1.6 In 2012, CNCo implemented a “5S” methodology to improve health and safety and general who will be responsible for the delivery of our 2020 strategic objectives. housekeeping in our offices and on our ships, The “5S” Methodology is a workplace This will start in January 2013, to build on the Future Scenario Planning organisation methodology that defines how to organise a work space for safety, efficiency outputs of the Strategic Risk and Opportunity Registers and develop a and effectiveness by identifying and storing the items used, maintaining the area and items, Strategic Balanced Scorecard up to the year 2020 that will contain and sustaining the new order that uses a list of five Japanese words: “seiri, seiton, seiso, shorter term goals up to the year 2016 and KPI metrics to determine seiketsu, and shitsuke”. Translated into English, 5S phases are: “sort, sweep, set in order, CNCo’s progress in getting to these goals. These internal goals mesh standardise and sustain”. into the longer term industry-wide Vision 2040 to which we have signed up with the Sustainable Shipping Initiative; “for a sustainable shipping 2013 TARGETS: • To have all of our new S-Class vessels fully compliant on delivery. industry in 2040”. • To have at least one engine and one deck store on our existing Challenger and Miho class fleets fully compliant. 2013 RESULT: A strategic balanced scorecard was developed by CNCo • To have a focus on 5S included in our in house Safety Awareness management during the “20420” Strategic Offsite meeting in January Courses. 2013. • To have a 5S check during all ship managers’ technical inspections. • To achieve a reduction in near misses relating to “defective tools” and 2014 TARGET: To continue the programme of strategic review offsite meetings in “poor housekeeping” by 50 % from the 2012 baseline January 2015 and beyond, with a view to maintaining a sustainable • To achieve 100% accuracy in 5S store rooms for spare parts against path and focus for the business. the Amos inventory

1.5 Increasingly we recognise that areas in which we work may have potential Environmental 2013 RESULT: We made good progress towards these stretching targets in 2013, with Issues and Human Rights Issues. We wish to exercise the highest operational standards in all new S-Class vessels fully compliant on delivery, and achieving a these areas both from the point of view of the general public good and for enlightened self- reduction in near misses relating to “defective tools” and “poor interest. housekeeping” by 50% from the 2012 baseline.

2013 TARGET: We will work over 2013 to establish a set of guidelines as to when an Progress on other 5S targets has been more difficult than first anticipated. Environmental Impact Assessment (“EIA”) and / or a Human Rights A Computer Based Training (CBT) programme was produced and sent to Impact Assessment (“HRIA”) should be conducted. every ship to clarify the importance of the 5S imitative. The time line for implementation was extended to the end of 2014 and further 2013 RESULT: Guidelines were not developed in 2013 as CNCo did not enter into extended to the end of 1 Quarter 2015 for the Miho ships. any new areas or localities where this might be required. This target will be carried forward to 2015.

2014 TARGET: By end of 2015, we will establish a set of guidelines as to when an Environmental Impact Assessment (“EIA”) and / or a Human Rights Impact Assessment (“HRIA”) should be conducted and a broad structure for the assessments.

The China Navigation Company / Sustainable Development Report 2013 Summary: Agenda and KPIs achieved in 2013 and set for 2014 10

2 HEALTH AND SAFETY Safety Pyramid CNCo is commited to Zero harm. Whilst logically reported within the Sustainable Development discipline, given its “mission-critical” importance it has its own dedicated LTI 0.012 / Per Ship / Per Month department. The fundamental target for CNCo is that no harm shall be suffered by its 3 employees or the marine environment. This is managed within our Health, Safety and Environmental Management System. 6 RWC / MTC 0.023 / Per Ship / Per Month

2013 TARGET: Incur a Total Recordable Case Frequency (“TRCF”) of no more than 4.0 1,187 NEAR MISS 4.7 / Per Ship / Per Month

Increase the number of Near Miss and Toolbox Risk Identification 25,956 TRIP 103 / Per Ship / Per Month Permits (“TRIP”) Reports by 10% over the figures for 2012

Reduce the Port State Inspection Deficiency Rate to < 2.0 in 2013. 2013 Jan 2013 - Dec 2013 / 21 Ships

2013 RESULT: 3 LTIs occurred on 2013, which exceeded our target of Zero. However, this maintains the improvement from 9, to 4 achieved in 2012. 3 ENVIRONMENTAL IMPACT We achieved our target of a Total Recordable Case Frequency of no more than 4, with a TRCF of 2.47 per million in 2013. This also marks 3.1 CNCo has committed to taking action to move its operations towards having a net zero an improvement over 2012 (3.5 per million). We increased (improved) our environmental impact. CNCo is also mindful of the harm pollutants can do to the marine TRIP report by 20.1%, from 21,609 in 2012, to 25,956 in 2013 against environment. It is thus critical that CNCo does all it can, technically and operationally, our target of 10% increase. to observe all the requirements of MARPOL regulations and to prevent the release of substances that are deemed harmful and hazardous to the marine environment. Our Port State Inspection Deficiency Rate of 1.78 remained below 2.0 our target for 2013, although it showed a slight increase from 2012 2013 TARGETS: Achieve Zero spills of pollutants hazardous to the marine environment. (1.38). 2013 RESULT: 2 spills occurred in 2013, resulting in 1 litre of hydraulic oil and 20 2014 TARGET: Achieve Zero LTIs, litres of sludge entering the sea. The more significant of these, a spill of 20 litres of sludge occurred during a transfer of sludge to shore Suffer a Total Recordable Case Frequency (“TRCF”) of no more than 4.0, from Highland Chief at Honiara port on 5th May 2013. The relevant authorities were duly notified. Any harmful effects of the spill were Increase the number of Near Miss and Toolbox Risk Identification successfully mitigated through absorption of the spilled sludge by the Permits (“TRIP”) Reports by 10% over the figures for 2012 ship’s staff and the 3rd party sludge collectors. As a result of this incident, we modified our safety management system to ensure Reduce the Port State Inspection Deficiency Rate to < 1.80 in 2013. that a thorough checking of 3rd party oil or waste hoses is carried out before and during every hydrocarbon transfer, as well as asking for the temperature limitations for the hose.

The China Navigation Company / Sustainable Development Report 2013 Summary: Agenda and KPIs achieved in 2013 and set for 2014 11

2014 TARGET: Achieve Zero spills of pollutants hazardous to the marine 2013 TARGET: To continue to observe this policy for any and all CNCo vessels that environment. are sent for recycling in 2013, and to work with the yards to achieve a higher level of conformance against independent 3rd party auditing 3.2 The Singapore Environment Council runs an Eco-Office Certification scheme that assists by LR than was achieved in 2012. businesses to run their office premises in a more sustainable and environmentally responsible way. CNCo successfully achieved EcoOffice in 2012. EcoOffice is currently 2013 RESULT: MV Erawan – see page 31 only available in Singapore, however, other schemes are available globally, such as BEAM (Management and Operation) and LEED for Existing Buildings. 2014 TARGET: To continue to work with the SSI working group to establish the gaps that exist at selected beaching yards in South Asia and thus identify 2013 TARGET: CNCo Head Office will retain Eco-Office certification through 2013 what must be done to bring them up to an acceptable standards. (ongoing). All other CNCo offices outside Singapore will be encouraged to adopt the same good practices using a similar scheme locally or 3.4 In addition to 3.3 and looking at the long term future, CNCo is a member of the Sustainable without formal certification where this is not appropriate. Shipping Initiative (“SSI”) Steering Group. The SSI has a Vision for a sustainable shipping industry in 2040 that is designed to help the industry make long-term plans for future 2013 RESULT: CNCo’s head office Eco-Office certification is valid until 2014. No success. An industry with long-lived assets needs long-term thinking, and the SSI aims to other offices have certified to EcoOffice or similar. help members think beyond the next regulation or design tweak.

2014 TARGET: CNCo Head Office will retain Eco-Office certification on an ongoing Over the 18 months from April 2012 to Oct 2013, CNCo worked with the SSI’s “Closed Loop basis. Material Management” (CLMM) work-stream. This sought to “Implement systems to trace and increase accountability of ship building materials and their sources, with the ultimate All other CNCo and Swire Shipping offices in New Zealand and aim of having end-to-end responsibility and accountability for these materials”. Australia will be encouraged to adopt the same good practices using a similar scheme locally or demonstrate compliance with the principles 2013 TARGET: CNCo to present on the learning points from the CLMM project, to the of Eco-office or similar without formal certification where this is not Tradewinds Ship Recycling Forum in Dubai in Q1 2013. appropriate. We will report on this in our 2015 report. CNCo and all other SSI members to report back on the various pilot 3.3 CNCo is under-going a fleet renewal programme. This will entail the retiring ships to workstreams to an industry event in Singapore in September 2013. be recycled. Conditions in many recycling yards, with respect to both worker safety and responsible disposal of hazardous waste, are considered unacceptable and not in 2013 RESULT: CNCo presented the results of the CLMM work in Dubai in Q1 2013, accordance with the highest, fully achievable, international standards. In 2012, CNCo and the presentation was well received. adopted a Responsible Recycling Policy that requires CNCo vessels being recycled to be sent only to yards that are independently certified to. These will include as a minimum 2014 TARGET: Following the completion of the CLMM work, in 2014-15 CNCo will ISO 9001, ISO 14001, OHSAS 18001 (or alternately ISO 30000), and compliance with use the results of the study to inform a Natural Capital Valuation of the principles underlying both the EU Recycling Guidelines and the HK Ship Recycling ship recycling. Data will be used to assess future ship recycling Convention (whether or not either is yet ratified). 4 ships were Responsibly Recycled at the options and policies and presenting opportunities feed-back into ship beginning of 2012. design.

The China Navigation Company / Sustainable Development Report 2013 Summary: Agenda and KPIs achieved in 2013 and set for 2014 12

3.5 Rightship – an industry body, has established an index to quantify the environmental 4 SUPPLY CHAIN MANAGEMENT design performance of existing ships (EVDI™) as the IMO standard (EEDI) only refers to ships delivered post 01 Jan 2013. IMO also has a standard for measuring the operational 4.1 CNCo recognises that it is not enough for organisations to conduct their own business efficiency of existing ships (EEOI). responsibly, but that it is critical that we ensure that our suppliers also operate to a minimum set of standards. In 2012, CNCo adopted a Supplier Code of Conduct, referred to in 1.1 2013 TARGET: On the principal that what is not measured cannot be managed above. efficiently, CNCo will develop internal targets for operational efficiency of existing owned and chartered ships plus criteria for selecting ships to 4.2 In addition to CNCo issuing its Supply Chain Sustainability Code of Conduct the company charter based on the environmental and energy efficiency of their design. also took the proactive step of issuing one of the industry’s first “Responsible Carriage of These targets will be based on 2012 baselines and will be set to Cargo Policy” (For more details on this see the Environmental Impact Mitigation Section, become more stringent over time towards 2020. EN26).

2013 RESULT: CNCo has adopted “EEOI” as our standard measure of ship 2013 TARGET: CNCo will work with suppliers with whom we have a total annual spend operational performance, and have established a baseline EEOI of of > USD 1 million who are assessed as presenting a higher risk of non- 31 as an average across our Liner fleet (2013) and 6.76 for our bulk compliance, to assure ourselves of the level of compliance and fleet (2013). to establish such follow-up action with the suppliers as is required to reduce non-compliance. CNCo has adopted EEDI and EVDI (where the latter is possible; it has some inherent inaccuracies for some ships in our niche sectors) as our 2013 RESULT: No audits or other supplier engagement was undertaken in 2013 standard measures of the design performance of our ships. to ensure compliance with our Supply Chain Sustainability Code of Conduct or “Responsible Carriage of Cargo Policy”, due to prioritisation We are pleased to have adopted stretching targets against these of resources. metrics, meeting our 2012 commitment. 2014 TARGET: In 2015, CNCo will work with suppliers with whom we have a total 2014 TARGET: We commit to demonstrating progress towards achieving a annual spend of > USD 1 million and who are assessed to have a consolidated annual EEOI index at >=50% better than the baseline potentially higher risk of non-compliance to assure ourselves of by 2020, with an interim target of >=80% by 2016. the level of compliance, and to establish such follow-up action with the suppliers as is required to reduce non-compliance. We are aiming to achieve, for all relevant liner and bulk vessels:

- EEDI compliance index at <=80% better than the IMO baseline 5 CORPORATE PHILANTHROPY delivery to CNCo - EVDI rating >= ‘C’ 5.1 CNCo is committed to target this as Strategic Community Investment for term projects that are sustainable, working with partners on projects that are aligned with our business, in communities where we can leverage the effect of our investment.

Our existing Corporate Philanthropy (“CP”) Committee will continue to work with all CNCo offices to identify projects or partner organisations that meet our internal guidelines.

The China Navigation Company / Sustainable Development Report 2013 Summary: Agenda and KPIs achieved in 2013 and set for 2014 13

2013 TARGET: Two CNCo teams have committed to participating in the Sailors’ Society Mt Kinabalu fund-raising Challenge to be held in Q1 2013.

We began drafting an “Employee CP Paid Volunteer Day Policy” in 2012, and are scheduling to issue this in 2013.

We will leverage both our financial support and our resources to work with the Maritime College in Madang, Papua New Guinea to achieve greater alignment in 2013.

CNCo wishes to ensure that its Corporate Philanthropy delivers the highest levels of social and environmental impact for the investment made, and will begin a project to develop metrics to measure Social Return On Investment (SROI). This is a nascent field, on which there is much ongoing research being undertaken, and this is therefore anticipated to be a long-term project.

2013 RESULT: CNCo developed a Social Return on Investment methodology, which was used in the assessment of our philanthropic funding to Papua New Guinea Maritime College.

The publication of our “Employee CP Paid Volunteer Day Policy” has been delayed to 2014.

We are delighted to report that two CNCo teams completed the Sailors’ Society Mt Kinabalu Fund-raising Challenge 2013, and we plan to continue support our staff who wish to participate in this event in future years.

We continued to support the Maritime College in Madang, Papua New Guinea. However we recognise that more management support is required to optimise positive impacts, which was not available due to management changes in 2013-14. This will be pursued in 2015.

2014 TARGET: We will continue to assess our relevant Corporate Philanthropy projects against SRoI criteria, and will update and improve our methodology for doing this as we learn lessons from its use. We will publish our Employee CP Paid Volunteer Day Policy” in 2014.

The China Navigation Company / Sustainable Development Report 2013 Summary: Agenda and KPIs achieved in 2013 and set for 2014 14

6 EMPLOYER OF CHOICE 6.2 We believe that outside our home base of Singapore and particularly in our key stakeholder communities of the Pacific Islands, there is also a wealth of potential talent. Over and above 6.1 Singapore is seeking to establish itself as a Maritime Hub, with 26 separate Institutes our support of time, money and resources to the Maritime College in Madang, PNG detailed of Higher Education offering young Singaporeans courses in a wide range of maritime in 5.1 above we seek to establish long-term, mutually beneficial relationships with our other disciplines. CNCo Head Office is a) under-represented with local managers and partners and stakeholder communities, particularly in the youth and education areas that are b) committed to support Singapore’s intention of being a Maritime Hub. CNCo aligned to our business. already supports the supply of short-term internship places to between 6-8 maritime undergraduates each year. 2013 TARGET: CNCo’s HR and Fleet Management departments will work to establish cadetships for 15% of CNCo’s annual requirement from In 2012, CNCo interviewed a number of potential undergraduates from NTU under the suitable candidates in key developing communities in Asia Pacific “SMFOne Scheme” and selected one Engineering Management Trainee who started with region by the end of 2016, increasing to 25% by the end of 2020. us after she graduated in mid-2013. It is hoped that this can become an entry stream for future local managers. 2013 RESULT: Recruitment ongoing to meet the target by the end of 2016.

2013 TARGET: CNCo will sponsor a number of both commercial and engineering 2014 TARGET: CNCo’s HR and Fleet Management departments will continue to work undergraduates under the Singapore Maritime Foundation to establish cadetships for 15% of CNCo’s annual requirement from “SMFOne Scheme”. suitable candidates in key developing communities in Asia Pacific region by the end of 2016, increasing to 25% by the end of 2020. 2013 RESULT: One Singaporean undergraduate studying at Newcastle University was found suitable for recruitment from the Singapore Maritime Foundation “SMFOne Scheme” for sponsorship in 2013 and joined CNCo at the start of 2014.

2014 TARGET: In 2015, CNCo will seek to sponsor a number of both commercial and engineering undergraduates under the Singapore Maritime Foundation “SMFOne Scheme”.

The China Navigation Company / Sustainable Development Report 2013 Detail 15

In this section we provide more detail on a wide range of areas that, taken as a whole, define our Sustainable Development commitment to People, Planet and Profit. All of these must coalesce to give a positive “Triple Bottom Line” to our Organisation, to the Communities we serve and Environment in which we live and work.

In this section:

16 Sustainable Development Policy 17 Governance 20 2013 Financial Summary 21 Economic 26 Environment 40 Labour 48 Human Rights 49 Society

The China Navigation Company / Sustainable Development Report 2013 Detail 16 Sustainable Development Policy

We adopt this policy because: OUR POLICY Making it happen:

Industry leadership: We aim to be leaders in • All companies in which The China Navigation We aim to create long term value for our shareholders. sustainable development in the industries in Company has a controlling interest will have which we operate. action plans for applying this policy in a way Achieving this depends on the sustainable development of which is relevant to their business. We will In our operations: We will: encourage other companies in which we our businesses and the communities in which we operate. have an interest as a shareholder or through • Be a good steward of the natural resources our supply chain to implement similar and biodiversity under our influence and policies. To achieve sustainable development, we aim: ensure that all potential adverse impacts of our operations on the environment • We will encourage and empower our staff are identified, mitigated where possible and to be proactive on sustainable development • To achieve net zero impact on the environment; appropriately managed. matters both at work and in the community.

• Do our best to safeguard the health and • We will monitor our performance and report • To cause zero harm to our stakeholder communities and safety of all our stakeholders. regularly. assets under our stewardship; • Provide an environment in which all • We will review this policy periodically, having employees are treated fairly and with respect regards in particular to stakeholder and can realise their full potential. dialogues. • To excel as corporate citizens. • Encourage suppliers and contractors to promote sustainable development.

• Encourage the responsible use of our products and services by our customers and consumers.

• Bring value to the communities of which we are a part and enhance their capabilities while respecting people’s culture and heritage.

New Sustainable Development Policy http://bit.ly/1GDKIYs

The China Navigation Company / Sustainable Development Report 2013 Detail 17 Governance

The China Navigation Company Pte Ltd. the Parent Company Board of Directors is Mr. The shareholders are directly represented on Our absolute requirement for probity, (“CNCo”) is a Singapore registered company Barnaby Swire. The CNCo Board of Directors the CNCo Board of Directors and they use transparency and accountable conduct in that is a wholly owned subsidiary of The China provides organisational oversight and comprises this forum to give governance direction to the all business affairs is highlighted to all of our Navigation Company Limited registered in 8 members of whom 4 are non-executive company. Whilst CNCo has no direct public new onshore staff on joining. A hard copy London. Neither company is publicly quoted directors and of these 2 are independent. shareholders, it seeks to comply with the of our Code of Conduct detailing the ethical on any stock exchange. As can be seen from relevant sections of the Codes on Corporate and responsible way we expect all of our staff the Organisational and Operational Boundaries CNCo has a high level Sustainable Governance Practices issued by the London to conduct themselves is given to each new diagram (see page 3), The China Navigation Development (SD) Steering Group composed and HK Stock Exchanges and has its own employee within their induction in the first Company Limited is also the parent company of the MD, the Fleet Health, Safety, Security internal Code of Conduct covering ethical week. Once every two years they will then be for Swire Shipping branded agency companies and Environmental Manager, the Global standards which are available here sent a link to a web based Code of Conduct in Australia, PRC, Hong Kong, New Caledonia, Operations Manager for Swire Shipping (and http://bit.ly/18vDFT7 video, FAQ and then an awareness test in New Zealand and Taiwan. It also has a 50% head of the Shore-side Safety Committee) and which they are coached to get 100% if they share in Swire CTM Bulk Logistics Limited, a the GM for SD. This committee meets quarterly This compliance is in line with our belief that it fail to score this at their first pass. We are joint venture with C Transport Maritime SAM in Head Office in Singapore and reviews all is imperative to act with probity, transparency planning to produce a company specific video registered in Monaco, a 25% share in Mandarin strategic aspects of SD, in particular Health, and accountability in order to achieve our explaining our Code of Conduct during 2014. Shipping Limited registered in HK and is the Safety, Environment, Social and Governance long-term objectives. Our Board is committed managing shareholder of Quadrant Pacific Ltd., issues. Below this there are SD Working to maintaining and developing robust corporate The DPA has been an internationally legally one of New Zealand and Fiji’s leading shipping Groups which comprise cross-functional governance practices and conducting regular required position since 1993, peculiar to the agency and logistics companies. representatives also meeting quarterly internal reviews that ensure: shipping industry under the ISM code, wherein (between the SD WG meetings) in the Head every Company must designate a person or The parent company’s Board of Directors is Office in Singapore and main regional offices • satisfactory and sustainable returns to its persons ashore having direct access to the the highest level governance and oversight of Sydney and Auckland. These seek to act parent company; highest level of management. The responsibility body and this sets strategy for its subsidiary operationally on the guidance and strategy • the interests of stakeholders are and authority of the designated person or companies. The (Non-Executive) Chairman of emanating from the SD Steering Group. safeguarded; persons includes monitoring the safety and • that overall business risk is understood pollution prevention aspects of the operation and managed appropriately; of each ship and ensuring that adequate • delivery of high-quality services to the resources and shore-based support are satisfaction of customers; applied, as required. • and that the highest standards of ethics CNCo has a high level Sustainable Development (SD) are maintained.

Steering Group composed of the MD, the Fleet Health, The above are all encapsulated in our Vision Safety, Security and Environmental Manager, the Global Statement, which can be found here: http://bit.ly/1NHYV90 Operations Manager for Swire Shipping (and head of the Shore-side Safety Committee) and the GM for SD.

The China Navigation Company / Sustainable Development Report 2013 Detail: Governance 18

We have included other relevant additional This is further enhanced by five annual off-site information herein which supports the meetings (one detailed below and one held commitment that our activities and two weeks after each board meeting) in which commitments to Sustainable Development strategic issues that have sustainable impacts are considered material to the way we run our are fully and freely discussed by the entire business and as such are an integral part of Executive Management Team. our strategic and operational decision making processes. No specific stakeholder engagement was undertaken in relation to the production of this This is achieved by the General Manager document, our second full SD report, although SD having direct reporting responsibility to we obviously do conduct formal service quality the Managing Director, building on his wide reviews with all our major customers on a experience within the shipping industry, regular basis throughout the year. both at sea and onshore, plus being able to provide input in the early stages of all In early 2013 we established a materiality strategic decision-making where SD issues matrix (see page 19) at our annual may be relevant as he is a full member of the Sustainability and Strategy meeting and this Executive Committee that meets weekly to has been partially used for this report as we review all existing and planned future business transition from GRI 3.1 compliance to full GRI operations. 4 compliance for the 2014 report. We are also constructing a Key Stakeholder Communication matrix and will use this to engage with our key stakeholders on the subject of issues that are material to them.

Our activities and commitments to Sustainable Development are considered material to the way we run our business and as such are an integral part of our strategic and operational decision making processes.

The China Navigation Company / Sustainable Development Report 2013 Detail 19 Materiality Matrix

Corporate Spill & Leakage 10 Whale Strikes Philanthropy Prevention & (SROI) Response

Wages & Benefits Customer Human Rights Major Oil Spill 9 Compliance

Entry of Low H & S GHG & Air 0.5% Sulphur Stakeholders 8 Cost Operators Pollution Fuel Cost Engagement Communication Counter Party Labour & Living System Diversity & Conditions, 7 Inclusivity Optimization Corporate Wages & Benefits CSR Local Governance Tax Hiring Talent Infrastructure Community 6 Network Management Development Involvement Optimization Ship & (Shipping Logistics) Tier 3 Political Personnel 5.5 NOx Fuel Issue Stability Potential for Security Growth in China & Ship Recycling Other Regions Anti Corruption Business Structure 5 Labour & Living Bribery & Government Conditions Payment Disclosure Indonesia Development Energy & Fuel Vessel Discharge Impact of Global PNG & PI Export Opportunities Efficiency 4 & Ballast Water MLOs on our Region Opportunities Importance to Stakeholders Lobbying CSR Governance Industry 3 & Maintenance Collaboration Weather Events System & Partnership

Regulations 2

1

1 2 3 4 5 5.5 6 7 8 9 10

Importance to Business

Affecting / mitigating / building on this Affecting / mitigating / building on this factor Affecting / mitigating / building on this factor is > 66% within the control of CNCo. is > 33% and < 66% within the control of CNCo. factor is < 33% within the control of CNCo. Generally driven by CNCo. Requires input from both parties. Generally driven by 3rd parties.

The China Navigation Company / Sustainable Development Report 2013 Detail / Economic 20 2013 Financial Summary

Financial Commentary the panamax trans-shipper, MV Erawan, in CNCo Pte Ltd reported a profit for the period Papua New Guinea. 01 Jan to 31 Dec 2013. During 2013 the majority of revenue was derived from the liner Total administrative costs remained in the area shipping division that operates under the Swire of 10% of revenue. Shipping brand. The liner business performed better than budgeted but continued to work Investment under a very challenging environment and Fleet renewal and capacity management continuously seeks to improve freight rates/ remained the company’s key focus as part cargo mix and route optimisation. Swire of the continuous programme to improve Shipping operates its fleet in its traditional core customer service and profitability. Since the trading area within the Pacific Ocean, but offers commencement of the fleet renewal plan in a full shipping service, linking over 130 ports 2010, the Company has ordered 8 x 31,000dwt across Asia, the Pacific Islands, Australia, New multipurpose vessels, 4 x 22,000dwt multi- Zealand, North America, Europe, the Middle purpose vessels, 24 x 39,000dwt B.Delta East and the Indian Sub-Continent. handysize bulk carriers and 4 x 38,000dwt Imabari handysize bulk carriers. CNCo set up Swire Bulk, a new division concentrating on eco-efficient handysize dry In 2013, CNCo took delivery of six 31,000 dwt bulk carriers in late 2012 to develop long term multipurpose vessels (S-Class) specifically relationships with cargo charterers and industrial built for deployment within Swire Shipping’s shippers who ascribe value to sustainable Asia Pacific network of trades, with the final shipping and with whom the economic and two due for delivery in early 2014. During the environmental advantages can be shared. year, CNCo also acquired 3 second-hand B170 container-feeder vessels in support of In 2013 Swire Bulk operated out of offices in its liner shipping business. All of these vessels CNCo Pte Ltd reported a profit for the period 01 Jan to 31 Singapore and Australia, with plans to expand are deployed across Swire Shipping’s network its network to Japan, UK and USA in 2014. of 11 liner trades and are supplemented by a Dec 2013. During 2013 the majority of revenue was derived Swire Bulk covers both the Pacific and Atlantic chartered fleet of a further 10 vessels at any basins focusing on bulk cargoes such as one time. from the liner shipping division that operates under the grains, fertilisers, steel, forest products, sugar, Swire Shipping brand. concentrates etc. In its first year the Swire Bulk CNCo also took delivery of two B.Delta39 division contributed to approximately 3% of the bulk carriers in 2013 as part of its planned CNCo group’s total revenue. expansion to a complementary fleet of approximately 24 owned vessels within a total In 2013, CNCo also generated revenue from controlled fleet of 50 owned and long-term Swire Bulk Logistics through the operation of chartered ships by 2018.

The China Navigation Company / Sustainable Development Report 2013 Detail / Economic 21 Risks and Opportunities Due to Climate Change

The senior management body in CNCo “Although in most of the world there is considers the various aspects of climate some time to plan and prepare for climate change and our mitigation of the change, we are the first to feel its effects as a anthropogenic drivers on which we have a direct threat to continued life in our country. handle on a continuing basis and for future We are among the most vulnerable of the new projects and business areas where vulnerable. Even a marginal increase in sea relevant. CNCo senior management seeks levels will be disastrous for our country’s a) to have an action plan for both identifying future. It is doubtful that any other country high priority Sustainable Development feels the effects of climate change as much issues, mitigating them where possible as we do. In Kiribati, the entire nation faces and managing those parts that cannot be real danger—our own survival is at stake as a viably mitigated and b) when considering people, as a unique and vibrant culture and any capital investment to review the GHG as a sovereign nation”. footprint of the investment and how this can be mitigated to as low a level as reasonably With CNCo’s commitment to moving towards practical. CNCO has committed to moving having Net Zero Environmental Impact, we to a “net zero environmental impact” and the are playing our part to reduce the cause of above will form a critical part of this. sea level rise and its effects on places such as Kiribati. However going hand-in-hand with the above Both of the scenarios that were developed We do not currently foresee many risks to operational risks to our business are the at the workshop in 2012 were bound directly our core business due to physical changes • Any increase in severe weather events may operational opportunities for our business. with climate change issues and indirectly with associated with anthropogenic climate increase downtime on a like-for-like basis, CNCo contracted with Forum For the Future the effects of climate change in the patterns change. but this can generally be countered by (FFF) to conduct a series of Future Scenario of trade that our business supports in the Asia working with shippers to optimise scheduling Planning workshops in 2012. These established Pacific region over the future life of the ships • Changes in sea level do not have a net in the face of such frequency increase. a number of credible but stretching scenarios that we have delivered in 2013 and others that effect on vessels floating on the surface. for the world in which we live and do business we will be committing to build in future years. When ships are alongside in port they may • Any shift in climatic zones will affect global up to 2030, and from these we developed a experience lower freeboard at the jetties but food chains which, given the cargo volume Strategic Opportunity Register. As far as our business today is concerned these have always varied over the diurnal of food and forestry products that we carry from a regulatory point of view, our vessels tidal cycle, and will continue to be managed such as rice, coffee and timber, will directly We convene 20 of the senior managers of emit NOx and SOx as a by-product of operationally. The most significantly impact our business operations and network CNCo each year to review this Strategic combustion in the vessels’ engines and the threatened port that CNCo currently serves is of routes. Opportunity Register, our Vision, Values and allowable limits of these pollutants are being Tarawa, an atoll in the central Pacific Ocean, SD Policy for relevance against the possible progressively reduced under the governing and which is the location of the capital of output scenarios and to identify the direction/s legislation in MARPOL Annex VI. The level of the Republic of Kiribati, South Tarawa. The we should be investing in and any potential emissions is a function of engine design and President, Anote Tong has said: downsides that we need to manage. the fuel specification they use. Our vessels generally consume 3.5% sulphur content

The China Navigation Company / Sustainable Development Report 2013 Detail: Economic − Risks and Opportunities Due to Climate Change 22

grades of residual fuels such as Intermediate Levels of NOx and SOx emissions are certified Fuel Oil (IFO) and Heavy Fuel Oil (HFO) whilst for each vessel by independent Classification in transit at sea, but switch to using distillate Societies in accordance with limits laid down by Marine Gas Oil (MGO) - which typically has UN International Maritime Organisation (IMO) a sulphur content less than half that of IFO/ under MARPOL Convention Annex VI. All our MGO, and which can be as low as 0.2-0.5%, vessels are fully compliant with this. The revised both when in Hong Kong port limits because Annex VI came into force on 1 July 2010. of our membership of the “Fair Winds Charter” (this has been voluntarily adopted by around We have invested significantly in a Kongsberg 17 shipowners to reduce SOx air pollution in Vessel Performance System package, which the Pearl River Delta) and in the local statutory includes “Marorka” software, for all our new Emission Control Areas (ECAs) such as those ships. This gives dynamic real-time fuel that have been established on the West Coast performance of the main engine and auxiliaries, of North America. at all alarm and monitoring workstations, i.e. the bridge, E/R control room and cargo This involves a classic split incentive issue, office. This then enables us to optimise our with a cost of using the lighter fraction, lower fuel consumption by maximising the energy sulphur distillate fuel to CNCo with the benefits efficiency of the ships while minimising their being borne by the communities close to the negative environmental impact. All the new port areas in Hong Kong, Long Beach and vessels delivered in 2013 and beyond have Singapore. CNCo has supported the call Class-approved Energy Efficient Design Indices by the Fair Winds Charter secretariat and (EEDI) and we have produced Ship Energy others for the HK Government to legislate our Efficiency Plans (SEEMP) for all of our existing voluntary reduction into regulation to create ships, prior to it being required by legislation. a level playing field and this has borne fruit. The Hong Kong government announced in We also record LO consumed on our owned late 2013 that it will make switching to low and chartered vessels. “LO” covers the sulphur fuel mandatory for vessels at berth complete range of grades of lubricating oil from 2015 — the first Asian port to do so. A and 100% by volume of the total LO usage draft Bill that requires sulphur content to be no we have reported is actually consumed in more than 0.5% will be tabled at the Legislative internal combustion engines and converted Council for a vote in mid-2014. Far thinking into GHG which is emitted to atmosphere. We governments, including Singapore’s have Green thus use this figure and an average specific Funds that are used to offset some of the port gravity of 0.9 across all grades to convert total charges for vessels that switch to burning low LO recorded and consumed in litres into GHG sulphur fuels in their engines, although the emissions in tCO2e. offset does not in any way cover the current extra cost of using lower sulphur fuel.

The China Navigation Company / Sustainable Development Report 2013 Detail: Economic − Risks and Opportunities Due to Climate Change 23

Regrettably none of the UNFCCC CoP CNCo is working on reducing as meetings over the past 5 years has achieved much of the Scope 1 and 2 GHG sufficient consensus to produce either a footprint for its vessels operationally legally-binding or global convention for Annex 1 (developed) and non-Annex 1 (lesser as possible developed) countries to achieve limitation of GHG emissions to cover the period post Kyoto Phase 1 after the end of 2012. We continue to move forward incrementally towards what we ignored, and not to support and favour a hope will be an ambitious and equitable 2015 procrastinating compromise as the world agreement at UNFCC CoP 21 in Paris to cover witnesses clear evidence that anthropogenic the Kyoto Phase 3 post 2020. global warming is real, and becoming more and more to halt and reverse. This evidence has GHG emissions from shipping are already been accepted by an overwhelming body of (in Australia and New Zealand) regulated by scientific experts in the field. national “cap and trade” Emissions Trading Schemes (ETSs), though the degree of will CNCo is working on reducing as much of to enforce these wavers with the perceived the Scope 1 and 2 GHG footprint for its local political imperatives of the hour, which is vessels operationally as possible, as with the certainly not the ideal way to achieve a global introduction of ETSs, ECAs and SECAs globally reduction in anthropogenic GHG emissions there will be increased financial cost implications over the long-term. The Labour opposition with compliance. Our journey towards Net in Australia has said it will repeal the ETS if it Zero Environmental Impact will be assisted achieves a majority at the next general election. practically however by our achievement of step- change reductions in our footprint through our After the EC threats to impose an EU-ETS on significant capital investment in new vessels shipping unless there was agreement at IMO by of advanced designs and the sustainable the end of 2011, which were then put on hold recycling of our older tonnage. whilst all parties watched to see if aviation could achieve a global emission reduction scheme at ICAO, the clock has been stopped, but not put away. Sectoral regional schemes such as an EU-ETS in the absence of an IMO governed global scheme will introduce unnecessary unwanted and additional costs and complexity. However we firmly believe that the solution is to accept that every party has a liability for external costs, which has been historically

The China Navigation Company / Sustainable Development Report 2013 Detail / Economic 24 Financial Assistance from Government

Only one instance of financial assistance was received from CNCo’s host government (Singapore) in 2013:

This was a PIC (Productivity and Innovation tax Credit) that was introduced in the Singapore Budget 2010 to provide enhanced tax deductions and investments in broad range of innovation value chain activities of SGD 75,000. This assistance related to our investment in server equipment and licenses for our corporate intranet system.

No assistance was received from MPA under the MINT scheme for enhancing performance of new ships.

The China Navigation Company / Sustainable Development Report 2013 Detail / Economic 25 Local Purchasing Policy

Policy, practices and proportion of spending However because the basic data are skewed This shows that over a fifth of our total annual We continue to conduct evaluations on all on locally-based suppliers at significant by the company’s spend on: spend is from suppliers in the country of our suppliers seeking to be selected or retained locations of operation. operational headquarters. This all adds value as a primary vendor and will start to undertake 1 fuel and lubricating oil, supplied where/when to Singapore’s economy, whilst simultaneously site audits to examine their environmental The senior management of CNCo considers required (often outside Singapore, but allowing us to foster a close working, and performance and compliance with safety and the various aspects of climate change and invoiced in Singapore) hopefully long-term, relationship with our key MARPOL regulations once we are suitably our mitigation of its anthropogenic drivers suppliers. resourced. In addition, the company follows that are relevant to our operations from our 2 for material amounts of charter hire invoiced the recommended best practice of the Swire headquarters in Singapore when making by charterers or brokers who may have CNCo currently has no explicit policies group and (re-)evaluates at least the top 100 purchases. offices here, and directing spending to locally-based suppliers. most used vendors every 36 months. In 2013 This is in large part a practical acceptance of we started to conduct a business process CNCo is registered under the Approved 3 the total funds remitted to shipyards as we the fact that as the consumers of the goods review of our purchasing processes to ensure International Shipping Enterprises (“AIS”) build new ships to renew our fleet is very and services - the ships, are continually mobile, that they are fit for purpose to support our Scheme, which is aimed at building up a significant so the supply of (non-OEM) products will be expanding business divisions cost effectively, critical mass of shipowners and managers driven by the imminent location of a vessel as responsively and responsibly. which will eventually develop Singapore into a We have followed herein the local spending its particular need/s arise. As our Bulk Division maritime centre. Under the AIS Scheme, “local reporting methodology reported in previous increases in size and trades globally, we would We plan to employ a dedicated CNCo Group spending” is defined as that invoiced by a years and these three line items of effectively expect the local purchase percentage to Purchasing Manager in 2014 and devote Singapore registered entity. This is audited by non-discretionary spending are excluded, decline slightly over the next few years before significantly more resources to this important the Singapore Tax Authorities and this is the then CNCo’s more “discretionary”, true local plateauing out again. area. This will help to ensure that a) our basic definition and source of figures that are (non-Fuel, Ship-building, 3rd Party Charter shareholders get more value for money and reported herein. Hire) spend as a percentage of the total (non- The company however certainly does have b) we can reduce our core supplier base to Fuel, Ship-building, 3rd Party Charter Hire) is procedures for vendor selection to ensure those who strongly support our corporate 21.24%. control is maintained over the quality of goods sustainability objectives. and service supplied by vendors. This is primarily to ensure that goods affecting either the safety of or prevention of pollution from our ships are of the correct quality and are In 2013 we started to conduct a business process review delivered in a timely manner. The procedures require not only that the vendor meets the of our purchasing processes to ensure that they are fit for company’s requirements and ISO or equivalent purpose to support our expanding business divisions cost accreditation, but that those who have an environmental policy and show a positive effectively, responsively and responsibly. attitude to environmental protection will be preferred during the selection process.

The China Navigation Company / Sustainable Development Report 2013 Detail 26 2013 Environmental Summary

Virtually all of CNCo’s significant environmental impacts are due to transportation used for logistical purposes and these are reported separately in this section (corresponding to GRI indicators EN3, EN4) and in more details in EN29, “Environmental Impacts of Transporting Goods”.

2010 2011 2012 2013

Total vessels (owned and managed/operated) as at 31 Dec 34 35 15 (plus 16 u/c) 24 (plus 26 u/c) Scope 1 & 2 GHG emissions (tCO2e) 661,041 690,242 610,558 625,426 (iaw GHG Reporting Guide) Emissions from marine fuel (99.8% marine fuels) (99.8% marine fuels) (99.8% marine fuels) (99.9% marine fuels) EEOI - liner fleet 31 30 EEOI - bulk fleet n/a n/a n/a Not a full year Electricity (tCO2e) 286 237 241 Business flights (tCO2e) 4284 4,547 3,098 SOx emissions (mT) 11,767 14,776 13,051 13,858 NOx emissions (mT) 17,506 15,510 16,259 Particulate Matter emissions (mT) 1,396 1,233 1,313 VOC emissions (mT) 261 231 241 Spills of oil and other materials hazardous to the marine 35 litres of rusty water 1 (20 litres oil, with 3 litres Nil 2 (21 litres in total of environment released entering the sea) hydraulic oil or sludge being transferred entered the sea)

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 27

CO2 Emissions - Fleet

CNCo had a total GHG footprint in 2013 of 625,426tCO2e¹² - As with previous years, over 99.8% of this footprint is related to marine fuels consumed in transporting cargo, shown in the table below.

380 IFO tonnes 193,977 Liner 181,528.79 Bulk 12,448.00

180 IFO tonnes 2,807 Liner 2,475.32 Bulk 332

MGO (t) tonnes 2,907 Liner 2,819.54 Bulk 87.00

Variation in CNCo’s overall CO2 emissions have historically been reflective of the changing size of LO (L) litres 1,381,358 our fleet – for example, an 18% reduction in emissions in 2012, corresponded to an 18% reduction Liner 1,381,358 in tonnage; However in 2013 Scope 1 and 2 emissions rose by only 2.4% despite significantly a higher fleet expansion as the newer vessels are designed to have a step change in higher fuel Bulk n/a efficiency and thus a consequent lower environmental footprint.

¹ - (see tables EN 16, EN 17, EN 19, EN 20 in the Data Section: Environmental) ² - ISO 14064 Scope 1 and 2

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 28

Measures to reduce emissions • Electric cargo cranes using approximately While expansion of our fleet will inevitably Lower Carbon Fuels 40-50% less power and have zero potential lead to increased emissions, we anticipate In 2011 we committed to investigating using to leak hydraulic oil to the environment the acquisition of these new, highly energy alternative, lower carbon fuels such as LNG or Efficient Newbuildings compared to similar electro-hydraulic cranes; efficient vessels will yield tangible and lasting Bio-Diesel. As part of a major expansion and renewal CO2 emission reductions per tonne/km, above programme, CNCo took delivery of six S-Class • Reduced auxiliary power, through enhanced and beyond those attributable to market • The Swire group purchased Argent Energy, vessels and two B.Delta39 bulk carrier vessels heat recovery, vessel energy management fluctuations. registered in UK, in 2013. This company (W-Class) in 2013. Fuel efficiency is a key system, low energy lighting and forced draft has successfully overcome the obstacles of element in the design and specification of both fans; We see this as a first step in eventually de- manufacturing bio fuel (IFO and MGO) from the S-Class and B.Delta39 Class, which include coupling the growth of our business from waste vegetable oil and fats (of which a number of features including: • Advanced hull design, especially around the increase carbon emissions, in line with our 500,000 tonnes are produced annually in the aft end and propeller area; ambition to be Net Zero with respect to carbon. UK alone), and their bio-fuel has been used • Main engines with maximum efficiency at by a number of bus companies in the UK 70% and 60% MCR for the new W and S • Fuel reducing trim-optimisation software It is currently too early to report on the actual for some years. We started investigating the type respectively, as the vessels are being placed on board. performance of these vessels and their impact use of fuel derived from waste fats, to power specifically designed for the draft and load on our overall emissions, and we look forward ships in the CNCo fleet, working with to be expected on each trade on which the to doing so in 2014. Wärtsilä to investigate the technical feasibility vessels are scheduled to be deployed; of this in their marine engines.

Slow Steaming • Increasingly biodiesel is being used in In 2011 we commenced our programme conventional marine fuel blends, with to systematically evaluate slow steaming quantities of up to 7% not requiring reporting. alternatives across all of our trades, estimating We are now working with our Bunker annual savings of 16,678 tCO2e (-2.4% of our suppliers to investigate the implications for total emissions) or 207,650 GJ energy. After a our CO2 reporting, and the potential for successful pilot involving fitting slide valves in increasing the blends, and will report further the main engines that permit slow steaming on in this area in 2014. one of our trades without affecting the engine we expanded the initiative to all the ships on that trade.

This initiative was undertaken through the generous sponsorship of our parent company’s Sustainability Fund and this has assisted in further moving CNCo towards its goal of having net zero environmental impact.

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 29

Cold Ironing Average energy performance of CNCo’s fleet, We sought initial discussions with various normalised by distance and cargo carried port authorities on the feasibility of cold- is expressed by the EEOI figure, which in ironing to mitigate the environmental impact 2013 was 30 for our liner fleet. This does not of FO consumption of our vessels on long- represent a significant change from previous term charters during 2013. This is certainly years, but it must be borne in mind that as technically feasible, but the capital costs are trade patterns change, so does our scheduling very high for both ship and port facilities, and of differently sized vessels on different trade modifying the ship-side fittings and equipment routes, so we are not comparing our fleet usage to take this reduces the economic flexibility of /operations on a like-for-like basis, year on year. re-programming ships to work on other trades in our liner network. Until cold-ironing is more We certainly are however closely monitoring widely available in ports it is almost impossible individual ship, and collective trade-fleet EEOI to economically justify fitting this equipment on metrics and are seeing a general downward our tramping B.Delta39 handysize class bulk trend in our footprint as the newer more energy carriers. efficient ships replace the older ones.

Average energy performance of CNCo’s fleet, normalised by distance and cargo carried is expressed by the EEOI figure, which in 2013 was 30 for our liner fleet.

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 30

CO2 emissions – electricity and CO2 emissions associated with onshore and • a good proportion of the increase in This represents a reduction of a material 16.8% staff travel offshore staff air-travel, decreased from 4,547 personnel was due to the absorption of in normalised Scope 1 and 2 CO2 footprint tCO2e in 2012 to 3,098tCO2e in 2013 (-31.9%). functions and services requiring little or no per unit of activity and is in small part due to This is despite our total workforce increasing travel, and which were previously carried out the increasing legislative requirements to use As with our overall GHG emissions from our by 31.54%. by third or allied parties, back into the CNCo lower sulphur fuel: by California Air Resources fleet, changes in our onshore electricity use group. Board (“CARB”) regulation off California, and (primarily in Singapore, Australia and New This is explained primarily by reduced business voluntarily within HK Port Limits (by members Zealand) reflect changes in occupancy and travel as the (anticipated) result of a number of of Fairwinds Charter group, including CNCo), business growth, rather than underlying causes: Other emissions to be regulated soon in HK and expected to changes in efficiency; Electricity consumption be expanded to the entire Pearl River Delta in (470,229kWh) and corresponding CO2 • the rationalisation of the Swire Shipping All the other 2013 emission metrics, for NOx, subsequent years. emissions (241 tonnes) rose by 1.74% in 2013, Liner Trades business model in which, as SOx, VOC and PM increased slightly (by reflecting renewed growth following office reported last year, we ensured that we had between 4.4 to 6.4%) and the major metric, of In the main however, it is substantive evidence space rationalisation in 2012 which resulted in local managers closer to our key customers, our Scope 1 and 2 CO2 footprint, increased of the very real step change in environmental a reduction of 17.3% in 2012. resulting in a reduced need for air travel, by only 2.4% over our figures for 2012. This is impact and fuel efficiency that has been despite an increase in fleet activity (measured achieved in our programme of replacement of All of the electricity used by CNCo is supplied • where internal meetings across the company as Vessel Operating Days) of 23.1%, from older tonnage with new, eco-designed, ships by the local national grids. locations were required, we extensively used 9,089 to 11,187 days. operated to the maximum efficiency using the our now fully commissioned teleconferencing latest technology, as detailed on page 28. facilities, and

2011 2012 2013 SOx metric Tonnes (mT) 14,776 13,051 13,858 NOx (mT) 17,506 15,510 16,259 Particulates (mT) 1,396 1,233 1,313 VOC (mT) 261 231 241

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 31

Waste Management In our operating offices, CNCo endeavours to reduce paper usage and wastage by CNCo monitors waste generation both ashore using only FSC certified paper and utilising and aboard. CNCo’s owned vessels follow paper recycling for all waste paper, including the IMO Marpol Waste categorising system. It confidential waste for which a dedicated was designed to control waste management “confi-waste” recycling contract is in place. on board vessels and define the ways in which different materials can be handled, either through disposal ashore, to sea, or disposal EN22A through incineration onboard. CNCo’s decision to use responsible, “Green The following categories are defined and and Safe” ship recycling yards when recycling included in our analysis: its ships the end of their economic lives continued through 2013. Our trans-shipper, • Cat. 1 Plastic (discharge to shore only) MV Erawan came to the end of its contract in • Cat. 2 Biodegradable timber and paper mid-2013 and was sold to be recycled at the materials same green and safe yard that was used in • Cat. 3 Ground biodegradable rags, glass 2012 for the 4 D-Class ships. or metal • Cat. 4 Paper products, rags, glass, metal, This is in accordance with CNCo’s voluntarily bottles, cargo residue etc. adopted policy that • Cat. 5 Food waste • Cat. 6 Incinerator ash (non-plastic) “It would only send vessels for recycling to yards that have valid and verified accreditation As a company determined to emphasise the issued by a reputable independent third importance of sustainable development and party against all standards: ISO 9001:2008, reduce its impact on environment, CNCo ISO 14001:2004, OHSAS 18001:1999 and also monitors the following in addition to the particularly ISO 30000:2009, and preferably be categories above: an “A” member of International Ship Recycling Association”. • Batteries sent ashore • Drums sent ashore • Waste oil sent ashore • Scrap metal recycled ashore

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 32

Context & Objectives encourage the expansion of, more responsible willpower and commitment from the shipowners The Green and Safe yards chosen were subject “Green and Safe” ship recycling yards. to not support those yards commercially. to on-site Superintendency and number of It is widely reported that a large number of ship detailed audits from both our Fleet Managers recycling yards globally using the beaching This has not gone unnoticed by some yards The key decision is to adopt a completely and Lloyds Register (LR) which was engaged method have poor (or very poor) health, safety globally and is a way for the yards to both new view of the way the company defines as our independent process monitor. Close out and environmental standards and are often maintain and enhance their ‘local licence to the boundaries of its operations. Historically, payments were dependent on the production of found using child labour along with violating operate’ by the provision of a safer workspace responsibility for an asset has ceased on a satisfactory recycling completion report by LR. labour and human rights. This evasion of for their employees, a less polluted environment completing the sale transaction. In the new the costs of responsible recycling by some and more harmonious society for the key stake- paradigm, the prior owner now continues to The yards were clean, and importantly injury- shipowners is causing avoidable harm to both holder communities in the vicinity of their yards. take some responsibility for its asset, (in this free, whilst we were there, and any hazardous the beaching yards’ workers and the nearby case – its responsible recycling) after all usual waste was all disposed of appropriately. The communities. Our corporate conscience Even if only a small percentage of the publicity liabilities and responsibilities would have passed yards we used were of course not perfect; LR will not permit us to support this and so we is correct, and the ship recycling yards that to a third party: the willing and aligned buyer. audited and issued non-conformances during have taken the decision, at an acknowledged practice beaching cause harm to workers the recycling, but the yard took these in the cost premium, to go beyond legislation and and the environment in the surrounding There are a number of yards that have been spirit of continuous improvement and closed positively promote the use of, and in so doing communities, this can be avoided by the externally and independently audited by the them all out prior to the completion of the EU and awarded “Green and Safe” AA status*. recycling. This shows that the yards are willing Already around 19% ships to be recycled are to improve their practices in the market where reported to be routed to yards rated / operating they receive financial incentive and are not this way. For our ships being recycled in 2012 squeezed out financially. It also shows that a our S&P broker charged a small premium to joint commitment will lead to better outcomes intimately manage the recycling process and for both parties. Recycling Plans were produced before work started. For further information: http://bit.ly/1osumph

The Green and Safe yards chosen were subject to on-site Superintendency and number of detailed audits from both our Fleet Managers and Lloyds Register (LR) which was engaged as our independent process monitor.

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 33

Outcomes 3 Further detailed research in this area would permit the Social Return On Investment (SROI) to be quantitatively calculated, based 1 The cost to CNCo of exercising leadership on the inputs (leakage of recycling work, by voluntarily but proactively using more and better commercial returns, from yards responsible, “Green and Safe” ship recycling with poorer, to those with better standards), yards over the yards with poorer standards outputs (reduced fatalities, injuries and has been a (not-insignificant) loss of around environmental harm) and impact on the 8.0% of the potential net profit from the communities and the businesses. disposal of the ships. 4 As taking more extended responsibility 2 The driver behind the decision was simply for ‘Life Of Asset’ and for those workers Market pressures will help them see that running clean and that CNCo decided that it was morally associated with it when it is up-cycled, unacceptable to support parts of the industry becomes more widely accepted in our green yards is the sustainable future for their workforce, the with such poor practices where workers industry, evidence of the increased use of local environment, and their own bottom lines. were being killed or injured unnecessarily “Green and Safe” yards will be demonstrated (as evidenced by the better safety records commercially to the laggard yards with in “clean and green” yards). However poorer standards. we believe that this voluntary taking of additional responsibility will be recognised 5 However boycotting “bad” yards must only by not only our employees, who will see be the first step; it is clearly recognised us as an Employer of Choice (and so that a close second intent is that the pan- increase retention/decrease turnover costs industry organisations and industry leaders within the company), but also our clients, must forge a partnership with those laggard customers and analysts (especially those yards that have the commitment (borne of servicing Socially Responsible Investors natural market forces) to help them raise – an increasing band these days) that we their standards. Market pressures will help are striving to be an industry leader on them see that running clean and green yards Sustainability as further evidenced by our is the sustainable future for their workforce, membership of SSI. the local environment, and their own bottom lines.

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 34

What are the first steps an organisation can better protection of the environment in key take to replicate this idea/initiative? stakeholder communities that the shipping industry has historically relied on, but have 1 The owner of the ship to be recycled must been under the radar for many in the past. decide to exercise leadership in the industry, even in the absence of legislation. We are proud to have commitment from senior This involves the paradigm shift of taking management through to the Fleet Operations responsibility for an asset even after it has department to be able “to do the right thing”. been transferred to a new owner. We believe that by showing leadership and being transparent in this area we can begin 2 The owner of the ship to be recycled must to convince our peers to help enhance the establish an internal policy to accept the environment, the social conditions of ship need to pay a reasonable premium recycling yard workers and their families, and to support safer working practices and the reputation of the industry.

EN 22B The SSI is a four-stage initiative designed to help the industry make long-term plans for Hand in hand with responsible recycling goes future success. Its membership comprises a Hand in hand with responsible recycling goes responsible responsible shipbuilding. This enables us to cross-industry grouping bringing together 16 “close the loop”, such that if we can track the leading companies from across the industry shipbuilding. This enables us to “close the loop”, such material that goes into a ship then when it and around the world with NGO’s Forum for that if we can track the material that goes into a ship then comes time to recycle it we know where the the Future and acting as “robust in-house more hazardous and more valuable materials challenger”, the World Wildlife Fund: when it comes time to recycle it we know where the more are and the ship can be dismantled more safely hazardous and more valuable materials are and the ship and cost-effectively so the old asset is UP- • Ship owners, charterers and operators: cycled and the steel and other materials more BP Shipping, Bunge, Cargill, Carnival can be dismantled more safely and cost-effectively efficiently used to build the next new asset. The Corporation, China Navigation Company, story of what we are doing follows below. Gearbulk, Maersk Line, Rio Tinto Marine and Tsakos Energy Navigation. In mid-2011, CNCo committed to work with • Shipbuilders, engineers and service other industry leaders to reduce shipping’s providers: Daewoo Shipbuilding & Marine negative effects on the environment and joined Engineering; Wärtsilä. the Steering Group of the Sustainable Shipping • Banks and insurers: ABN Amro, RSA. Initiative (SSI). • Classification societies (setting technical standards): DNV and Lloyd’s Register • Representing shipping customers: Unilever

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 35

In the first stage, members launched a Case for In 2012 CNCo joined the SSI “Closed Loop the last owner, and making the earth’s resources The 2040 goal of the CLMM is to achieve full Action in May 2011 in which we stated: Material Management” (CLMM) workstream. last longer. Consider: the energy required to transparency and accountability for the social The three members of the CLMM work stream manufacture a tonne of steel from iron ore (in and environmental impacts from construction “Our goal is to transform the global shipping (Carnival Cruises, Maersk and CNCo) worked itself a finite resource) is 60 times less than that through to recycling of ships. industry and the wider maritime sector, on three pilot projects and a stakeholder required to recycle a tonne of “scrap” steel! establishing a new, sustainable approach as the consultation process to investigate the Our findings will be reported in our 2013 SD norm.” feasibility and added-value of using a database This concept is already in wide usage in the Report, and at an industry-sharing event in system to track shipbuilding materials from European and US automobile industry, so we Singapore in Sep 2013, but we firmly believe It analyses the social, environmental and building to recycling. are seeking to adapt it to the marine sphere that if scaled up the impact could be … economic challenges shipping faces and and avoid “reinventing the wheel. how best to react to them and it calls on The goal is to achieve full transparency and • Safer, cleaner, healthier and more profitable the industry to take far-reaching action. This accountability for the social and environmental The CLMM challenge was to look at how ships ship recycling by helping owners realise the analysis is a call to action for the worldwide impacts of all materials, from construction could be better designed, built, operated and true value of ships at the end of their life shipping industry. The SSI members believe through to recycling of ships (“Life of Asset”). dismantled to drive higher value and more • Significant CO2 savings from more effective that, with far-sighted leadership, businesses This goes significantly beyond the concept of efficient recycling of materials and components. recycling in the wider ‘steel loop’ and can weather the storm and emerge stronger a “Green Passport” for ships that only covers The aim was to understand the feasibility and establishing ways to further reduce the use and more sustainable. And we believe that the hazardous materials and looks at ALL materials value of tracing and tracking the materials used of finite resources in future shipbuilding industry has a vital role to play in helping create that have gone into the construction of a in ship construction through to recycling. Our • Potential CO2 and financial benefits from a sustainable, low-carbon economy. particular ship. That ship can then be much target is to collect data of about 98% by weight ‘design for remanufacture and reuse’. more safely and efficiently recycled at the end of of all the materials used in the construction of its life, giving a higher return in final sale value to two new vessels and a cruise ship cabin.

The CLMM (“Closed Loop Material Management”) challenge was to look at how ships could be better designed, built, operated and dismantled to drive higher value and more efficient recycling of materials and components.

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 36

Energy Saving Initiatives – CNCo is also working with the other CNCo’s new S-Class vessels are designed to • Reusing exhaust gases from the main A Case Study members of the industry leadership group, have “best-in-class” environmental features, engine and generators to make steam to the Sustainable Shipping Initiative¹, to meet including fuel efficiency and emission heat the fuel its vision for 2040. This vision states that reductions to deliver the lowest carbon A commitment to building green, sustainable “Shipping plays a critical role in the global footprint possible from operations. • Using a hull form that optimises cargo vessels that save energy and perform efficiently economy. Recognising that the challenges capacity for low fuel consumption was at the forefront of CNCo’s plans for the 8 of the future demand significant change, SSI All areas of the ships have been designed new S-Class 31,000dwt MPVs, designed to members have developed a shared Vision for to achieve energy savings and reliability by • Wake ducts to improve fuel efficient carry containers, bulk and break-bulk cargo, 2040 – a vision in which sustainability equals considering such factors as the likely trade that were built at Zhejiang Ouhua Shipyard, success”. The SSI understands that this routes together with the speeds that will • Cargo cranes that consume only 40-50% Zhoushan, PRC, and launched in 2013. means, inter alia, probably be required to maintain the schedules, power of traditional cranes, and are the potential load factors and thus draft, etc. electric rather than hydraulic to mitigate all CNCo has a strategic vision “to be the leading “Changing to a diverse mix of energy chances of oil spills to the environment provider of sustainable shipping solutions sources, using resources more efficiently A list of energy efficiency initiatives include: and our customers’ partner of choice”. To and responsibly, and dramatically reducing • Adoption of a newly designed Sea Water meet this vision we have defined 5 strategic greenhouse gas intensity”. Cooling System (“SWCS”) for the main objectives, including that of Operational engines and generators on board. Excellence: promoting innovation, operational Major capital expenditure events such as excellence and providing a safe, healthy and committing to building a new class of ships secure working environment. Underlying this are the classic times to seize the opportunity are defined goals to help us achieve this, to make a step change in technology with including, significantly, one of halving our Net a commensurate increase in efficiency and Environmental Impact. decrease in negative environmental impacts.

CNCo has a strategic vision “to be the leading provider of sustainable shipping solutions and our customers’ partner of choice”.

¹For further information on the Sustainable Shipping Initiative visit: http://bit.ly/1Af6ue2

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 37

The latter initiative involves a critical Given its commitment to operating sustainably, component with huge potential for energy CNCo investigated methods of controlling the savings as well as operational and maintenance pump’s flow rather than running it at 100% savings. Controlled by centrifugal pumps and to save energy. We selected a new system: AC motors, the SWCS is a key component on “Colfax Fluid Handling Smart Technology CM- ships. The system pumps ambient sea water 100 Series” to provide variable speed operation into a circulating loop. This loop provides for the pumps, giving a potential energy saving a heat exchange with the vessel’s fresh of 80% per ship, significantly reducing the water cooling system, which works to cool energy expended and thus lowering each the shipboard energy consumers, including vessel’s carbon footprint. the main engines, generators and auxiliary equipment. Once the sea water has taken on There are additional advantages in terms of heat from the fresh water, it is pumped back sustainability: by running the pumps at only the into the ocean as cooler ambient sea water is level needed to provide pre-set cooling levels, drawn in and introduced into the system. the effective lifetime of the pumps, motors and related equipment is extended. This then The sea water cooling pumps on the new results in less frequent need for replacement, S Class vessels are arranged in 2 x 100% and fewer items that require scrapping/ configuration, which means that one pump recycling. is always active and, in a traditional system, would operate at 100% flow with the second CNCo expected savings of around 50% pump being redundant in normal service. annually for repairs and maintenance. The CM-1000 equipment selected provides 24/7 However based on cooling level requirements, intelligent monitoring to detect component Jerry Chen, CNCo’s Product Manager said at “Sustainability is about having the operating pump does not always need to failure, misalignment, wear, damage or leakage. the beginning of the S-Class operations: the least negative impact on the run at 100% flow (a worst case scenario is 32 Monitoring is constant, which permits faster, environment. We are confident this °C at full flow). Depending on the area of the more targeted, maintenance intervention than world in which the vessel is operating, sea spot / regular checking by engineering staff. If system will work well to deliver more water temperatures may be low enough that a auto-monitoring detects the need, the pump sustainable operations, and that lesser flow would provide the sufficient cooling will switch the system from the operating pump support and spares for the pumps to the fresh water cooling system. to the stand-by pump to ensure continuity of operation whilst repairs can be effected. After will continue to be available for 30 a year of operation CNCo found that the new years, the expected lifetime of this system works effectively and saves significant class of ships”. amounts of power, with a commercial payback of about 6 months simultaneously with the environmental benefits this upgrade provides.

The China Navigation Company / Sustainable Development Report 2013 Detail: 2013 Environmental Summary 38

Total Number of Significant Oil Spills

As would be expected, the prevention of spills and leakage of oil and other hazardous marine pollutants, and our effective response should there be an incident is assessed as having the highest materiality to all of our stakeholder groups and to ourselves internally as a major impactor on our business.

In recognition of this, our target for any oil spills of any size from our fleet continues to beZERO .

The lowlights of 2013 were two very minor, but avoidable, spills of hydrocarbons (1litre of hydraulic and 20 litres of sludge). Procedures have been tightened to prevent a recurrence.

However they were still below both our target rate for 2013 and a very healthy 42% below the Tokyo MoU industry average rate of 3.07 for Dec 2013 (and 36% below the Paris MoU rate of 2.77). We believe this is in part due to the bedding in of many brand new ships and we are working to resume a decline in the DpI rate in 2014.

Our target for any oil spills of any size from our fleet continues to be ZERO.

The China Navigation Company / Sustainable Development Report 2013 Detail / Environment 39 Other Environmental Indicators

We do not report herein any GRI water indicators (EN8, EN9, or EN10), as these are a) not material to the provision of shipping services and b) we actually produce potable water from sea water on our ships, using waste heat from the main engines and / or reverse osmosis machines. All waste water is then treated and returned to the sea, so this activity has a net zero effect on the use of natural resources.

We will seek to report Ozone Depleting Substances (EN 19) in the next report, not because we have material ODS emissions post the Montreal Convention coming into force, but because even Zero Ozone Depleting Potential (“ODP”) substances often have a high positive Global Warming Potential (“GWP”) which remains increasingly important.

The China Navigation Company / Sustainable Development Report 2013 Detail / Labour 40 Employment

Total workforce by employment type, were male (from 77.6% in 2012) and 27.1% background, disability, family status, gender Staff turnover or attrition in New Zealand in employment contract, and region, broken female (from 22.4%), a welcome move of 9.4% identity, marital status, nationality or ethnic 2013 was 7.81%. Benchmarking data are hard down by gender. towards more equal female representation. origin, political opinion, race, religion, sexual to find, but New Zealand Government Statistics Also at the support staff level the gender orientation or social group. Our Corporate Office and third-party studies do refer to the Total number and rate of new employee hires disparity has decreased further by 4.6% with Code of Conduct requires all employees to country as “a nation of job hoppers” with a and employee turnover by age group, gender, males dropping to 36.3% (from 38.6%) and behave with courtesy and respect towards common turnover rate of around 14% annually, and region. females increasing to 63.7% (from 61.4%) from everyone encountered in the course of so this is positive compared to the national 2012 levels. business. figures, but still materially higher than we would Composition of governance bodies and ideally like. breakdown of employees per employee During the recruitment process we always Only five employees (0.88%) of our shore staff category according to gender, age group, stress CNCo’s commitment to being an equal were temporary, as we actively seek to offer In the larger job market of Australia in 2013 minority group membership, and other opportunities employer. We welcome diversity and maintain long-term employment. This is a the rate was a comparable 6.78%. The local indicators of diversity. in the workplace, believing that it adds material 50% decrease from 2012. The average length AMMA and ABS statistics on labour mobility for value to an organisation by helping workers to of service in New Zealand has decreased the maritime sector reports an average rate of approach their jobs from different perspectives. slightly year-on-year from 5.29 to 5 years, in around 11%, twice the rate of 2010, so in both All our offices are significantly, and happily, Australia from 7.05 to 6.9 years but increased locations the CNCo attrition rate is a welcome multicultural and the nature of working with in Singapore from 3.2 to 4.3 years. half to two thirds of applicable benchmarks. different parties around the world adds another In 2013 the CNCO Group employed 1,437 positive dimension to the cross-cultural people, split between seastaff on our ships (872) working environment. and shore staff (565). Out of the total shore staff, 51 were based in shipyards supervising When seeking new employees, CNCo has our large programme of ship newbuildings and discussions both internally and with any 514 positions were based in our four significant external placement consultants to ensure that employment locations: Singapore (Head Office) Persons With Disability (PWD) with the skill set – 29.91%, Australia – 19.47% and New Zealand matching our requirements are included in the –14.87% and PNG – 22.48%. process.

This is an increase of 31.54% over 2012 (in those four locations) and reflects establishment Respect in the Workplace of CNCo office in PNG and growing the number of employees across Swire Shipping and Swire CNCo is committed to providing an inclusive Bulk Divisions in their locations. work culture and appreciates and recognises that all people are unique and valuable and Of the onshore employees, 48.5% were should be respected for their individual abilities. male (from 54.0% in 2012) and 51.5 were female (from 46.0% in 2012). However at the CNCo will not tolerate harassment or management level by the end of 2013, 72.9% discrimination on the basis of age, cultural

The China Navigation Company / Sustainable Development Report 2013 Detail: Labour − Employment 41

In Singapore the turnover rate continues to In PNG the turnover rate was 12.88%. We remain high, at 15.12% in 2013. Whilst this were unable to find a reliable and authoritative is much higher than our other major office average local turnover rate against which to locations, it is still lower than the Singapore benchmark. Further given that CNCo only benchmark rate (the published annualised re-established an office in PNG in 2013 these monthly resignation rate figures for the figures will continue to be monitored in an effort Administrative and Support Services sector to establish a credible benchmark. from Singapore Ministry of Manpower) of 16.6% but it is still too high, and efforts are Overall staff retention in 2013 for shore staff continuing to be made to reduce it through was 89.14% and 97% for sea staff (officers). increased alignment, engagement, mentoring, Shore staff retention was slightly below communication and ensuring that our internally set target of >91% and is an on- remuneration packages are properly aligned going area of focus for the company, especially with the relevant sectors and skills of our in Singapore (see above). However sea staff employees. retention is much higher than targeted at >90% and is believed to be significantly higher than our peer group. Efforts will be made to benchmark this in the next report.

In particular we recognise that whilst we have an excellent cadre of employees, the physical separation between the onshore support staff and the seagoing operational staff that through this medium. NiuSwire is sent out to all Given the wide variety of our nationality and is peculiar to the shipping industry means our offices and sea staff monthly. work locations, we do not herein give a detailed that we must spend more time and resources breakdown of types of employment contracts than many other industries in ensuring that In 2013, as a follow up on the Alignment and or remuneration / pension entitlements as this we communicate what we are doing and Engagement (“A&E”) survey conducted in would a) be of little material value to anyone in where we are going corporately, and that the July 2012, the HR team ran a series of focus a different region, b) not justify the resources communication is a dialogue not a monologue. groups (workshops) in Singapore, Australia required to produce the detail. and NZ to further understand staff engagement To help maintain and enhance these lines of and alignment issues. The results from those Suffice to say, all of our contracts are in communication between the sea and shore workshops were fed into HR strategy for 2014 accordance with local employment law as staff across the various countries where we and served to continuously improve how the a minimum and are blind to gender identity have stakeholders, we continued to use our company communicates its core strategy and or age, whilst recognising experience and in-house monthly magazine, “NiuSwire”, objectives and how all employees have a part competence/qualifications. to announce any important companywide to play in reaching these objectives. initiatives and bring everyone closer together

The China Navigation Company / Sustainable Development Report 2013 Detail: Labour − Employment 42

Worldwide, 93.81% of our staff are classed With respect to the ratio of sea staff on as “local”, slightly less than in 2013. (“local” permanent / fixed term contracts, we strongly is defined as a national or permanent resident seek to have all sea staff on permanent in the country of employment). The balance contracts of employment. of 6.19% is classed as expatriate. About 13% out of the total number of expatriate The historic issue of the employment of staff are parent company managers who are seafarers (and all other Overseas Filipino rotated through internal postings to gain wide Workers (“OFW”) in the Philippines being sectorial experience throughout the group as strictly controlled by the Philippines Overseas they progress during their career. The rest are Employment Agency “POEA” meant that it employed as industry experts and have long was illegal to employ a Filipino seafarer under term careers with the company worldwide. a direct contract with an overseas company but this has now been resolved as all seafarers We employed a total of 530 seafarers to fill employed worldwide are now required to be positions at sea (does not include 342 seafarers covered by a Collective Bargaining Agreement being on leave) as at 31 Dec 2013. This is a post the adoption of Maritime Labour significant increase of 27.4% from 2012 (385). Convention (“MLC”) 2006 convention. We This number will continue to increase over the believe this delivers much more security for our next 2 years as CNCo introduces new vessels seafarers, and in increasing our retention rates to the fleet under its fleet renewal and Bulk will deliver additional value to our bottom line, division establishment plans. considering the level of discretionary training that our seafarers undertake. Out of the total number of seafarers, 305 or 34.98% are from the Philippines, our biggest CNCo employs seafarers from more than provider of seafarers, followed closely by eleven different nationalities covering more 33.03% or 288 are from Peoples’ Republic of than five different religious faiths within its China (“PRC”)/ HK and Myanmar and 87 or global marine operations, involving 24 owned 9.98% are from PNG, see Table LA 1.1. We ships plus 4 chartered ships (as at 31 Dec The China Navigation Company employs seafarers from seek to run all of our operations to a single 2013). They currently call at many ports “international” standard. worldwide but are predominantly working more than eleven different nationalities covering more within the Asia Pacific region, demarcated by than five different religious faiths within its global marine We do not report in which country or region Vladivostok in the north, Port Klang in the west, the sea staff (the majority) are working. Due to Lyttleton on New Zealand’s South Island in the operations, involving 24 owned ships plus 4 chartered ships the trans-border nature of working at sea the south and Vancouver, Canada in the east, with (as at 31 Dec 2013). geographical distribution is very dynamic and a significant presence in trades to and from thus would only be a snapshot at a moment in Papua New Guinea. time.

The China Navigation Company / Sustainable Development Report 2013 Detail - Labour 43 Occupational Health & Safety

Rates of Injury, Lost Days and Absenteeism sessions to ensure that the driver of near miss and Total Number of Work-related Fatalities reporting as a proactive safety tool is clearly by region understood by all.

The safety initiatives introduced in 2011 The General Permit to Work or Tool Box Risk and 2012 have started to show a sustained Identification Permit (TRIP) has continued to improvement for personal safety in 2013. create greater focus on safety for all work There were 3 LTIs for 2013, one fewer than in activities carried out on board. This enables 2012. The reporting of leading indicators (e.g. potential hazards to be identified and control near misses) fell by 7.2% for the period 2013 measures implemented before commencing compared to 2012 as six (6) new ships were any work. added to the Fleet. (At the end of 2012 there were 15 owned and managed ships whereas at Similarly with TRIPs being reported there has the end of 2013 there were 24 owned ships in been fall of 25.6% for the same period as it the Fleet of which 3 were managed by a third takes time to adapt to the TRIP requirement. party). (It is not CNCo policy to prescribe a The number of TRIPs reported during 2013 number of near misses to report each month; stands at 103 per ship per month, from the 135 we rely on the integrity of our staff to report for the year 2012 and it is envisaged that as the quality near misses which are then shared with TRIP concept becomes more firmly embedded the Fleet in the monthly Safety and Quality with our sea staff, the number of near misses report). With a large number of new joiners will start to reduce year on year. This is to the Company it takes time to adapt to the because identifying hazards and implementing reporting culture. controls should eliminate opportunities for near to demonstrate its use and benefit for safety LTIs but also for severe near misses where the misses to occur. for all work related activities. Notwithstanding potential for injury and damage are assessed Near Miss Reporting – Instruction in the that it is a legal document; its intrinsic purpose as significant. The 4-Box register is reviewed understanding of near miss reporting is carried Training in the use of the TRIP is carried out is to allow a considered and measured risk at every Safety Awareness Course (SAC) so out at all internal Safety Awareness training during all safety awareness courses in order management process to take place before that the learning outcomes are not forgotten starting every work activity. As a consequence and feedback from the incidents reviewed. A of slightly retarding the commencement of Number of NGO’s have asked to use CNCo’s work it allows more time for work to be planned 4-Box concept, and this permission has of safely. course been freely given.

The safety initiatives introduced in 2011 and 2012 have 4-Box Alert: The 4-Box concept has proven a The full CNCO Safety Statistics for sea staff significantly powerful tool in helping to deliver can be found in data table LA7 on page 44. started to show a sustained improvement for personal a very strong safety message to the Fleet in safety in 2013. a very short time frame. The 4-Box is used There was no work-related fatality in CNCo in for a variety of different incidents, not only for 2013.

The China Navigation Company / Sustainable Development Report 2013 Detail: Labour − Occupational Health & Safety 44

Injuries

TRCF per 1 mill LTIF per 1 mill 4 per. Mov. Avg. 4 per. Mov. Avg. MANHOURS MANHOURS (TRCF per 1 mill MANHOURS) (LTIF per 1 mill MANHOURS)

2012 2013 2014 8

7

6

5

4

3

2

1

Personal Injuries / 1 million man hours worked Personal 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Quarter The China Navigation Company / Sustainable Development Report 2013 Detail: Labour − Occupational Health & Safety 45

Near Misses

2011 2012 2013 2014 400

350

300

250

200

150

No. of Near Miss Reports 100

50

0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

Quarter

The China Navigation Company / Sustainable Development Report 2013 Detail / Labour 46 Training and Education

Governance Training Training and development

CNCo expects all its employees to comply Shore Staff with the Code of Conduct and in 2013, the company introduced Code of Conduct training CNCo continues to invest in the training, for its shore employees. The training was learning and development of all employees. initially conducted in Singapore and the training The focus of shore employees’ training material was prepared for wider company had been on soft skills development, such roll out in 2014. This was also considered as negotiation skills, people management, advisable as we seek to meet the provisions of interpersonal skills and leadership skills the UK Bribery Act 2010 and the US Foreign training. Corrupt Practices Act (FCPA). In Singapore, shore staff attended 1,086 hours To ensure that employees understood the of training with the total cost of SGD 77,533. Code, an on-line ethics test was introduced. The exercise comprise viewing an FAQ video, In Australia, training for shore staff covered reading the Code and then answering five 2,085 hours with the total cost of AUD 122,967. randomly chosen questions from a question bank. All employees are expected to obtain 100% In New Zealand, shore staff employees score in the on-line quiz with those who initially received 983 of training hours with the total don’t, being mentored through until they do. training cost of NZD 24,188. The test is repeated biennially to ensure the employees refresh their awareness with the content of the Code. Sea Staff vessels to the fleet, there was a need to ensure objective, CNCo has committed to recruit 15% Statutory Training – International Convention that all our engineers and electrical officers of its required cadet intake from the key and on Standards of Training, Certification and attend main engine and crane operation core stakeholder communities in the South Watchkeeping for Seafarers (STCW): 2010 (as courses conducted by the equipment Pacific Islands by the end of 2016 (which has amended in Manila) will come into force on manufacturers. Prior to the vessels’ delivery, been met) and 25% by the end of 2020. 01 Jan 2017. In 2013, officers and crew were safety familiarisation was completed for each undertaking the relevant courses required to vessel by way of on-site training. CNCo also revalidate their Certificate of Competency and committed to reinstating the Safety Awareness prepared our seastaff cadre to be ready for this Courses in Singapore in 2014 for our officers. Details of the breakdown of CNCo’s seagoing implementation. workforce as at 31 Dec 2013 are shown in the The Cadetship Programme was on-going with tables in the Data Section. CNCo puts a lot of focus on Safety Training. cadets from PRC, HK and from the South With the addition of the new S- and W-Class Pacific Islands. As a strategic sustainability

The China Navigation Company / Sustainable Development Report 2013 Detail / Labour 47 Diversity and Equal Opportunity

CNCo is “gender blind”; employing, developing However at the management level by the IHS Fairplay reported in Jan 2013¹ Shipping The IMO World Maritime University in Malmo and advancing its employees on the basis of end of 2013, 72.9% were male (from 77.6% has traditionally been a male-dominated has been concerned about this imbalance their ability. Remuneration is based on role; in 2012) and 27.1% female (from 22.4%), a industry, but the increasing use of technology since 2008², but positive change is still glacially there is no differential in employment terms welcome move of 9.4% towards more equal at all levels and across all sectors is an slow. based on gender identity, (except where local female representation. Also at the support staff incentive for the brightest talent to be attracted legislation prescribes different conditions, such level the gender disparity has decreased further to maritime as a career. We reiterate that CNCo is gender-blind when as maternity/paternity leave). by 4.6% with males dropping to 36.3% (from employing new seafarers, and certainly 38.6%) and females increasing to 63.7% (from Employers are much better at offering flexible when considering their development and With respect to gender balance on governing 61.4%) from 2012 levels. working arrangements than they used to be, advancement. This is an area that will require bodies, there was one female, our Finance but there is still a way to go on transparency a long term strategy to be developed over the Director, on the CNCo Board of Directors and Within the seastaff only 4 of the 530 were regarding remuneration. It can no longer next few years. on the Executive Committee during 2013. female. This is obviously a significant gender be said that shipping’s future depends on imbalance, but (whilst not accepted or male seafarers coming ashore to run male- Of the onshore employees, 48.5% were male condoned) is simply reflective of the state of dominated companies in an industry still (from 54.0% in 2012) and 51.5 were female the global shipping industry (excluding the hindered by gender imbalance. But the (from 46.0% in 2012). leisure sector). numbers are far from equal.

CNCo is “gender blind”; employing, developing and advancing its employees on the basis of their ability alone.

¹http://bit.ly/1GDMIQu ²http://bit.ly/1F9Ol6W

The China Navigation Company / Sustainable Development Report 2013 Detail / Human Rights 48 Non-Discrimination

Total number of incidents of “Discrimination” encompasses “incidents There were zero acts of discrimination or background, social group, disability, sexual discrimination and actions taken on grounds of race, colour, sex, religion, harassment reported on any grounds to, or by, orientation, marital status, family status, age or political opinion, national extraction, or social any CNCo personnel during the calendar year political opinion. The Code requires all Relevant origin as defined by the International Labour 2013. Persons to behave with courtesy and respect Human Rights (and Diversity and Inclusion) are Organisation (ILO), or other relevant forms of towards everyone encountered in the course of both issues that are in the upper right quadrant discrimination involving internal and/or external The CNCo Code of Conduct was revised at the business. of the CNCo Materiality Matrix – as being of stakeholders across operations in the reporting beginning of 2013 to ‘rev 4’ but the provisions high importance to our stakeholders and for the period”, and includes “harassment”, defined with respect to discrimination and harassment The Code promotes the following principles: sustainability of our business. Accordingly we as “a course of comments or actions that are are unchanged (except that a “child” in “child have a robust and clear policy on harassment, unwelcome, or should reasonably be known to labour” is now defined as “being under the age • Upholding all applicable legal and discrimination and bullying, whether physical, be unwelcome, to the person towards whom of 16, or local minimum age, whichever is the corporate occupational health and safety verbal or non-verbal. they are addressed”. higher”). standards; • Not permitting any breaches of It can also be found at http://bit.ly/18vDFT7. It employment law or the use of child contains these following explicit provisions: (defined as being under the age of 16, or local minimum age, whichever is the higher) or forced labour; Respect in the Workplace • Reporting unacceptable conduct to line management or the business unit head; CNCo is committed to providing an inclusive • Not condoning bullying and harassment; work culture and appreciates and recognises • Complying with any legal requirements that everyone is unique and valuable and concerning the collection, holding, should be respected for individual abilities. processing, disclosure and use of personal CNCo will not tolerate harassment or data; discrimination on the basis of gender, religion, • Respecting intellectual property rights, race, nationality or ethnic origin, cultural including copyright, belonging to others;

There were zero acts of discrimination or harassment reported on any grounds to, or by, any CNCo personnel during the calendar year 2013.

The China Navigation Company / Sustainable Development Report 2013 Detail / Society 49 Anti-Competitive Behaviour

Total number of legal action for anti- One area where we have been especially competitive behaviour, anti-trust, and particular to avoid any possibility of accusations monopoly practices and their outcomes. of anti-trust type commercial collusion is at the biannual meetings of the members of the CNCo takes all these practices very seriously Sustainable Shipping Initiative. Whilst the and requires both its employees and its meetings are not convened to discuss any contractors the highest ethical standards, as issues of commercial relevance to any of the described in its Code of Conduct (“CoC”). We members whatsoever, the text of an anti-trust are pleased to report that, as in 2012, in 2013, statement is formally read to all members at the CNCo was not involved in any legal actions beginning of every meeting as a reminder. for anticompetitive behaviour, anti-trust, and monopoly practices. The anti-trust statement reads:

Details of our rigorous internal regime for ABN AMRO, ABS, AkzoNobel, Bunge, Cargill, making employees aware of our Code of Carnival, China Navigation Co/SWIRE, DNV Conduct and its contents are contained in (Det Norske Veritas), Gearbulk, IMC, Lloyd’s section SO8: Compliance. Register, Maersk Line, Namura Shipbuilding Corporation, Rio Tinto, U-Ming Marine Whilst CNCo planned in 2013 to enhance Transport Corporation, Unilever, Wartsila, its auditing of its suppliers to ensure WWF and Forum for the Future are members their compliance with the Supply Chain of the Sustainable Shipping Initiative, working Sustainability CoC, this target was not towards the Vision 2040, and intend to achieved. We expect this to be developed into cooperate in full compliance with the antitrust a more robust and formal system in 2014. and competition laws of the United Kingdom, • Current or future prices charged by a • Individual company production plans, the European Union, and other applicable company costs, timelines, levels or quantities of jurisdictions. The companies recognise that production these laws are intended to promote and protect • Current of future costs of products or free and open competition and agree that their services to a company • Refusal to deal with any competitor, conduct in furtherance of the Vision 2040 will supplier, or customer be consistent at all times with this objective. • Price-related data or practices of individual companies, including but not limited • Allocation of markets, territories or In adherence to this principle, the companies to discounts, advertising terms, terms of customers between or among the acknowledge and agree that in any meetings or payment or credit, marketing practices, companies other discussions between or among members sales practices, bids or bid practices, of the group, the following subjects will not be warranty terms, profitability or other profit- • Endorsements of individual companies, discussed: related information products or services

The China Navigation Company / Sustainable Development Report 2013 Detail / Society 50 Compliance

Monetary value of significant fines and This is slightly higher than the previous year, non-monetary sanctions for non-compliance but still below both our target PSCI rate for with laws and regulations 2013 (<2.0 DpI) and a full 42% below the Tokyo MoU industry average rate of 3.07 for Dec 2013 In 2013, CNCo received no fines for non- (and 36% below the Paris MoU rate of 2.77). compliance with non-environmental laws and We believe this is in part due to the bedding in regulations. of many brand new ships and we are working to resume a decline in the DpI rate in 2014. We have previously reported as non-monetary sanctions received by CNCo any detentions The older vessels’ increasing age profile has related to the results of Port State Inspections meant that increasing effort and resources have (“PSI”) of ships in the (owned) fleet (as been applied to turning this trend round and detentions in chartered in tonnage are the greatly reducing the DpI rate towards zero. We primary responsibility of the relevant owners). expect that their replacement with our newer We are pleased to report that in 2013 there tonnage this year and in the future will greatly were NIL detentions of any owned (or chartered assist us on this journey. All these statistics in) tonnage. are circulated around the fleet, and crew are recognised for good performance when a During 2013, the fleet of 24 owned ships were Port State Inspection has resulted in zero inspected on a total of 58 separate occasions deficiencies. (approximately 9% fewer inspections per vessel than the previous year). 43% of these inspections led to a totally clean bill of health, with the remainder leading to a total of 105 deficiencies being found, giving an average of 1.78 Deficiencies per PSI (DpI).

In 2013, CNCo received no fines for non-compliance with non-environmental laws and regulations.

The China Navigation Company / Sustainable Development Report 2013 Data 51

This section reports all the supporting data that is used to provide the narrative in the Detail section. The data is aggregated from many sources - primarily the owned and managed fleet and our offices worldwide, that are contained within CNCo’s Organisational and Operational Boundaries as shown in the Summary section on page 4.

We review both the boundaries and which data is material for reporting to our stakeholders annually.

In this section:

52 Reporting Philosophy, Methodology and Scope 53 Fleet Breakdown 55 Labour Data and Tables 56 Abbreviations 58 GRI Assurance Statement 60 G3.1 Content Index GRI Application Level C 71 Contact

The China Navigation Company / Sustainable Development Report 2013 Data 52 Reporting Philosophy, Methodology and Scope

The CNCo SD report on the year 2012 was stakeholders. The degree of importance of additional GRI indicators that are relevant to published at the end of 2013. At the beginning each has been plotted against these two axes, those areas over which we have great control of 2014, the senior management of CNCo met and the resultant matrix is shown on page 19. and are in the upper right quadrant of the to review the company’s progress against its Materiality Matrix e.g. Corporate Governance, strategic targets and goals for 2016 and 2020, The slightly more than 40 issues were then Oil Spill Prevention and Health and Safety, and and to map the path ahead towards meeting divided into those over which >66% control as graduating down to a lesser degree for those both the CNCo Vision: “to be the leading to their outcome lies with CNCo, e.g. Health issues in the bottom left hand corner of the provider of sustainable shipping solutions and Safety of our operations, those over which matrix, and/or over which we have little control and our Customer’s partner of choice” and CNCo can only exercise <33%, e.g. weather (aside from noting our mitigation strategies). the SSI Vision 2040, where shipping plays a and political stability in our stakeholder areas, critical role in the global economy and in which and those in between which we can exercise a Over time we will continue to verify the “sustainability equals success”. reasonable measure of control in conjunction placement of the issues on the matrix with third parties. in discussion with our key stakeholders, At this meeting the management developed in accordance with our Stakeholder a materiality matrix of issues that have Within this report we have sought to prioritise Communication Plan that will be developed importance to our business and to our and emphasise reporting on all the core and in 2014.

The China Navigation Company / Sustainable Development Report 2013 Data 53 Fleet Breakdown

Owned Vessels: In Operation as at 31 Dec 2013

Vessel Name Specific EVDI Year IMO No. Speed DWT GT NT LOA Max Capacity Hold Hold Cargo Gear (T) Country of Vessel’s Type Emission Emissions’ Built (Knots) (SSW (m) Breadth Nominal Capacity - Capacity - Registration in grm Rating MTs) (m) (TEU) Bale (m³) Grain (m³)

Island Chief 24.732 D 1990 8810449 15.5 13387 10352 5804 158.1 22.0 981 N/A N/A 3 x 45T Hong Kong Mihos Highland Chief 24.371 D 1990 8809189 15.5 13668 10357 5802 158.1 22.0 876 N/A N/A 3 x 60T Hong Kong Mihos Coral Chief 24.888 D 1990 8809191 15.5 13387 10352 5804 158.1 22.0 981 N/A N/A 3 x 45 T Hong Kong Mihos Papuan Chief 19.630 B 1991 8901705 15.5 13557 10350 5802 158.1 22.0 981 N/A N/A 3 x 45T Hong Kong Mihos Kokopo Chief 19.040 B 1991 8907412 15.5 13387 10352 5804 158.1 22.0 981 N/A N/A 3 x 45T Hong Kong Mihos Chenan 14.519 G 1992 9007374 15.0 25561 18391 9229 184.9 27.6 1123 32114 34103 3 x 26T, 2 x 31T, 1 x 20T Hong Kong Challengers Chengtu 14.458 G 1991 9007362 15.0 25561 18391 9229 184.9 27.6 1123 32114 34103 3 x 26T, 2 x 31T, 1 x 20T Hong Kong Challengers Chekiang 15.637 F 1991 9003835 15.0 25561 18391 9229 184.9 27.6 1123 32114 34103 3 x 26T, 2 x 31T, 1 x 20T Hong Kong Challengers Changsha 15.634 F 1991 9003847 15.0 25561 18391 9229 184.9 27.6 1123 32114 34103 3 x 26T, 2 x 31T, 1 x 20T Hong Kong Challengers Kweichow 15.710 F 1994 9070694 15.0 25524 18451 8250 184.9 27.6 1257 28831 29819 2 x 26T, 3 x 35T Hong Kong Challengers Kwangtung 15.297 F 1994 9070709 15.0 25524 18451 8250 184.9 27.6 1257 28831 29819 2 x 26T, 3 x 35T Hong Kong Challengers Kweilin 15.734 F 1994 9103104 15.0 25410 18468 9201 184.9 27.6 1257 32608 33756 2 x 26T, 3 x 35T Hong Kong Challengers Kwangsi 15.320 F 1995 9103116 15.0 25607 18468 9253 184.9 27.6 1257 31472 33077 2 x 26T, 3 x 35T Hong Kong Challengers Ningpo 14.168 F 1997 9134658 19.5 22900 16800 8662 183.9 25.3 1728 N/A N/A 3 x 40T Hong Kong B170* Nanchang 21.214 D 1995 9082805 19.8 23016 16800 8662 181.1 25.3 1728 N/A N/A 3 x 40T Hong Kong B170** Ngankin 21.291 D 1996 9105994 19.7 23064 16801 8672 184.1 25.3 1730 N/A N/A 3 x 40T Hong Kong B170** Shansi 18.858 D+ 2013 9614476 15.5 30700 25483 11814 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31) Shantung 18.788 D 2013 9614488 15.5 30814 25483 11819 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31)

Shaoshing 18.788 D 2013 9614490 15.5 30769 25483 11808 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31)

Shengking 18.789 D 2013 9614505 15.5 30814 25483 11813 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31) Shuntien 18.765 D 2013 9614517 15.5 30814 25483 11810 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31) Siangtan 18.675 D 2013 9614529 15.5 30756 25483 11805 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31) Wuchang 4.504 A 2013 9657844 14.0 39127 24785 12537 180.0 30.0 N/A 47661 48908 4 x 30T Singapore Bulk Carrier Wuchow 5.119 B 2013 9657856 14.0 39090 24785 12537 180.0 30.0 N/A 47661 48908 4 x 30T Singapore Bulk Carrier

*Reclassified as general cargo vessel **Container Ship

The China Navigation Company / Sustainable Development Report 2013 Data: Fleet Breakdown 54

Owned Vessels: Under Construction as at 31 Dec 2013

Vessel Name Specific EVDI Year IMO No. Speed DWT GT NT LOA Max Capacity Hold Hold Cargo Gear (T) Country of Vessel’s Type Emission Emissions’ Built (Knots) (SSW (m) Breadth Nominal Capacity - Capacity - Registration in grm Rating MTs) (m) (TEU) Bale (m³) Grain (m³)

Soochow – – 2014 9614531 15.5 30721 25483 11817 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31) Container Ship

Szechuen – – 2014 9614543 15.5 30688 25483 11813 199.9 28.2 2118 41881 44807 4 x 60T Singapore S-Class (MPV31) Container Ship

Wuhu – – 2014 9657868 14.0 39179 24785 12545 180.0 30.0 N/A 47661 48908 4 x 30T + 4 x 12cbm Singapore Handysize Bulk Carrier Grabs Grabs Fitted

Wulin – – 2014 9657870 14.0 39047 24785 12538 180.0 30.0 N/A 47661 48908 4 x 30T + 4 x 12cbm Singapore Handysize Bulk Carrier Grabs Grabs Fitted

Eredine – – 2014 9681871 14.0 39855 24785 13019 180.0 30.0 N/A 47661 48908 4 x 36T Singapore Handysize Bulk Carrier Logs Fitted

Erradale – – 2014 9681883 14.0 39757 24785 13019 180.0 30.0 N/A 47661 48908 4 x 36T Singapore Handysize Bulk Carrier Logs Fitted

Erisort – – 2014 9681895 14.0 39860 24785 13019 180.0 30.0 N/A 47661 48908 4 x 36T Singapore Handysize Bulk Carrier Logs Fitted

Eriskay – – 2015 9681900 14.0 39810 24785 13021 180.0 30.0 N/A 47661 48908 4 x 36T Singapore Handysize Bulk Carrier Logs Fitted

Coral Chief – – 2015 9689938 15.0 21980 18598 7656 175.2 27.6 1617 32000 3 x 60T Hong Kong Chief-Class (MPV22) MPP Ship

Highland Chief – – 2015 9689940 15.0 21980 18598 7656 175.2 27.6 1617 32000 3 x 60T Hong Kong Chief-Class (MPV22) MPP Ship

The China Navigation Company / Sustainable Development Report 2013 Labour Data & Tables 55 Breakdown of Nationality of Sea Staff Positions 2013

Nationality Age Range 46 Sri Lanka 56-60 Over 60 65 5.3% 28 staff 4 staff Ukraine/Croatia 7.5% 46-55 133 staff 81 UK/Aus/NZ 9.3%

305 Below 31* Filipino 300 staff 35%

87 Papua New Guinea 10% 288 31-45* PRC/HKG/Myanmar 407 staff 33%

Total number of seafarers in 2013 – 872 (of whom 6 were female). *5 females in 31-45 age group and 1 female in Below 31 age group Officers – 479, Ratings – 393

The data on this page shows the numbers of sea staff (the numbers split 55%:45%, officers:crew), working on full-time and “fixed-term” contracts, and their nationalities.

None of our employees worldwide would be regarded as self-employed.

The China Navigation Company / Sustainable Development Report 2013 Data 56 Abbreviations

AMSA Australian Marine Safety Authority HHV Higher Heating Value, also known as gross calorific value, of a fuel is defined as the ASA Australian Shipping Association amount of heat released by combusting a specified quantity and returning the ASSM Anscor Swire Ship Management manning agency temperature of the combustion products to 150°C. LHV assumes all the water BHP Brake Horse Power component is in liquid state at the end of combustion CAR Audit-driven Corrective Action Report HOF Head Office (in Singapore) CBA Collective Bargaining Agreement HSE Health, Safety and the Environment CCoC Corporate Code of Conduct ICAO Inter Civil Aviation Organisation CFC Chloro-fluoro-carbon/s IFO Intermediate Fuel Oil - residual fuel. Usually 180 or 380 CST viscousity. CNCo The China Navigation Company Pte Ltd See http://intertek.ch/schwerol CoC Certificate of Competency CSR Corporate Social Responsibility IHM Inventory of Hazardous Material, per the HK Ship Recycling Convention DCC Australian government: Department of Climate Change ILO (UN) International Labour Organisation DECC UK government: Department of Energy and Climate Change IMO (UN) International Maritime Organisation DEFRA UK government: Department for Environment, Food and Rural Affairs ISM International Management Code for the Safe Operation of Ships and for Pollution DPA ISM Code Designated Person Ashore Prevention, (International Safety Management (ISM) Code) as chapter XI of SOLAS ECA Emission Control Area IUCN International Union for Conservation of Nature and Natural Resources EEOI Energy Efficiency Operational Index KBA Key Biodiversity Area EPA US government Environmental Protection Agency KPI Key Performance Indicator ETS Emission Trading Scheme kW hr (unit) Kilo Watt hour, is a unit of energy equal to 1,000 Watt hours or 3.6 mega Joules GEDO Australian government DCC Greenhouse and Energy Data Officer LHV Lower Heating Value, also known as net calorific value, of a fuel is defined as the GHG Greenhouse Gas/es amount of heat released by combusting a specified quantity and returning the GJ (unit) Giga-Joule, 1 billion joules of energy temperature of the combustion products to 150°C. LHV assumes all the water GRI Global Reporting Initiative component is in vapour state at the end of combustion HCFC Hydro-chloro-fluoro-carbon/s LO Lubricating Oil HCV High Conservation Value LTI Lost Time Injury HFO Heavy Fuel Oil – a residual fuel LTIFR Lost Time Injury Frequency Rate

The China Navigation Company / Sustainable Development Report 2013 Data: Abbreviations 57

MARPOL IMO International Convention for the Prevention of Pollution from Ships, 1973, SEEMP Ship Energy Efficiency Management Plan as modified by the Protocol of 1978 and later SIN Singapore MCA (UK) Maritime and Coastguard Agency SMS Safety Management System MDO Marine Diesel Oil – a distillate fuel SMTC Swire Marine Training Centre, located in Loyang, Singapore MGO Marine Gas Oil – a distillate fuel SOLAS IMO International Convention for the Safety of Life at Sea, 1974, as amended MHE Material Hazardous to the Environment in 1980 and later

MLC ILO Maritime Labour Convention, 2006 SOX Oxides of Sulphur MTC Medical Treatment Case STCW IMO International Convention on Standards of Training, Certification and NGER Australian National Greenhouse Gas and Energy Reporting Act Watch-keeping for Seafarers, 1978, as amended in 1995 and later NI Nautical Institute tCO2 Tonnes of Carbon Dioxide

NOX Oxides of Nitrogen tCO2e Tonnes of Carbon Dioxide equivalent. This is CO2 plus the other four “natural GHG OFW Overseas Filipino Workers of CH4, N2O and the two industrial GHG of SF6 and HydroFluroCarbonsGHG PM Particulate Matter TRCF Total Recordable Case Frequency PO Purchase Order/s TRIP Toolbox Risk Identification Permit POEA Philippines Overseas Employment Agency ULS Ultra Low Sulphur content PSI Port State Inspection, DPl: Deficiencies per Port State Inspection, CARB: California UNFCCC United Nations Framework Convention on Climate Change Air Resources Board, PSCI: Port State Inspection Compliance Index, TRCF: Total VOC Volatile Organic Compound/s Recordable Case Frequency Rate y-o-y Year on Year change QHSE Quality, Health, Safety and Environment 5S “Seiri, Seiton, Seiso, Seiketsu, and Shitsuke” or “Sorting, Set in order, Systematic RFQ Request For a Quote cleaning, Standardizing, and Sustaining” RWC Restricted Work Case SD Sustainable Development SECA Sulphur Emission Control Area/s

The China Navigation Company / Sustainable Development Report 2013 GRI Assurance Statement 58

Copeland & Partners Limited

Anne Copeland 柯安娜 T +852 9833 5979 [email protected] http://www.anne-copeland.com/ 3B, Block 1, Victoria Garden, 301 Victoria Road, Pokfulam, Hong Kong, PRC 香港域多利道 301 號域多利花園 1 座 3B

Assurance Statement

The China Navigation Company Pte Limited (CNCo) commissioned Copeland & Partners Limited to conduct independent assurance of its 2013 Sustainable Development (SD) Report, in accordance with the scope below.

Objective and Scope

The objective of the assurance process was to verify a representative sampling of the information included in CNCo’s 2013 SD Report and to determine conformance of the report contents with the requirements of the Global Reporting Initiative (GRI)’s Sustainability Reporting Guidelines (version 3.1) for Application Level C. An assessment of the company’s SD initiatives was also conducted and recommendations were provided to management on the company’s overall performance.

Methodology

The assurance process, which was conducted from December 2016 to March 2017, involved a desktop review of CNCo’s SD Report to identify a representative sampling of data and information, as well as claims regarding management systems, performance and corporate strategies, for onsite verification. Discussions were held with CNCo’s General Manager for Sustainable Development and team, as well as representatives of the company responsible for risk management, human resources, training and development, health and safety, the environment and procurement to confirm a representative sampling of data included in the report, to review the report contents and strategies for managing CNCo’s sustainability issues and to identify gaps or areas for improvement. Based on this process, observations were made which resulted in CNCo making minor amendments to the GRI Content Index.

Findings

Based on the claims and data sampled, CNCo’s 2013 SD Report includes accurate and robust information to support the company’s commitment to, and performance in, implementing its SD Policy and its self-declaration of the report meeting the requirements of GRI’s Application Level C in terms of its coverage of the required profile disclosures and material indicators. This report, which continues to evolve with CNCo’s continuous improvement in its sustainability performance, discloses information on the company’s approach to, and performance in, addressing the elements of ISO 26000:2010 - Guidance on Social Responsibility. The report format and content is web-based and the materiality of its content evolves in response to stakeholder feedback as the company engages its stakeholders on sustainability. CNCo’s material sustainability issues are substantively covered and the report also addresses challenges CNCo faces. These challenges range from further reducing its environmental/greenhouse gas footprint as a responsible player in an industry that operates under a global framework, to enhancing its working environment and safety management system and training.

The China Navigation Company / Sustainable Development Report 2013

Page 1 of 2

GRI Assurance Statement 59

Copeland & Partners Limited

Anne Copeland 柯安娜 T +852 9833 5979 [email protected] http://www.anne-copeland.com/ 3B, Block 1, Victoria Garden, 301 Victoria Road, Pokfulam, Hong Kong, PRC 香港域多利道 301 號域多利花園 1 座 3B

The transparent disclosure of CNCo’s approach to sustainability and of its priorities and performance, is welcomed. It is also noteworthy to recognise the company’s initiatives to:

• Implement its strategic framework for managing risks, planning future scenarios, exploring opportunities and assessing materiality that is rooted in the company’s Enterprise and Strategic Risk Register, Business Unit Risk Registers and the corporate SD Plan with Targets and Key Performance Indicators, which are reviewed monthly to drive improvement actions across operations, with regular reporting to the Managing Director and the Board. • Maintain its comprehensive approach to providing safety awareness, resources, tools and training and its commitment to achieve Zero harm in safety performance. • Provide training, development and support for employees and for seafarers globally, and their communities. • Disclose diversity metrics and CNCo’s initiatives to respect and enhance diversity. • Continue progressive improvements in the eco-efficiency of the shipping fleet, GHG and pollutant emission reduction and sustainable ship building and recycling, and influencing the global shipping industry. • Establish a Responsible Cargo Carriage Policy and implement its requirements for not transporting endangered species. • Continued certification to the Eco-office initiative. • Maintain stringent anti-corruption practices, transparent reporting of the industry challenges.

Recommendations for Future SD Strategy and Reporting

The commitment and resources that CNCo has dedicated to integrating sustainability into its business processes, to managing and planning for potential risks and opportunities, and making progress in addressing the recommendations of the previous assurance process is commendable. Going forward, CNCo is encouraged to enhance its existing efforts to:

• Build on its substantive materiality matrix and share details of CNCo’s stakeholder identification and issue mapping, and engagement processes. • Engage and support other stakeholders in the industry and in CNCo’s value chain to further the sustainable design, operation and recycling of ships and the responsible carriage of cargo. • Diversify the Board and management and report on its oversight of how sustainability is integrated into the business, risk management and performance results and compliance. • Engage employees to enhance understanding of the ways sustainability issues are relevant to their work, receive updates on the company’s sustainability performance and share ideas and feedback.

Anne Copeland Managing Director & Sustainability Advisor, Copeland & Partners Ltd April 13, 2017

The China Navigation Company / Sustainable Development Report 2013

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G3.1 Content Index GRI Application Level C 60

STANDARD DISCLOSURES PART I: Profile Disclosures 1. Strategy and Analysis

Profile Disclosure Description Reported Cross-reference/ Direct answer/ Reason for omission/ Explanation

1.1 Statement from the most senior decision-maker of the organization. Partially Summary - MD's message, p.7 2. Organizational Profile

Profile Disclosure Description Reported Cross-reference/ Direct answer/ Reason for omission/ Explanation

2.1 Name of the organization. Fully Cover page 2.2 Primary brands, products, and/or services. Fully Organisational and Operational Boundaries of Report, page 3 Operational structure of the organization, including main divisions, 2.3 Fully Organisational and Operational Boundaries of Report, page 3 operating companies, subsidiaries, and joint ventures. 2.4 Location of organization's headquarters. Fully Organisational and Operational Boundaries of Report, page 3 Number of countries where the organization operates, and names 2.5 of countries with either major operations or that are specifically Fully Detail section - Governance, page 17 relevant to the sustainability issues covered in the report. Organisational and Operational Boundaries of Report, page 3 and Detail - Governance, 2.6 Nature of ownership and legal form. Fully page 17 Customers include manufacturing, agricultural and resource processing companies, freight Markets served (including geographic breakdown, sectors served, and logistics companies, global forwarding companies, personal effects movers, bulk 2.7 Fully and types of customers/beneficiaries). shippers, P&I clubs, Marine consultants/ surveyors

2.8 Scale of the reporting organization. Partially Net sales, capitalisation omitted on purpose Significant changes during the reporting period regarding size, 2.9 Fully Summary of 2013 Highlights, pages 5-6 structure, or ownership. 2.10 Awards received in the reporting period. Fully Head office certified as an Eco-office, page 11 3. Report Parameters

Profile Disclosure Description Reported Cross-reference/ Direct answer/ Reason for omission/ Explanation

Reporting period (e.g., fiscal/calendar year) for information 3.1 Fully Cover and Summary-Introduction, pages 4-5 and Reporting Philosophy, page 52 provided. 3.2 Date of most recent previous report (if any). Fully Cover and Summary-Introduction, pages 4-5 and Reporting Philosophy, page 52 3.3 Reporting cycle (annual, biennial, etc.) Fully Reporting Philosophy, page 52 3.4 Contact point for questions regarding the report or its contents. Fully Pages 5 and 60 3.5 Process for defining report content. Fully Page 5 and Materiality Matrix, pages 18-19 and Reporting Philosophy, page 52

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Boundary of the report (e.g., countries, divisions, subsidiaries, 3.6 leased facilities, joint ventures, suppliers). See GRI Boundary Fully Organisational and Operational Boundaries of Report, page 3 Protocol for further guidance. State any specific limitations on the scope or boundary of the report 3.7 Fully Organisational and Operational Boundaries of Report, page 3 (see completeness principle for explanation of scope). Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly 3.8 Fully Organisational and Operational Boundaries of Report, page 3 affect comparability from period to period and/or between organizations. Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement 3.10 Fully Summary-Introduction, pages 5 and 6 (e.g.,mergers/acquisitions, change of base years/periods, nature of business, measurement methods). Significant changes from previous reporting periods in the scope, 3.11 Fully Summary-Introduction, pages 3, 5 and 6 boundary, or measurement methods applied in the report. Table identifying the location of the Standard Disclosures in the 3.12 Fully This table report. 4. Governance, Commitments, and Engagement

Profile Disclosure Description Reported Cross-reference/ Direct answer/ Reason for omission/ Explanation

Governance structure of the organization, including committees Not by age or diversity 4.1 under the highest governance body responsible for specific tasks, Partially As a private company, CNCo doesn't disclose detail on governance such as setting strategy or organisational oversight.

Indicate whether the Chair of the highest governance body is also 4.2 Fully Governance, page 17 an executive officer.

For organizations that have a unitary board structure, state the 4.3 number and gender of members of the highest governance body Fully Governance, page 17 that are independent and/or non-executive members.

Mechanisms for shareholders and employees to provide 4.4 Fully Governance, page 17 recommendations or direction to the highest governance body.

Key stakeholder groups are: Investors and their advisors/ Subsidiary Companies / Employees/ Suppliers / Customers / Business partners / Government and Regulators / List of stakeholder groups engaged by the organization. Fully 4.14 Communities. Formal engagement was undertaked internally with subsidiaries, employees on-shore and offshore.

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Stakeholders were indentified based on their ability to impact our business's achievement of Basis for identification and selection of stakeholders with whom to 4.15 Fully its strategy. The materiality was addressed from the point of view of the various types of engage. stakeholders (as per inidicator 4.14).

STANDARD DISCLOSURES PART III: Performance Indicators Economic

Performance Indicator Description Reported Cross-reference/Direct answer

Economic performance

Direct economic value generated and distributed, including Limited information on contriubtion of divisions to revenues and administrative revenues, operating costs, employee compensation, donations and EC1 Partially costs disclosed as percentages, finanical assistance from government and support other community investments, retained earnings, and payments to to ASSMDA. Financial reporting is limited as CNCo is a private company. capital providers and governments.

Financial implications and other risks and opportunities for the EC2 Partially Risks and Opportunities Due to Climate Change pages 21-23 organization's activities due to climate change.

EC3 Coverage of the organization's defined benefit plan obligations. Not

EC4 Significant financial assistance received from government. Fully Financial Assistance from Government, page 24 Market presence

Range of ratios of standard entry level wage by gender compared EC5 Not to local minimum wage at significant locations of operation.

Policy, practices, and proportion of spending on locally-based As a global shipping company our procurement is done when and as requried EC6 Not suppliers at significant locations of operation. (centralised and decentralised). Procedures for local hiring and proportion of senior management EC7 Not hired from the local community at significant locations of operation. Indirect economic impacts Development and impact of infrastructure investments and services EC8 provided primarily for public benefit through commercial, in-kind, or Not pro bono engagement. Understanding and describing significant indirect economic EC9 Not impacts, including the extent of impacts.

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Environmental

Performance Indicator Description Reported Cross-reference/Direct answer

Materials EN1 Materials used by weight or volume. Not EN2 Percentage of materials used that are recycled input materials. Not Energy

EN3 Direct energy consumption by primary energy source. Fully Detail Section - Environment - CO2 emissions, page 26

EN4 Indirect energy consumption by primary source. Fully Detail - Environment - CO2 emisisons, page 26 Detail - Environment - Measures to reduce emssions and energy-saving initiatives - EN5 Energy saved due to conservation and efficiency improvements. Partially a case study, page 36 Initiatives to provide energy-efficient or renewable energy based EN6 products and services, and reductions in energy requirements as a Not result of these initiatives. Initiatives to reduce indirect energy consumption and reductions EN7 Not achieved. Water

EN8 Total water withdrawal by source. Not Not material

EN9 Water sources significantly affected by withdrawal of water. Not Not material EN10 Percentage and total volume of water recycled and reused. Not Not material Biodiversity Location and size of land owned, leased, managed in, or adjacent EN11 to, protected areas and areas of high biodiversity value outside Not protected areas. Description of significant impacts of activities, products, and EN12 services on biodiversity in protected areas and areas of high Not biodiversity value outside protected areas. EN13 Habitats protected or restored. Not Strategies, current actions, and future plans for managing impacts EN14 Not on biodiversity. Number of IUCN Red List species and national conservation list EN15 species with habitats in areas affected by operations, by level of Not extinction risk. Emissions, effluents and waste

EN16 Total direct and indirect greenhouse gas emissions by weight. Fully Detail - Environment - CO2 emissions, page 26

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EN17 Other relevant indirect greenhouse gas emissions by weight. Fully Detail - Environment - CO2 emissions, page 26 Initiatives to reduce greenhouse gas emissions and reductions EN18 Fully Detail - Environment - measures to reduce emissions page 28 achieved. EN19 Emissions of ozone-depleting substances by weight. Not EN20 NOx, SOx, and other significant air emissions by type and weight. Fully Detail - Environment - environmental summary page 26 EN21 Total water discharge by quality and destination. Not Not material EN22 Total weight of waste by type and disposal method. Partially Detail - Environment - Waste Management, page 34 EN23 Total number and volume of significant spills. Fully Detail - Environmental Summary - Total number of significant oil spills Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex EN24 Not I, II, III, and VIII, and percentage of transported waste shipped internationally. Identity, size, protected status, and biodiversity value of water EN25 bodies and related habitats significantly affected by the reporting Not organization's discharges of water and runoff. Products and services Initiatives to mitigate environmental impacts of products and EN26 Partially Detail - Environment, page 29-31 services, and extent of impact mitigation.

Percentage of products sold and their packaging materials that are EN27 Not reclaimed by category. Compliance

Monetary value of significant fines and total number of non- EN28 monetary sanctions for non-compliance with environmental laws Fully Detail - Social - Compliance, page 50 and regulations.

Transport

Significant environmental impacts of transporting products and EN29 other goods and materials used for the organization's operations, Fully Detail - Environment, page 26 and transporting members of the workforce.

Overall Total environmental protection expenditures and investments by EN30 Not type. Social: Labor Practices and Decent Work

Performance Indicator Description Reported Cross-reference/Direct answer

Employment

Total workforce by employment type, employment contract, and LA1 Fully Detail - Labour, pages 40-42 region, broken down by gender.

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Total number and rate of new employee hires and employee LA2 Partially Detail - Labour, pages 40-41 turnover by age group, gender, and region.

Benefits provided to full-time employees that are not provided to LA3 Not temporary or part-time employees, by major operations.

LA15 Return to work and retention rates after parental leave, by gender. Not

Labor/management relations Percentage of employees covered by collective bargaining LA4 Partially Detail - Labour - Employment - for seafarers, page 42 agreements. Minimum notice period(s) regarding significant operational LA5 Not changes, including whether it is specified in collective agreements. Occupational health and safety

Percentage of total workforce represented in formal joint LA6 management-worker health and safety committees that help Not monitor and advise on occupational health and safety programs.

Rates of injury, occupational diseases, lost days, and absenteeism, LA7 Partially No occupational diseases. Pages 42-45 and number of work-related fatalities by region and by gender.

Education, training, counseling, prevention, and risk-control LA8 programs in place to assist workforce members, their families, or Partially Detail - Labour - Training and Education, no counselling. Page 46 community members regarding serious diseases.

Health and safety topics covered in formal agreements with trade LA9 Not unions. Training and education

Average hours of training per year per employee by gender, and by Detail - Labour - Training, Education. Training hours by gender not disclose, page LA10 Partially employee category. 46

Programs for skills management and lifelong learning that support LA11 the continued employability of employees and assist them in Not managing career endings. Percentage of employees receiving regular performance and LA12 Partially Detail - Labour - Training, Education, pages 40-41 career development reviews, by gender.

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Diversity and equal opportunity

Composition of governance bodies and breakdown of employees LA13 per employee category according to gender, age group, minority Partially Detial - Labour - Employment, page 47 group membership, and other indicators of diversity.

Equal remuneration for women and men

Ratio of basic salary and remuneration of women to men by LA14 Not employee category, by significant locations of operation.

Social: Human Rights

Performance Indicator Description Reported Cross-reference/Direct answer

Investment and procurement practices

Percentage and total number of significant investment agreements HR1 and contracts that include clauses incorporating human rights Not concerns, or that have undergone human rights screening.

Percentage of significant suppliers, contractors and other business HR2 partners that have undergone human rights screening, and actions Not taken. Total hours of employee training on policies and procedures HR3 concerning aspects of human rights that are relevant to operations, Not including the percentage of employees trained. Non-discrimination

Detail - Human Rights - Total Number of Incidents of Discrimination and Actions HR4 Total number of incidents of discrimination and actions taken. Fully Taken, page 48

Freedom of association and collective bargaining

Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be HR5 Not violated or at significant risk, and actions taken to support these rights.

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Child labor

Operations and significant suppliers identified as having significant HR6 risk for incidents of child labor, and measures taken to contribute to Not the effective abolition of child labor.

Forced and compulsory labor

Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to HR7 Not contribute to the elimination of all forms of forced or compulsory labor.

Security practices

Percentage of security personnel trained in the organization's HR8 policies or procedures concerning aspects of human rights that are Not relevant to operations.

Indigenous rights

Total number of incidents of violations involving rights of HR9 Not indigenous people and actions taken.

Assessment

Percentage and total number of operations that have been subject HR10 Not to human rights reviews and/or impact assessments.

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Remediation

Number of grievances related to human rights filed, addressed and HR11 resolved through formal Not grievance mechanisms.

Social: Society

Performance Indicator Description Reported Cross-reference/Direct answer

Local communities

Percentage of operations with implemented local community SO1 Not engagement, impact assessments, and development programs.

Operations with significant potential or actual negative impacts on SO9 Not local communities. Prevention and mitigation measures implemented in operations SO10 with significant potential or actual negative impacts on local Not communities. Corruption

Percentage and total number of business units analyzed for risks SO2 Not related to corruption.

Percentage of employees trained in organization's anti-corruption SO3 Not policies and procedures. SO4 Actions taken in response to incidents of corruption. Not Public policy

Public policy positions and participation in public policy SO5 Not development and lobbying.

Total value of financial and in-kind contributions to political parties, SO6 Not politicians, and related institutions by country.

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Anti-competitive behavior

Total number of legal actions for anti-competitive behavior, anti- SO7 Fully Detail - Society - Compliance, page 49 trust, and monopoly practices and their outcomes.

Compliance

Monetary value of significant fines and total number of non- SO8 Fully Detail - Society - Compliance, page 50 monetary sanctions for non-compliance with laws and regulations.

Social: Product Responsibility

Performance Indicator Description Reported Cross-reference/Direct answer

Customer health and safety

Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of PR1 Not significant products and services categories subject to such procedures.

Total number of incidents of non-compliance with regulations and PR2 voluntary codes concerning health and safety impacts of products Not and services during their life cycle, by type of outcomes. Product and service labelling Type of product and service information required by procedures, PR3 and percentage of significant products and services subject to such Not information requirements. Total number of incidents of non-compliance with regulations and PR4 voluntary codes concerning product and service information and Not labeling, by type of outcomes. Practices related to customer satisfaction, including results of PR5 Not Alignment and Engagement (“A&E”) survey for employees surveys measuring customer satisfaction.

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Marketing communications

Programs for adherence to laws, standards, and voluntary codes PR6 related to marketing communications, including advertising, Not promotion, and sponsorship.

Total number of incidents of non-compliance with regulations and PR7 voluntary codes concerning marketing communications, including Not advertising, promotion, and sponsorship by type of outcomes. Customer privacy

Total number of substantiated complaints regarding breaches of PR8 Not customer privacy and losses of customer data.

Compliance

Monetary value of significant fines for non-compliance with laws PR9 and regulations concerning the provision and use of products and Not services.

The China Navigation Company / Sustainable Development Report 2013 Data 71 Contact

Request for feedback

In order that we may continually improve our reporting, we would be grateful for your views and comments on any aspects of this report via e-mail to the address below.

Contact Details

Thank you for reading this report

Simon Bennett General Manager Sustainable Development The China Navigation Company 300 Beach Road, #27-03 The Concourse, Singapore 199555

Tel +65 6309 3632 [email protected] www.chinanav.com

The China Navigation Company / Sustainable Development Report 2013