Navigating the transition to net zero requires dramatic shifts in capital spending for automotive manufacturers. Here’s how they’re tackling the road ahead.
Automotive manufacturing is responsible for almost 10% of global industrial CO2 emissions. Facing rising pressure from net-zero initiatives, some automakers have significantly reduced the environmental impact of their production processes thanks to high implementation levels of sustainability practices and technologies. For example, Volkswagen reduced its impact by 37.4% between 2010 and 2021, while Volvo aims to achieve climate neutrality by 2025, according to their latest sustainability reports.
However, according to Capgemini, fewer than a tenth of automakers are leading the way towards a truly sustainable automotive industry. They’re the ones that expect to cut greenhouse gas emissions by 35% by 2030, compared to an average projected reduction of 19% across the industry. It’s clear there’s still much work to be done.
Recent estimates suggest that a significant fragment of vehicle’s carbon footprint occurs during the production stage, with a further five percent when it is recycled at the end of its life cycle. For example, the manufacture of a single petrol or diesel car emits 5.6 tonnes of CO2 on average.
It is clear from these figures that manufacturers must prioritise sustainable production models, while also paying attention to the environmental viability of their vehicles throughout their lifecycles.
In this article, we’ll explore the key areas that automakers are focusing on to address the net zero challenge.
For decades, conversations about sustainability have largely revolved around recycling. But recycling only happens at the end of a product’s lifecycle. In the case of vehicles, that usually means the scrap metal heap. However, automakers need to factor in sustainability during the design, supply sourcing, and manufacturing stages too.
Unlike recycling, circularity takes a different approach by going back to the beginning of the production lifecycle. The ultimate aim is to minimise waste and pollution throughout every stage of that lifecycle and, ideally, eliminate the need to recycle altogether. As the World Economic Forum puts it, that means preventing waste from being generated in the first place.
The time has come to decarbonise the entire process from design to end-of-life. For example, in BMW Groups 2022 report, the company prioritised sustainability, circularity, and hydrogen power in engagements with stakeholders.
While that ultimate goal may never be possible, it does aim to give automakers the impetus to continuously increase their degree of circularity. This includes designing vehicles with end-of-life disassembly in mind, investing in closed-loop recycling systems, and requiring suppliers to themselves use sustainable materials and production processes.
Government regulations and evolving industry standards play a significant role in driving the transition to net zero. As countries around the world set more aggressive targets for reducing emissions, manufacturers must continuously adapt to new standards and regulations ahead of time. In other words, their goal should be to surpass current requirements by imposing strict environmental, social, and governance (ESG) policies on themselves.
Europe has established initiatives and regulations with the goal of reducing the environmental impact of the automotive sector, including the manufacturing processes it relies on. The EC’s Circular Economy Action Plan, for example, seeks to promote resource efficiency and reduce waste in all areas of manufacturing. Automakers must also take responsibility for the proper disposal of end-of-life vehicles in accordance with the EU’s End-of-Life Vehicle Directive. All manufacturers are also required to provide demonstrable proof of their efforts to source more sustainable supplies and third-party vendors and reduce the carbon emissions from their own manufacturing processes.
In many industries, the biggest environmental impact lies somewhere further back along the supply chain. That’s especially the case for automakers, which rely heavily on things like heat treatment and the mining and refining of rare earth materials. Often, these processes produce even more pollution than the design and assembly of vehicles themselves. Furthermore, that’s not a problem that the transition to electric car manufacturing can resolve alone by itself. After all, it is not only about the end product, but about how it is made and how it is disposed of at the end of its lifecycle.
Because of this, automakers must also evaluate the sustainability of their supply chains. They must set targets for their third- and fourth-party suppliers need to meet if they’re to continue doing business with them. When suppliers meet sustainability standards, automakers create a ripple effect that drives more environmentally friendly manufacturing processes throughout the supply chain.
To build and maintain partnerships with sustainable vendors, automakers must set their own standards and conduct regular audits to ensure compliance with them. They should also be especially mindful of working with overseas suppliers in regions of the world that may not have the same environmental and sustainability standards as their own.
Building a truly circular car that produces zero waste and pollution throughout its lifecycle may not be possible in the foreseeable future, but that doesn’t mean it shouldn’t be a top-level goal for automakers.
Getting there requires keeping ahead of government regulations with continuous improvement across the entire manufacturing process and the supply chains it depends on. The road ahead is a long one, but it’s the only one worth travelling.
Join the conversation about the automotive industry’s transition to net zero at the ICM Summit 2023 on May 17 in Frankfurt, Germany.