1、The Automotive Industry in the Era of Sustainability The Automotive Industry in the Era of Sustainability2 Executive summary With growing concerns of climate change and environmental degradation, sustainability has become a strategic priority for automotive organizations. Governments, consumers and
2、investors are now pushing automotive organizations to change their ways of working, culture and products. This will have far reaching implications for the industry, that while making substantial progress still requires to step up its sustainability efforts. Our research tried to gauge how the automo
3、tive industry is responding to the challenge. This includes scrutinizing their progress and initiatives with the collective knowledge of more than 300 sustainability experts and regulators. Our key findings are: Sustainability is a strategic issue for the automotive industry and key to organization
4、purpose The implementation of sustainability initiatives is fragmented and lacking on many fronts: Some areas such as sustainable R -2.5%/year 2007-2015 Historical rate with fi rst standard: -3.5%/year 2007-2015 Historical rate with second standard: 0.3%/year 2015-2018 Historical data Business as us
5、ual: -1.2%/year 2000-2007 2015: 130 g/km 2021: 95 g/km TrendsTargets Source: International Council on Clean Transport, European Vehicle Market Statistics 2019/2020 edition, December 2018. The Automotive Industry in the Era of Sustainability6 However, after 2015, carbon emissions started to rise, led
6、 by growing sales of SUVs. At the same time, growing environmental concerns have meant increased pressure from a variety of stakeholder groups: Regulators. Globally, regulators are imposing more stringent and comprehensive measures to reduce the environmental impact of vehicles.7 A growing number of
7、 cities are restricting the entry of vehicles with high emissions. Public-interest groups. Globally, there is rising public awareness and concern about the harmful impact of the human activities on the environment.8 This, combined with the transport sectors high share of total emissions, has meant t
8、he industry is under intense pressure and scrutiny from environmental and public-interest groups, and society at large, to take active measures to curb emissions. This is reflective of consumer demand for electric vehicles. It has grown phenomenally 63% in 2018 to 5 million stock units. It is expect
9、ed by 2030, electric vehicles will have global sales of 23 million units (excluding two/three wheelers) and 130 million electric vehicles on the road.9 Investors and financial institutions. Investment firms are pushing for sustainability and climate change as investment criteria to evaluate target c
10、ompanies. Large players in capital markets such as BlackRock, the worlds largest asset manager are making a major strategic shift to environmental sustainability.10 Financial regulators, insurers, and central banks are also considering sustainability as a critical part of their risk portfolio and re
11、gulation. To understand where the automotive industry stands today in terms of its sustainability efforts, we launched a comprehensive research program, surveying 500 large automotive organizations as well as 300 experts, including regulators, academics, and non-governmental organizations working in
12、 the field of sustainability. More details on the research methodology are at the end of the report. Our research looks to answer the following questions: What are automotive original equipment manufacturers (OEMs) and their suppliers doing to ensure that the entire automotive value chain is sustain
13、able from responsible mining of metals to sustainable waste disposal? How mature are automotive organizations in implementing their sustainability initiatives? How can the automotive industry ensure that major sustainability drivers such as electric vehicles and supporting a circular economy deliver
14、 on their promise? What can automotive organizations learn from leading players who are at the forefront of sustainability? 300 290 280 270 260 250 240 230 220 210 2000200520025 CO (g/km) Business as usual: -0.6%/year (2000-2007) Historical rate: -2.1%/year (2007-2017) Source: Environment
15、al Protection Agency, “The 2018 Automotive Trends Report,” March 2019. Figure 2: New passenger fleet CO2 emissions, US (g/km, Real world EPAs GHG model) 7 What do we mean by sustainability in the automotive industry? Sustainability in the automotive industry involves a comprehensive view of planet-
16、and human- friendly operations, processes, products, and services. As Figure 3 shows, we identified 14 elements that the industry is pursuing in the field of sustainability. These range from “Sustainable R “Volkswagen Investors Worry About Ambitious Electric Car Plans,” Forbes website, May 2019; Com
17、pany sustainability reports; “General Motors Texas Plant Runs 100% on Wind Power,” Industry Week, October 2018. 9 Sustainability is now a strategic priority for the industry While sustainability has been on the agenda for automotive organizations for some time now11 today it has achieved a new urgen
18、cy and importance. As the head of sustainability at a large OEM told us, “We recently reaffirmed our focus on sustainability strategy at the corporate level into three key areas: climate action, circular economy, and ethical and responsible business. Its a long-term plan to go beyond ensuring sustai
19、nability in our operations and work with our supply chain network to make our entire value chain sustainable.” Figure 4: Automotive industry is increasingly discussing sustainability with its key stakeholders 142 173 184 261 320 200182019 Number of investor events discussing sustainabilit
20、y* *Investor events are public conferences, shareholder meetings, analyst roadshows, etc. discussing the companys strategy/earnings/valuation, etc. Source: Capgemini Research Institute analysis. As Figure 4 shows, for example, the number of investor events in the sector that mention sustainability t
21、opics has increased dramatically. Sustainability now plays a key role in the investor and board priorities. According to our survey, the two largest drivers for automotive sustainability are “commitment to be a responsible organization” and “addressing consumer expectations around sustainability.” O
22、ur panel of experts including regulators, academics, and environmental NGOs agree that the industry is embracing this issue with enthusiasm. Nearly half (46%) believe that the industry has made better progress in sustainability The Automotive Industry in the Era of Sustainability10 Figure 5: Expert
23、views on progress of automotive relative to other industries In ensuring global sustainability, the automotive industry is. Lagging other industries, 35% In-line with other industries, 19% Ahead of other industries, 46% Figure 6: Experts believe that automotive organizations are broadly in-line with
24、 or ahead of regulations on sustainability Lagging regulations, 25% Ahead of regulations, 38% In-line with regulations, 37% In ensuring global sustainability, the automotive industry is. Source: Capgemini Research Institute sustainability experts survey (N=317), NovemberDecember 2019. Source: Capgem
25、ini Research Institute sustainability experts survey (N=317), November-December 2019 relative to that of other industries (see Figure 5). Marelli, a tier-1 automotive component supplier, is working at local levels to address sustainability. As Ashish Srivastava, head of sustainability at Marelli Ind
26、ia, told us, And, as Figure 5 shows, three-quarters (75%) of the experts we surveyed also believe that the automotive industry has progressed in line, or ahead of, regulatory requirements. For instance, according to the US Environmental Protection Agency, all large US OEMs earned Greenhouse Gas (GHG
27、) emission credits for 2017, implying that they exceeded the GHG norms through the period 20122017.12 “Our three plants are meeting more than 50% of their electricity consumption demand from solar power. And to offset what we are consuming from the grid, we have undertaken extensive tree plantation
28、in and around our plants as well as at CSR (corporate social responsibility) project sites across India.” Ashish Srivastava Head of Sustainability, Marelli India 11 Rank Top ranked expert priorities for sustainability 1Sustainable manufacturing 2 Recycling of waste and easy returns for end-of-life d
29、isposal 3 Supporting and promoting a circular economy 4Sustainable R waste processing, treatment, reduction, elimination and recycling; and environmental improvement measures, such as ecosystem protection, clean-ups, green space development and natural landscape conservation. However, while leading
30、players are making significant investments such as these, there are question marks over whether the overall investment by the industry is enough to meet sustainability goals. Our survey panel of sustainability experts (51%) who say that the industrys investment levels are less than sufficient, belie
31、ve that the automotive organizations are investing 20% less than what is needed to achieve sustainability targets.whether the overall investment by the industry is enough to meet sustainability goals. Our survey panel of sustainability experts (51%) who say that the industrys investment levels are l
32、ess than sufficient, believe that the automotive organizations are investing 20% less than what is needed to achieve sustainability targets. We quantified the shortfall of investment as follows: Target sustainability investment to revenue ratio derived from our survey of experts: 0.9% Actual sustain
33、ability investment to revenue ratio (based on sample of 10 large automotive organizations): 0.4% Shortfall in sustainability investment to revenue ratio: 0.5% Average annual forecast revenue of the automotive industry over the next five years: $1.9 trillion Total investments over 5 years: USD 47.5 b
34、illion or USD 50 billion This investment needs to be made in addition to the investment also needed for large-scale manufacturing and R Capgemini Research Institute analysis. The Automotive Industry in the Era of Sustainability20 Figure 13: EV emissions vary by country depending on the electricity g
35、rid powering them Source: International Council on Clean Transport, “Effects of battery manufacturing on electric vehicle lifecycle greenhouse emissions,” February 2018. Note: Estimate of 150,000 km lifecycle. 250 200 150 100 50 0 Lithium batteryOther manufacturingFuel cycleTailpipe CO emessions (g/
36、km) Average European car European union average FranceGermanyNetherlandsNorwayUnited Kingdom Electric Most effi cient Conventional however almost 90% of the increase was due to private charging points (i.e. points that feed directly from the grid). Effectively, most of the charging infrastructure is
37、 directly powered by the grid. This creates an incremental demand of 640 TWh by 2030 or 2.7% of the 2018 global electric output. If this increase in demand outstrips supply from renewable sources, EVs will still be dependent on carbon-intensive electricity. Due to the above two scenarios, in-use EV
38、operations by 2030 would lead to an effective contribution of 230 million tonnes of CO2 equivalent (mt CO2-eq) while displacing 220 mt CO2-eq. While there are plausible alternatives for zero-emission vehicles like hydrogen-powered cars their development and adoption are rather limited and hence thei
39、r overall impact currently is less significant in the near future compared to electric vehicles. Circular economy yields economic gains while supporting EV sustainability Supporting a circular economy has a strong business case. Remanufactured vehicle parts can save around 30 to 50% of the cost whil
40、e retaining the same level of quality as traditionally manufactured ones.26 Leveraging the circular economy provides immediate cost savings. GM has generated $1 billion from the sale of recyclable waste, with 150 of its factories and offices designated as “zero-waste to landfill.” 27 Additionally, t
41、he increased cost of remanufacturing vehicle “Organizations need to own the strategic stock of resources. They need to shift to a circular economy. Its not just ethical, its just not for sustainability or environmental sustainability. Its a matter of competitiveness and of being able to manufacture
42、in constrained supply chains. Its a matter of survival for the sector.” Jordi Oliver Sol CEO, Indit, a circular economy consulting group. 21 Figure 14: Automotive organizations have significant variability in implementing various sustainability initiatives 75% 71% 66% 60% 57% 56% 51% 36% Which of th
43、e following circular economy initiatives have you implemented? (Percentage of organizations) Recycling a significant amount of industrial waste and scrap Mandate procurement teams to emphasizeon reused and/ or recycled components Encourage exchange or returns for end- of-life products for recycling
44、and reusing Invest in infra structure and skills to salvage and reuse old components and scraps Incentivize end-users to use refurbished parts and components Mandate the internal product development teams to design products with second life usage and easy recycling Develop new ownerships models to e
45、ncourage customer participation in the circular economy Implement partnerships with utilities and suppliers for second life of electric vehicle batteries Source: Capgemini Research Institute survey of automotive executives (N=503) and sustainability experts (N=317), NovemberDecember 2019. parts is m
46、ore than offset by the reduction in material and resource costs, as well as other overheads. 28 As we saw earlier, “supporting and promoting a circular economy” is the most commonly deployed initiative among the fourteen we studied. However, only half of organizations are deploying it. More needs to
47、 be done to adopt remanufacturing best practices. Additionally, only 32% of their supply chain contributes to the circular economy, and only expect this to increase to 51% in five years time. “The automotive industry cannot produce hundreds of thousands of vehicles per year using virgin raw material
48、s,” says Jordi Oliver Sol, CEO at the circular economy consulting group Indit. Most automotive organizations are focused on recycling, incentivizing the use of refurbished components and end-of- life use of vehicles (see Figure 14). For example, in November 2019, Toyota set up a joint venture with M
49、aruti to establish vehicle dismantling units across India.29 However, only 51% are investing in salvage infrastructure and skills and only 36% partner with suppliers and utilities around the second life for EV batteries. Renault provides an example of what can be done in this area. It has developed a network of over 330 salvage organizations in France, through its subsidiary Renault Environment, to recycle parts and materials.30 Renault cars currently sold in Europe contain on average 36% recycled materials and 1020% recycled pla
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