Case Study Notes: Carnival Cruise Lines Compliance Journey

Jonathan Brun


Carnival Cruise Lines has a history of rough seas when it comes to environmental compliance programs. With over 60 million dollars in fines and after being placed in monitorship by the United States Department of Justice, Carnival decided to embark on a journey to make their compliance management program world-class. This post summarizes some of the key points made by the Compliance Weekly case study entitled “Tale of Two Storms”.

Background on Carnival Cruise Lines Compliance Journey

In 2013, a whistleblower documented the cruise line’s compliance issues and submitted them to the UK and US governments. After these environmental compliance issues were raised with regulators, Carnival crews intentionally tried to hide the systematic behavior of discharging waste illegally into open waters. This behaviour was not a new issue, Carnival had already paid an 18 million dollar fine in 2002 for similar actions. The 2002 fine did lead to environmental program overhaul, but did not result in a systematic overhaul of the company’s compliance program. That is to say, specific actions were taken to improve reporting, documentation, training and procedures around environmental issues, but the underlying company culture towards compliance remained unchanged. Though there were actions taken, they did not go deep enough and ultimately the general company culture determined the behaviour of staff when it came to environmental issues. This is why a siloed compliance program can lead to major shortcomings. The 2013 issues resulted in over 40 million dollars in fines for Carnival, as well as a tarnished reputation, significant internal costs, and being placed in monitorship. When the monitorship began in 2019 following the conviction, Carnival finally started to fundamentally change.

Key Take-Aways

Some of the main points that I took from this fascinating case study:

  • Even after the guilty findings in 2019, illegal behaviour continued – from more discharges to briefing the ships prior to inspections from the Department of Justice. This led to judgments that forced Carnival management to accept responsibility for the compliance issues, pay for more independent audits and a variety of other changes that all incurred substantial costs – not to mention another 20 million dollar fine.
  • Carnival was put under monitorship with the second round of fines, this process is very expensive, and it also indicates that the regulator has lost confidence in the company’s ability to clean up its systems without very close supervision.
  • In 2019, Carnival hired a Chief Ethics and Compliance Officer, Peter Anderson, who was an experienced lawyer. This position was intentionally about compliance AND Ethics They put an emphasis on Ethics as over 50% of carnival’s problems and compliance issues were tied to their business ethics.
  • Carnival has 105 Vessels and 130,000 employees around the world. Carnival brought together 9 Brands in a relatively short period of time. All of these companies had their own systems in place and many of them were previously competitors. Moreover, prior to 2020, there was no centralized compliance function. Each business unit had its own team, with various standards and systems.
  • To tackle these obstacles, Anderson rearranged the offices so that Environment, Safety, Physical Security and General Compliance were all co-located and could better collaborate.
  • To add to their environmental compliance challenges, Carnival Cruises also owned Costa Cruises, best known for the 2012 Costa Concordia accident which left 30 passengers and later one salvage diver dead.
  • Prior to 2020, crews were given too much leeway in determining actions related to waste. As a result, crews would release dirty bilge water and other hazardous waste at sea to avoid costly fees in port to dispose of the waste properly.
  • The company’s environmental compliance lead did not have a direct line of sight into each vessel until after the second round of fines and the culture change.
  • Carnival, when speaking about the various actions they took to put in place a proper compliance program in 2020, stated that “They wished they had done it the first time around”
  • In the second round of fines, Carnival finally came to understand that you cannot really fix operational issues without fixing the underlying cultural issues.

Key Actions Taken to Improve Compliance for Carnival Cruise Lines

The Chief Ethics and Compliance Officer, Peter Anderson, brought a four pillar model of compliance and self governance to Carnival:

  • Prevention
  • Detection
  • Response
  • Correction

Like many organizations, Carnival was too focused on response and being reactive. Under Peter Anderson the EHS, Risk and Safety teams came together to better evaluate risk, link to controls and determine actions to take.

The corporate team had to work closely with the ships and the Environmental Compliance Officers. Changing the culture within leadership was a critical step in the journey. An essential change was having Peter Anderson, the Chief Ethics and Compliance Officer, participate in the weekly leadership calls with the CEO, CFO and other top level executives. By bringing compliance to the highest level of discussion, it allowed issues to be raised and also sent a message to the rest of the organization.

The company also added a board member with direct compliance experience, a former VP at Wal-Mart who was responsible for compliance. Too often, boards look for people with financial and strategic experience, but do not look for members with a compliance background.

Another key element in shifting leadership was to engage the Ship Captains in this process. Ship Captains are in charge when at sea and it was critical to get them onboard with a compliance management program that included a more open conversation with crew members and staff about compliance issues.

Carnival’s Culture Action Plan

Carnival also developed a culture action plan that leveraged information from staff and created a path to meaningfully change the culture at Carnival when it came to compliance. Since putting these leadership changes in place and implementing the culture plan, the number of reported compliance issues by staff have more than doubled.

To reinforce the programs, plans and changes, Carnival has also put in place a competition and reward system for staff and ships. Carnival provides cash prizes, environmental compliance coins, and they recognize one ship out of the 105 ship fleet as the best environmentally friendly ship each year.

This case study was an excellent overview of what it takes to genuinely transform the compliance management program of a large, multinational organization with numerous business units. If your organization is looking to make a radical change in its compliance management program, I highly recommend this case study.

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