IS THE AUTOMOTIVE INDUSTRY ON TRACK TO MEET ITS SUSTAINABILITY TARGETS?

According to the report, directives such as The European Green Deal and The Paris Agreement are pushing the automotive industry to pursue more sustainable solutions to meet carbon-neutral targets. A large majority (70%) of the automotive industry is focused on overall emissions reduction across the value chain, including scope 1, 2, and 3 emissions[3], from sourcing to end-of-life processes. Two-thirds (64%) of automotive organizations expect to achieve a reduction in carbon emissions by 2040, and 57% are going beyond ESG compliance to make sustainability a key business driver. However, since 2018, the automotive industry has reduced overall Greenhouse Gas (GHG) emissions by only 5%, with a further 19% reduction expected to be realized by 2030. At current rates, automotive organizations are not in line to meet the overall goal of net zero emissions by 2050 under the Paris Agreement.

The report finds that only a small group of organizations (less than 10%) are showing the way towards a sustainable automotive industry. Those report that they expect reducing their Greenhouse Gas (GHG) emissions by 35% by 2030 (compared to an average projected reduction of 19% across the automotive industry). At the same time, their operational efficiency is expected to improve by 22% through 2026 (compared to 16% for the rest of the organizations in the same period) as a direct result of their sustainability initiatives that enhance transparency across the value chain. They also enjoy a stronger employer ‘brand’ boost to their attractiveness to talent owing to their recent sustainability initiatives (18% versus 10% for the rest).

Deployment of initiatives has improved only in select focus areas

Automotive organizations are focusing on emissions reduction and prioritizing initiatives over which they have direct control and influence – such as manufacturing and decarbonizing vehicle fleets. The report finds that the deployment of sustainable supply chain initiatives has risen to 57% in 2022 from 42% in 2019, and responsible sourcing of metals has risen to 44% from 33% in the same period.

However, the report shows a drop in the implementation of circular economy initiatives. While 73% of organizations agree that contribution to a circular economy is a necessity to achieve their long term financial and competitive goals, only 53% have a circular economy strategy in place and less than half (45%) currently adhere to circularity principles[4] throughout their value chain.

Transition to Electric Vehicles remains complex and represents only one part of the solution

A demand for GHG emission reductions has further pushed automotive organizations to focus their efforts on Electric Vehicles (EVs). To drive this impact over the lifetime of an EV, it is essential that original equipment manufacturers (OEMs) ensure circularity of production and consider the end-of-life process for EV batteries across the value chain. Fewer than half (41%) of executives surveyed note that their organization has a dedicated sustainability initiative for battery end-of-life; this drops to 28% for second life batteries. Despite increasing sales of EVs, customers are reluctant to switch to electric due to due to range anxiety and costs for charging, find the ease of availability for internal combustion engine (ICE) vehicle spare parts and servicing options more attractive. Rising costs across the energy grid as well as complicated charging methods are halting progress and adoption.

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