MISC Integrated Annual Report 2020

Sustainability Pillar Initiatives and outcomes Shareholders We are continuously collaborating with our strategic partners to create greater shareholder value. Customers In 2020, Eaglestar conducted a Customers Engagement Survey for our key customers to gauge their perception of the Group and identify how we could enhance our customer service. Within the ‘Operational Performance’, the majority of respondents agreed that overall Eaglestar had well managed the fleet. Based on the findings, an action plan with respect to the identified gaps and areas of recommendation has been developed. For more details of the Customers Survey, please refer to Anchoring Sustainability @ MISC section on page 104 of this Integrated Annual Report. Governance and Business Ethics Eaglestar is committed to embedding a work culture founded on principles of strong corporate governance and ethical business conduct, in line with our high standards of ethics and in full compliance with all relevant laws. Our Code of Conduct and Business Ethics (CoBE) provides the framework for the enhancement and monitoring of good business ethics and ensuring our business operations are conducted with the utmost integrity. During the year, Eaglestar conducted a Social Risk Assessment (SRA) at one of our significant operations, to determine Human Rights risks and impacts associated with the business. Based on the risks identified, we developed a mitigation plan that reduces and addresses these risks. Employees Throughout the pandemic, Eaglestar proactively and continuously engaged with our seafarers to ensure their health, safety and welfare. We introduced mental health and wellness programmes for crew who served onboard ships for extended periods of time, to help them manage their stress. Coming together with over 300 companies and organisations in the maritime value chain, MISC Group comprising of MISC, AET and Eaglestar signed the Neptune Declaration on Seafarer Wellbeing and Crew Change in January 2021. The declaration is a worldwide call to action to end the unprecedented crew change crisis caused by COVID-19. Fatigue after long periods at sea has significant consequences on the physical and mental wellbeing of seafarers. It also increases the risk of maritime incidents and environmental disasters, and poses a threat to the integrity of maritime supply chains, which transport 90% of global trade. An incident which deeply grieved us during the year was the one case of fatality we recorded due to a vessel unmooring operation. We have reached out to our employee’s family, to provide them the assistance they required to help them cope with their immeasurable loss. To internalise this unfortunate accident, we conducted a HSSE Stand Down on 23 September 2020 throughout all our global operations. For more details, please refer to Operating Safely and Sustainably section on page 206 of this Integrated Annual Report. MARKET REVIEW During the year under review, the pandemic caused severe logistical challenges as a number of major ports around the world either suspended or restricted crew change activities which led to an industry-wide crew change crisis. This was further compounded by travel restrictions imposed by various countries around the world. In many instances, ship managers had to extend the service of crews on board vessels, or re-route seafarers, which impacted their work-life balance. There were also occasions when ships had to be diverted to other ports for crew changes to take place. Consequently, there were increased crew repatriation costs, additional voyage costs encountered in relation to bunker and port charges, and a rise in crew voyage periods. In addition to deviations related costs, the crew change crisis caused an increase in ship operating costs mainly due to crew-related expenses. Further costs were incurred to comply with the various COVID-19 related health checks and quarantine requirements, as well as allowances paid to crew during extended service periods. Market imbalance in tonnage demand and supply led to fluctuating freight rates for gas carriers and tankers. Ship owners were pressured to efficiently manage ship operating costs to ensure sound financial performance and demonstrate their ability to weather the crisis, as they sought to mitigate the impacts of the pandemic on their business. KEY DEVELOPMENTS Eaglestar is a service-based organisation, with our sea, shore and newbuilding site teams possessing the knowledge and skillsets required to operate and maintain ships as key business enablers. We play an important role in securing and delivering various projects that have contributed positively towards the Group’s business growth. Leveraging on our expertise to provide technical recommendations and competitive pricing, we worked jointly with Petroleum & Product Shipping and LNG Asset Solutions segments to secure 11 new vessels as part of new projects obtained in 2020. Despite disruptions at the shipyard that affected newbuilds and dry docking, we delivered a total of six newbuilds during the year off the back of the sterling abilities and collective expertise of Eaglestar’s sea, shore and newbuilding site teams. Over the next two years, more vessels are in the pipeline scheduled for delivery. Eaglestar has demonstrated a wide variety of shipmanagement skillsets to cater to a wide spectrum of vessels. Our experience in delivering Southeast Asia’s first LBV, the Avenir Advantage , has put us ahead of the curve amongst other regional shipmanagement businesses. Avenir Advantage completed its first LNG bunkering delivery to the Pasir Gudang Port in Johor on 9 November 2020. Additionally, Eaglestar conducted the delivery of two VLECs, the Seri Everest and the Seri Erlang , from Samsung Heavy Industries Co. Ltd. (SHI) to Zhejiang Satellite Petrochemical Co. Ltd. (STL). Recognising the role of technology which is a key push and pull factor shaping global trade flows, we have embarked on our journey towards the digitalisation of the fleet that will take place through 2023. The adoption of e-navigation systems to replace the traditional paper-map navigation has led to increased levels of safety in vessel navigation with up-to-date maps, and better data exchange and communications between ships, as well as between ship and shore. During the year, Eaglestar developed and implemented the agency model to enable the business to operate as third-party shipmanagers. We are undertaking a phased approach in rolling out this model, and have commenced with the foundational groundwork towards establishing ourselves as a competitive third-party shipmanager to generate new sources of revenue beyond our traditional client base of MISC and AET. In September 2020, our exemplary shipmanagement track record received international recognition when Eaglestar obtained the Green Foundation Award certification for the LNG dual-fuel Aframax Eagle Brasilia . In addition, the LNGC Seri Amanah was awarded the ‘Best Quality Ship Award 2019’ by the Japan Federation of Pilots’ Associations in June 2020. Our good HSSE culture has received various international acknowledgements. As at the end of 2020, 58 vessels from the Eaglestar managed fleet have received the Chamber of Shipping America (CSA) Jones F. Devlin award for safety, and 58 vessels received the CSA Annual Environment Achievement Award. A further 29 vessels have been recognised with the ‘Automated Mutual-Assistance Vessel Rescue System’ (AMVER) from the Commandant of the United States Coast Guard in recognition of their support of lifesaving on the world’s oceans. The Maritime and Port Authority of Singapore also presented the Eagle Kuching with a Safety Award. On home shores, Eaglestar as part of MISC Group was honoured at the prestigious Prime Minister’s Hibiscus Award for the Notable Achievement in Environmental Performance. SUSTAINABILITY In line with our commitment to create value through our sustainability initiatives, we recorded the following outcomes during the year: INTEGRATED MARINE SERVICES ///// Sustainability / Financial Review / Business Review / Leadership / Governance /// MISC Berhad / Integrated Annual Report 2020 7 174 MISC Berhad / Integrated Annual Report 2020 7 175 /// Governance / Leadership / Business Review / Financial Review / Sustainability ///// Section Section