As of 2021, the climate crisis is well beyond being a vague threat in the future. Countries and communities across the world have already been witnessing the vagaries of the changing climate, right from more frequent natural disasters to water shortages, and heatwaves. In light of this situation, ideas of sustainability have found a footing among overall development goals. Sustainability, as we now understand it covers and seeks to integrate economic, social and environmental goals. To really be able to make a difference towards the achievement of these sustainable development goals (SDGs- as the United Nations has identified them), every stakeholder and actor must do their part. This includes not just governments and state bodies but also businesses, other organisations and individuals.
Given their large-scale impact and influence over the economy, society and natural resources, businesses have a tremendous responsibility towards conservation, protection and sustainability. In recent times, this responsibility has evolved from being a ‘nice-to-do’ to a ‘must-do’. With shifts in regulations, investor and consumer perceptions, companies can no longer skirt around environmental and social concerns without affecting their long-term financial and business sustainability.
The automotive sector is no stranger to such a changing environment. Sustainability is a strategic concern and imperative to their organisational purpose. The increasingly popular trends of electrification and lower emissions of vehicles as well and carbon-neutral production processes indicate the emergence of sustainability in the automotive industry.
Significance of sustainability in the sector
The automotive sector is one of the biggest contributors to global greenhouse gas emissions. For each basic internal combustion engine (ICE) vehicle, almost 5 metric tons of carbon dioxide is annually emitted into the atmosphere (US-EPA reports). The majority of the emissions in the sector are generated both as part of its value chain as well as over the lifetime of the consumer’s usage of the vehicle. Therefore, tackling sustainability will involve a holistic approach and cooperation between several supply chain players.
Much like every other sector, regulations along with investor and consumer interest have driven the trends towards ‘greening’ of operations. The global pandemic further accelerated the regulations and incentives provided by state authorities in many parts of the world. Investors have recognised the changing regulatory environment and consumer sentiment and are accordingly more cognisant of their image if associated with companies not taking the required measures.
Consumers on their part are no longer just looking for cleaner vehicles but also a transformation in mobility alternatives, particularly in urban areas. Vehicles are no longer seen as status symbols. Instead, a more utilitarian approach is considered. Ride-sharing, intelligent or driver-less fleet management, connected vehicle services, etc. lie in the future landscape of the sector. Companies and suppliers that are able to adapt to these fundamental shifts and provide services and products in line with them will survive and thrive.
What does being sustainable mean in the automotive sector?
The key to long-term viability and success in the industry lies in innovation, consistent research and development, effective branding and an efficient global value chain. The automotive industry is already one of the biggest investors in research and development. However, to win against the upheaval in business and economy-wide practices we are currently witnessing, their R&D must enable them and their suppliers to stay ahead of the curve in terms of reducing emissions, lightweight constructions, and other mega-trends.
One of the basics for creating a carbon-neutral automotive sector is the electrification of vehicles since it will allow the lifetime of their usage to be as clean as the electricity that powers them. As renewable sources of electricity become more prevalent, emissions from vehicle usage will correspondingly fall. Electrification of vehicles has further benefits by way of reduction in local pollution levels and greater potential for recycling engine components and extending the lifetime of vehicles.
As technology improves, autonomous vehicles can facilitate optimal management of multi-passenger fleets and help combat the environmental stress arising from individual ownership and wastage of resources from the idling of vehicles.
Key challenges related to sustainability in this sector
- Lack of adequate charging infrastructure- For electrification of vehicles to be successful, charging infrastructure is a prerequisite. Without it being well-developed manufacturers need to provide options like hybrid modes, which leads to having additional engine weight that can be inefficient in the long run. However, even developed countries have been lagging in this regard. Political apathy and inefficiency in governance have been significant roadblocks. To take matters into their own hands, several major car manufacturers have decided to come together to build the infrastructure in different parts of Europe. This initiative, too, needs to iron out some kinks in the forms of integrated payment options, etc.
- Battery and energy storage technology– In continuance of the above challenge, a technical aspect that has been hindering the uptake of electric vehicles is the technology available for batteries. Apart from being bulky and adding to the weight of the vehicle, the supply chain of batteries is infamous for its environmental impacts. Disposal of batteries creates further challenges.
- Balancing sustainability goals with cost-efficiency– Although consumers are more aware and interested in making sustainable choices, they are often held back by the higher prices associated with sustainable goods. Therefore, carmakers and other vehicle manufacturers need to find a balance between developing a green supply chain to comply with their regulatory requirements while also managing the production costs to match with the market’s price appetite. To achieve this, their solutions will have to integrate and transform not just their product technology but their entire value chain.
Economic, social and environmental disclosures for automotive companies
Regulations and their corresponding disclosures for automotive companies arise from three main categories:
- Climate Change and Greenhouse Gas emissions
- Value Chain Sustainability
- Responsible usage of data and digital technologies
In addition to the country-specific emission regulations and government incentives to automotive companies, the following are a few of the sustainability reporting standards for the automotive industry chalked out by the Global Reporting Initiative (GRI):
- EC5- deals with the payroll and benefits of employees
- EN10- deals with greenhouse gas emissions such as NOx, SOx
- EN15- refers to the extent of reclaimable and actually reclaimed product weight sold at the end of the product life cycle
- PR1- describes policies for reporting on customer health and safety during use
Self-driving and automated vehicle technology brings with it concerns regarding data security and protection that are not yet addressed but must be done so adequately by regulatory authorities.
Companies setting the examples for sustainability in the automotive sector:
Ford: Since the 1920s, Ford has been using sustainable agricultural products to manufacture certain components of their vehicles thanks to its founder’s vision of integrating farmers and automakers. This vision took effect on different scales, right from reducing wood consumed by making several parts using a mixture of wheat straw, silica, rubber, to building a prototype ‘soybean car’. Today the company continues its exploration of alternative manufacturing materials such as agricultural waste, coconut, jute, etc. Additionally, by making design choices to builder lighter and cheaper vehicles, they are significantly reducing their oil consumption, CO2 emissions and manufacturing more recyclable and reclaimable parts.
General Motors: GM employs a creative materials reuse program to reuse metal, tires and packaging materials. A significant instance of the implementation of this project was seen during the 2010 oil spill in the Gulf of Mexico. Oil-soaked booms spread over 2550 miles were recycled and turned into vehicle parts. GM also follows a zero-waste mindset thereby diverting waste from landfills to recycling plants. Such initiatives have also prevented about 8.9 million metric tons of CO2-equivalent emissions.
- Wellbrock, W., Ludin, D., Röhrle, L. et al. Sustainability in the automotive industry, importance of and impact on automobile interior – insights from an empirical survey. Int J Corporate Soc Responsibility 5, 10 (2020). https://doi.org/10.1186/s40991-020-00057-z
- Striking a balance between legislative requirements and consumer expectations
- Driving the automotive industry to a more sustainable future
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Disclaimer: The views and opinions expressed above are those of the author’s and do not necessarily represent the views of Center for Research and Implementation of Sustainable Practices or the CRISP Global.
Esha is a student of Sustainable Development Practices at TERI School of Advanced Studies. Her main research interests include Renewable Energy and Energy Security, Sustainable Finance and Circular Economy.