For Swedish Orient Line, the concept of business sustainability is a keyword in operations, and a vital foundation for sustainability in a larger context. It's about being a partner that delivers reliable, predictable, and long-term logistics services. But it's also about finding new innovative business models that benefit both parties.
"We build our business on partnerships where there should always be a win-win situation so that together we can create both economic and operational success. That's what we mean by business sustainability. We haven't talked much about it before, but now we are clear with our customers and partners that we want the business to be sustainable. It means creating the conditions together so both parties benefit from it," says Tommy Kalin, CEO of Swedish Orient Line.
Currently, SOL does not own any vessels but charters tonnage for varying periods. Over time, the company has concentrated its collaboration with a selection of shipowners from whom they charter vessels for longer periods.
"We operate in a spot market where much is about winning or losing, but we need to think differently. Historically, there haven't been significant price fluctuations, but with the coronavirus pandemic and its aftermath, price swings have become larger, which has also created an openness to discussing more long-term contract solutions," notes Tommy Kalin.
One of SOL's close partners is Regal Agencies Corporation, from whom they have chartered vessels for many years. Recently, a three-year agreement expired, which was made during a period of poor vessel chartering market conditions. During the agreement period, both time charter rates and freight rates on the market fluctuated significantly, making the outcomes of the contract unpredictable for both parties, which felt unsatisfactory.
"When the agreement expired, and we discussed a new one, we felt that it would have been better and more sustainable if both parties could be involved in both upturns and downturns in a more predictable and balanced manner. Therefore, together, we created an entirely new contract structure to charter vessels based on a philosophy that better aligns with market changes, thus creating a fairer and more sustainable arrangement for both parties," says Tommy Kalin.
From Regal Agencies Corporation’s perspective, the new arrangement feels like a good and innovative solution. ”Our new agreement offers alignment to market conditions while synchronizing the economy of charters and managers. In that way, we create a solid foundation for a long and trustworthy collaboration”, says Paola Tavridakis.
As SOL now discusses and tests its contract philosophy with other shipowners and customers, they sense a change in attitude. Especially among customers who have experienced disruptions and uncertainties in the logistics chain, they now want to discuss longer contracts that provide predictable pricing and service over a manageable period.
"But there are also companies and customers who are still only interested in every penny short term, out of fear of missing an upturn," acknowledges Tommy Kalin. "However, we strive to understand what our partners want to establish in good long-term cooperation. This may not be innovative thinking, but we believe that having a stable contractual partner with whom we can have discussions in both good and challenging times is a key factor for success.
Above: Rebecca Tageus, HR & Sustainability Manager and Tommy Kalin, CEO
Photographer: Anna-Lena Lundqvist
Photo: Transosprey at Kasköö, Christoffer Björkman
Where does the journey to create the best conditions for a sustainable business begin? In this article series, we will explore SOL’s perspective on a sustainable organization from various angles. In SOL’s sustainability mindset, there are several sustainability perspectives, all of which are important and need to be balanced. When these are in balance, they also create conditions for each other.
Sustainability is often defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” To succeed in this, SOL sees business sustainability as the core, as it is the prerequisite for success in the entire sustainability engagement.
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