The drive for sustainability

A common theme in this edition is sustainability. Automotive manufacturers and their suppliers are reviewing the materials used in the manufacture and assembly of vehicles, as well as the way they are designed and put together.

The phrase ‘circular economy’ has become as much a part of the automotive industry lexicon as ‘horsepower’ – and it is used more often, along with ‘end-of-life.’ Recovery or the ‘mining’ of the metals, plastics and minerals in automotive components has become a science and industry on its own.

As has near-shoring. The US Senate has approved the subsidization of the domestic semiconductor industry in order to alleviate future shortages and dependence on a single source.

Low-cost chips will be a game-changer for recycling. One can only ‘mine’ if the materials are available in sufficient quantity and suitable quality to reach economies of scale. There should be more value locked into a used car than the revenue from selling it or its’ parts in second-hand markets, such as Africa.

For this, manufacturers need to track individual components and body parts throughout their life-cycle – embedded chips will make this possible.

OEMs and Tiers will soon have no option. Regulators are in the process of putting the onus on the producer of the product to recover and process it at the end-of-life.

This is where design plays a part – it must be as cost-effective to disassemble a vehicle and its components as it is to put them together in the first place. Track and trace has to be able to follow the vehicle and its components from production line to junkyard. Reverse logistics specialists will need to be added to the organogram.

A recent study by the Capgemini Research Institute found that suppliers in general are more aware of the need to build in sustainability than OEMs. Suppliers interviewed by Capgemini researchers are investing a greater share of revenue (0.93%) towards sustainability per year than their original equipment manufacturer counterparts (0.79%).

Overall, the implementation levels of sustainability initiatives have improved only marginally, or even reduced in some areas since 2019, according to the “Sustainability in Automotive: From Ambition to Action” report. The authors say automotive organizations have responded to challenges such as ongoing chip shortages and supply chain issues by refocusing their priorities.

As a result, since 2018, the automotive industry has reduced overall greenhouse gas emissions by only 5%, with a further 19% reduction expected to be realized by 2030. At current rates, automotive organizations will not meet the goal of net zero emissions by 2050 under the Paris Agreement, the report warns. This means that the European Green Deal target of a climate neutral Europe by 2050 will also not be met.

On the positive side, some 70% of automotive industry respondents claimed to be focusing on overall emissions reduction across the value chain, including scope 1, 2, and 3 emissions, from sourcing to end-of-life processes. Two-thirds (64%) expect to achieve a reduction in carbon emissions by 2040, and 57% are going beyond ESG compliance to make sustainability a key business driver.

The effects will be felt on the bottom line as well as the environment. Operational efficiency is expected to improve by 22% through 2026 as a direct result of sustainability initiatives that enhance transparency across the value chain. Companies also become more attractive to talent owing to their sustainability initiatives (18% versus 10% for the rest).

“The automotive industry is entering a crucial decade largely defined by its ability to go all-electric. But while sustainability is credited as a top priority, the industry as a whole is falling behind. Automotive organizations must think practically about their sustainability approach if they are to reach the targets set out in the 2050 Paris Agreement. This includes a significant and renewed commitment to the circular economy that focuses on the full lifecycle of the vehicle as well as the inclusion of Scope 3 emissions,” said Alexandre Audoin, Global Head of Automotive Industry at Capgemini. “Accountability is imperative for defining goals and KPIs across the entire organization and progressing against these targets.”