Smart port vs. port integration to mitigate congestion: ESG performance and data validation

Abstract

In practice, ports compete on both service volume and service quality. The latter can be measured by the port congestion situation so the mitigation of congestion helps improve customers’ experience. We observe that smart ports are widely built and many local governments are promoting port integration to ease competition and reduce congestion. One immediate question is: Are the two strategies really effective that further enable the improvement of ESG (Environment, Social and Governance) performance? In this study, by taking the do-nothing strategy as the benchmark, we examine how smart port and port integration strategies work in port congestion reduction and ESG improvement. We reveal that the smart port strategy brings the Matthew effect that the large port obtains a larger market share and the smaller port worries about the win-lose situation. We also reveal that smart port can make each port and the entire port system more congested, resulting in the investment dilemma. Differently, the port integration strategy can effectively reduce congestion but hurt social welfare. We further discuss a mixed strategy where both strategies are implemented. Interestingly, under the mixed strategy, the risk of falling into the investment dilemma can be reduced and social welfare can be increased. We compare the ESG performances under three strategies and highlight that the mixed strategy achieves the highest system profit, the smart port strategy yields the highest social welfare, and the port integration strategy may outperform the other strategies in terms of environmental sustainability.