Sustainable management in the time of uncertainty on the cruise shipping market

Sustainable management currently applies to every sector of the economy and is understood as taking action in a company to maintain a balance between the environment, the economy, and society. Management in conditions of uncertainty is now taking on a completely different dimension than a few years ago. No analyst could have predicted a global pandemic, or such drastically intensifying climate catastrophes in recent years, and even more so the outbreak of war in the center of Europe. It would seem that among the risks estimated as potential threats to the achievement of business goals, those mentioned above were treated as very unlikely. Nevertheless, the events of recent years (i.e., the outbreak of the COVID-19 pandemic and the war in Ukraine) have significantly impacted the activities of all business entities, including entities involved in the maritime cruise shipping market.

The maritime cruise shipping sector has been particularly hard hit by the COVID-19 pandemic. Cruise ship owners were forced to keep cruise ships in ports for many months, ultimately to cut many connections, remove some cruise ships, release crews, disrupt supply chains, and pay compensation to contractors with whom contracts were terminated, etc. In turn, the war in Ukraine completely reoriented the movement of cruise ships in Northern Europe (NE). So far, the main destination has been the port of St. Petersburg, with a stop in Tallinn. Meanwhile, after the closure of the route to Russia, all traffic was directed to ports on the coasts of the southern Baltic Sea, i.e., to Polish and German ports, which were not prepared for such massive crowds of tourists. Unfortunately, the authorities of the leading cruise lines and seaports were not prepared for the situations they faced. The aim of this article is to identify areas of uncertainty that may affect sustainable management in the cruise shipping market in NE and to define the directions of sustainable management undertaken by the entities participating in this market.

This study mainly presents the activities undertaken by the leading cruise shipping companies in the context of sustainable management. The analysis was extended to include the statistical data on the effects of the COVID-19 pandemic and the war in Ukraine on the cruising market. Moreover, the data on the number of cruise ship calls at seaports in NE are presented for the period between 2019 and 2022, thus illustrating the changes caused in the market structure due to the COVID-19 pandemic and the war in Ukraine. These events are categorized as “unpredictable” and falling within the area of uncertainty. Furthermore, a list of uncertainty areas that significantly distort sustainable management in the maritime cruise shipping market is included.

Sustainable management is often treated as equal to sustainable development. However, it should be noted that these concepts are not identical because sustainable development should be understood in a broader context, and sustainable management should refer to the activities of an organization. According to M. Rosińska-Bukowska and J. Bukowski (2014), sustainable management is a kind of “requirement of social responsibility in a modern organization building its strength by interacting with the environment and thus developing new goods and services.”

Sustainable management is the subject of interest for many international organizations and institutions. They developed numerous documents and guidelines for public and private organizations, providing them with models, systems, and tools to support sustainable management processes. The European Union recommended applying an Eco-Management and Audit Scheme (EMAS), while the Organization for Economic Cooperation and Development prepared OECD Due Diligence Guidance for Responsible Business Conduct and OECD Guidelines for Multinational Enterprises. Moreover, the United Nations introduced the UN Global Compact and UN Guiding Principles on Business and Human Rights, while the International Organization for Standardization encouraged the use of management systems such as ISO 14001, Environmental management systems; requirements with guidance for use of ISO 26000, Guidance on social responsibility; or ISO High Level Structure for Management System Standards (Loew et al., 2019).

Studies and scientific analyses on the issue of sustainable development have been conducted since the 1980s, when the definition of the sustainable development was published in a report by the World Commission on Environment and Development (also known as the Brundtland Commission). Sustainable development was defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987). Only J. Elkington (1997) presented the concept of sustainable development in relation to organizational management in the context of three dimensions: social, economic, and environmental. Over the following years, the awareness regarding sustainable management has changed significantly, and now companies not only ensure that their products are made in compliance with the principles of environmental protection, but also require appropriate behavior in this area from their suppliers throughout the supply chain by defining minimum standards to be respected regarding the natural and social environment (Loew et al., 2019).

Currently, research on sustainable management is conducted in relation to all areas of business activity as well as its individual divisions in the context of human resources, including employment planning, recruitment, evaluation, motivation, etc. (Conkright, 2015; Pabian, 2015). Other studies focus on assessing the management of sustainable environmental resources (Knoepfel & Nahrath, 2005) or just managing a sustainable water environment (Qian, 2016) or environmental, social, and economic impacts (Jones et al., 2016, Waśniewska et al., 2016) and others refer to comprehensive managing organizational sustainability (Pabian, 2017; Ruedig & Metzger, 2013), but also in relation to management in conditions of uncertainty (Kotnis, 2014; Pera, 2012).

Some research studies are also carried out in relation to sustainability in cruise ship management (Genç, 2016), and in particular on the economic, environmental, social, and cultural effects of cruise tourism on destinations (Brida & Zapata, 2010) and the impact of cruise shipping on coastal and marine environments (Klein, 2011).

Modern organizations understand that, these days, their activities must generate added value not only for their entity, but also for all stakeholders and the environment (UN, 2015) and through sustainable management, they strive to harmonize traditional financial management with environmental quality and social justice (Silva & Gouveia, 2016). Currently, researchers point to various aspects of sustainable management, stressing that they should be implemented through development of sustainability programs (Roosa, 2010). Among other things, thanks to participation in an international project, Loew et al (2019) developed the 20 most relevant elements for a sustainability management system, which are assigned to eight main areas: (1) policies and rules; (2) organizational structure; (3) processes; (4) continuous improvement; (5) communication; (6) verification; (7) preparatory tasks; and (8) further requirements. It is, as the authors prove, a fairly flexible model of sustainable management that can be successfully implemented in both private and public entities.

A slightly different concept was presented by M. Rosińska-Bukowska and J. Bukowski (2014), according to which the model of sustainable management of the organization should take into account six pillars: (1) defining the mission and concept of the organization's development; (2) consistency of the developed and applied set of goals and effects of the organization; (3) a program of shaping the desired directions of development of the organization; (4) collecting and improving development capital in the organization; (5) principles for creating development perspectives of the organization; and (6) the organization's internal quality assurance system. It is this approach that has been used for further analysis in this study.

Of course, there are many schools on sustainable management models according to which companies create their management policy. That is why managers act to develop a consolidated and comprehensive way of management (Chalmeta & Palomero, 2011; Dyllick & Hockerts, 2002). Today, enterprises use a variety of tools for sustainable management, including but not limited to those recommended by international organizations and government agencies, but also based on management systems (ISO 9001; ISO 14001; ISO 26000, OHSAS 18001, etc.), or tools supported in indicators, but also public reporting of corporate commitments to sustainability (Silva & Gouveia, 2016).

An interesting approach is presented by M. Rosińska-Bukowska and J. Bukowski (2014), who argue that sustainable management should be based on three concepts, i.e.: corporate social responsibility (CSR), creating shared value (CSV), and creating value added (CVA).

The concept of CSR has gained in significant popularity in recent years (Barnett, 2019; Szelągowska-Rudzka, 2016; Wolska, 2018). It assumes that a company conducts its activities with respect for the development of local communities, minimizes environmental losses both in the organization and for the contractors, and cares for the health and satisfaction of company employees and other co-participants in the value creation process (Dąbrowska & Janoś-Kresło, 2012). It can be said that this concept coincides with the three pillars of sustainable development identified by the United Nations: economic development, social development, and environmental protection, indicating that, accordingly, this development should be bearable, equitable, and viable. However, the development of CSR policy in the organization should not be identified as the implementation of sustainable management in a given entity. M. Rosińska-Bukowska and J. Bukowski (2014) stress that “CSR is an important pillar of sustainable management, provided that it is implemented as a comprehensive concept of building long-term relationships with all participants of the economic and social system and takes into account their diverse development needs.”

The concept of CSV (Porter & Kramer, 2011) assumes that the strategy of a development-oriented enterprise should take into account the social aspects and be a long-term strategy focused on building socially useful values (Dąbrowska & Janoś-Kresło, 2012), while the concept of CVA is based on using the potential, in a broader sense, in the resources of an organization to develop added value for the organization through cooperation with the internal and external environment.

Companies also develop their own sustainable management policies based on the sustainable development management system (SDMS), in which they define their own goals and directions of sustainable management in areas such as safety policy, health policy, labor and human rights policy, energy and climate change policy, environmental policy, supply chain and responsible procurement policy, and also communities policy (Mondi Group, 2018).

It should be noted that sustainable business management is significantly hampered when areas of uncertainty are detected (Koźmiński, 2004). A situation when an organization can predict certain events and can control them in certain situations with high probability, as well as prepare for the related effects caused by different scenarios, is called risk assessment. However, it is much more difficult when the organization unfortunately fails to have proper knowledge about the potential events or circumstances and is not able to sufficiently assess the areas of uncertainty. It means that the organization fails to take into account the possibility of certain circumstances in planning their activities, which, of course, can have painful consequences for the organization.

The theory of management enumerates various sources of uncertainty that arise in organizations. These include, for example, lack of appropriate knowledge and skills of organization members, errors and problems in communication within the organization (but also in relation to the external environment), information chaos resulting from intricate legal regulations, and also deliberate actions of some members of the organization in order to gain an information advantage over others (Gątarska, 2016; Janecki, 2020; Sikorski, 1999).

In organizations with higher management culture and a larger scale of operations, the managers focus on predicting any difficulties, as detailed as possible, that could disturb the implementation of the development strategy adopted. It is about preparing the organization to react quickly to any emerging difficulties, minimizing losses to the environment, economy, and society. But unfortunately, as it turned out, the COVID-19 pandemic and the outbreak of war in Ukraine surprised even the largest entities because, regrettably, no one predicted their scale and the scope of their impact.

This is what most organizations in the world have encountered in recent years. The increase in fuel prices caused by the conflict with Russia, decrease in demand for goods and services caused by inflation, decreasing enterprise revenues from sales—these are the reasons for delaying the development of organizations and changing the investment decisions that force enterprises to disturb the balance at all levels of company management. In extreme cases, companies terminate commercial contracts, dismiss employees, and reduce expenditure on modern technologies. In such circumstances, it is difficult to think about the sustainable management of an organization during the crisis and uncertainty when organizations struggle to survive in the marketplace and allocate their resources to maintain jobs and financial liquidity. Unfortunately, in such circumstances, the issues related to quality and satisfaction resulting from the company operations often recede into the background, and all organizational and financial resources are invested in saving the company, sometimes even from possible bankruptcy.

The aim of this article is to identify areas of uncertainty that may affect sustainable management in the maritime cruise shipping market in NE and to define the directions of sustainable management undertaken by the entities participating in this market. The following research questions were asked: (1) What are the areas of uncertainty in the activities of cruise line owners in the maritime cruise shipping market? (2) What actions have been caused by the COVID-19 pandemic among entities on the maritime cruise shipping market? (3) What reactions among the entities in the maritime cruise shipping market were observed in connection with the outbreak of the war in Ukraine? (4) What changes have been observed in sustainable management among the players in the maritime cruise shipping market?

Several research methods were used in the work, i.e., analysis of existing materials, desk research, exploratory method, and case studies. The annual reports containing information on the effects caused by the pandemic prepared by the worldwide cruise shipping organizations [Cruise Lines International Association (CLIA) and Cruise Baltic] were used in the analysis. Sustainability strategies developed by the world's leading shipping companies were also analyzed, i.e., Carnival Corporation & plc (CCL & plc), the Royal Caribbean Group (RCG), and Norwegian Cruise Lines Holdings Ltd. (NCLH Ltd.). In addition, the results of Cruise Market Watch and the results of the author's own research were taken into account in the analyses.

The research is both qualitative and quantitative. Comparative analysis and critical analysis were also carried out. The article may be of interest to representatives of seaports in coastal tourist destinations, for sea cruise carriers, but also for organizers of sea cruises.

The experience gained by companies as a result of the consequences they have suffered due to the COVID-19 pandemic constitutes an invaluable lesson for managers on how to prepare companies for such events in the future. In strategic management, it is crucial to assess the risk of operations and predict events that may have an adverse impact on the defined goals and results.

The changes on the cruise shipping market observed in recent years, caused by the COVID-19 pandemic, the war in Ukraine, and the aggravating economic crisis, as well as restrictive regulations on the reduction of pollution emitted to the environment as a result of the ships’ operations constitute sources of uncertainty for the operations and development of companies on the cruise shipping market. When estimating the potential risks and scenarios for managing these issues within the concept of sustainable management, these entities should consider the following:

Uncertainty resulting from the turbulent political situation in the European countries (conflicts with the EU, periods of parliamentary elections, etc.);

Until recently, companies failed to even consider most of the above-mentioned areas of uncertainty or treated them as unlikely. Moreover, unfortunately, most of these areas of uncertainty are outside the companies’ direct influence, which creates an enormous sense of helplessness and can block development and further investments.

Planning company development with so many areas of uncertainty can significantly disrupt their operation affect financial results, force companies to reduce employment, and suspend the implementation of investments and technological development. These factors can have irreversible consequences for the future of these enterprises. Therefore, we can currently observe some caution among entrepreneurs in terms of making long-term investment plans and taking loans for the development. Due to the pandemic, the leading cruise shipping companies withdrew cruise ships in 2021, and in return introduced only eight vessels (CMW, 2022). In addition, the tense and uncertain political and economic situation also affects the morale of company employees and can cause many health and existential problems among these employees.

With regard to the issue of declining demand, especially among passengers from outside Europe, the sea cruise operators in NE and sea ports in this region, as well as coastal tourist destinations, are currently facing a challenge to reassure potential passengers that NE is a safe area for cruise shipping. But it is clear that this is not an easy task because, from the perspective of the inhabitants of other continents, armed conflict is happening in the center of Europe, and Russia has access to the Baltic Sea.

Another serious challenge for ship operators involves the runaway inflation of fuel prices, which affects transport prices, and in turn also the prices of all goods and services. The increase in prices reduces customers’ purchasing power and their independent decision-making about expenses for additional services, such as tourism and recreation or savings, and consequently leads to giving up additional expenses and changing purchasing behavior.

A serious area of uncertainty in the activities of cruise shipping companies refers to more restrictive legal regulations on the permissible emissions of pollution generated by ships at sea and in ports.

The analysis carried out showed that the leading cruise companies focus their attention on sustainable management and care about the image of their organizations in order to be called “environmentally responsible” and “socially sensitive.” They invest enormous resources into pro-ecological solutions, increasing the energy efficiency on ships and reducing the level of harmful emissions during ship operations. They also implement various incentive and assistance programs for their employees and are also willing to help and invest in coastal regions. They regularly monitor the implementation of sustainable development programs and strategies and prepare annual reports available to the public. In their sustainable development strategies, cruise shipping companies declare that their top priorities include environmental protection, health, and safety, as well as the well-being of passengers, staff and crew of their ships, and local communities in tourist destinations visited.

However, the question arises about whether the intentions and plans made in the conditions of stable economic development that occurred before 2020 can be achieved while following the principles of sustainable management. The organizations inundated with frequent economic and political turnabouts, but recently also with climate change (global warming) often face difficult choices as to the direction of strategic goals to be implemented. No analyst of the cruise shipping market predicted that between 2020 and 2022 we would experience a global lockdown, that ships would be closed in ports for many months, that a war would break out in Europe and force a change in cruise ship routes, that sea ports (Russian) would be closed, that we would experience problems with fuel supply and that prices would increase dramatically, and that, for the sake of their safety, passengers would give up traveling. Unfortunately, no one predicted such a scenario, and maritime companies have had to change their tactics, allocating their organizational and financial resources in different areas than they had planned, which is unfortunately taking place at the expense of sustainable management, especially when it occurs in the face of crisis and uncertainty.

Certainly, we need to realize that officially the authorities of corporations do not admit the fact that they have to recommit to their long-term plans in the field of sustainable management, even though it is not working to their advantage. Therefore, in the publicly presented strategies and the related implementation reports, one can conclude that they present the situation slightly more optimistically than it is in reality. From the marketing point of view, this can be justified.

For example, in the face of cruise ships’ decommission and employee dismissal, the closure of cruise ship routes and actions aimed to look for savings to compensate for the increase in operating costs caused by the increase in fuel prices, the cruise shipping companies have pushed the social aspects related to the internal environment in organizations to the background. The costs related to employee motivation, training, and rewarding employees, or promotion associated with higher earnings are reduced. This adversely affects employee morale and has litPle to do with sustainable management.

Moreover, looking more broadly at the economic and social aspects of the consequences of the war in Ukraine and the related change in the directions of cruise travel in NE caused by the closure of the port of St. Petersburg, cruise shipping companies were forced to redirect their resources to other seaports. At the same time, it involved a sharp decrease in the number of ship calls, e.g., in the port of Tallinn, by over 61.5%, with an increase in the number of ship calls to the Port of Gdańsk by 66.7% at the same time. Such dramatic changes in a short time involve not only economic but also social costs. Cruise lines were also forced to suspend or terminate contracts with entities that handled their cruise ships in Tallinn and St. Petersburg. On the one hand, employees in the port of Tallinn have been out of work, while the Port of Gdańsk may have logistical problems with handling an unexpected number of ships. The rapid inflow of a great number of tourists to the region may also have consequences for the natural environment and local communities through congestion, traffic jams, increased noise, littering, etc.

In view of the situation that NE is currently facing, it seems necessary that leading cruise shipping companies should collaborate with national and international organizations to advance and enhance sustainability efforts. Perhaps this will minimize negative consequences to the environment and society.