Steering Sustainability: ESG in the Automotive Sector

According to SMMT, in the last decade, the automotive industry has made vast improvements to reduce the environmental impact of its products throughout the life cycle. Improvements in production processes mean energy usage in the production of vehicles is down 19%, water use has dropped by 35% and 91% less waste enters landfill sites. 

However, the automotive industry is still a major contributor to global emissions and resource consumption. Social and ethical issues, including labour practices, supply chain transparency, and diversity and inclusion, are also critical ESG concerns in the automotive sector. Many automotive companies have recognized the need to address these ESG issues to meet regulatory requirements, attract environmentally-conscious customers, and secure investment from ESG-focused investors. In this blog post we explore these Environmental, Social and Governance (ESG) considerations in the Automotive industry through:

• ESG Frameworks: EcoVadis
• Material ESG Reporting Metrics
• ESG Developments - 3D Printing 

Frameworks 

EcoVadis

Founded in 2007, EcoVadis is a global provider of sustainability ratings and assessments for businesses. It operates as a platform that helps organisations evaluate and improve their environmental, social, and governance performance, as well as the sustainability practices of their suppliers. 

Their methodology is built on international sustainability standards, including the Global Reporting Initiative (GRI), the United Nations Global Compact (UNGC), and the ISO 26000. They cover 200+ spend categories and 175+ countries, providing a Sustainability Scorecard to companies with standardised assessment methodology that covers various ESG criteria across 21 indicators in four themes:

• Environment 
• Labour & Human Rights 
• Ethics 
• Sustainable Procurement 

EcoVadis has a database of thousands of companies across various industries, making it one of the leading providers of ESG ratings and assessments.

EcoVadis in the Automotive Industry:

Supplier Assessments: Automotive manufacturers often rely on complex global supply chains. EcoVadis helps these companies evaluate the ESG performance of their suppliers. This is crucial for identifying and mitigating ESG risks in the supply chain.

‍Benchmarking and Improvement: EcoVadis provides benchmarking data and assessments that allow automotive companies to compare their sustainability performance with industry peers. This information can guide improvements and set ESG goals.

Reporting and Transparency: With increasing pressure to disclose ESG performance, automotive companies use EcoVadis assessments to provide transparent and credible data to stakeholders, including investors, customers, and regulators.

‍Risk Mitigation: EcoVadis helps automotive companies identify ESG-related risks early, which can prevent supply chain disruptions, reputation damage, and legal issues.

‍Competitive Advantage: High EcoVadis scores can be used as a marketing tool to demonstrate a commitment to sustainability and attract environmentally-conscious consumers.

EcoVadis plays a significant role in helping the automotive industry assess and improve its ESG performance. As sustainability and ethical considerations continue to gain prominence, automotive companies are increasingly relying on platforms like EcoVadis to measure, manage, and communicate their ESG initiatives and progress.

Material ESG Metrics

Product Carbon Footprint (E)

The role of private cars and vans in environmental degradation has been substantial, accounting for over 25% of global oil use and around 10% of global energy-related CO2 emissions in 2022. Transition strategies include developing energy-efficient vehicles, such as electric and hydrogen fuel cell cars, to curb greenhouse gas emissions.

While electric vehicles accounted for 14% of global vehicle sales in 2022, all cars and van sales will need to be zero-emission by 2035 to be in line with the Net Zero Emissions by 2050 Scenario. To maintain transparency and exhibit their commitment to reducing environmental impacts, organisations are producing extensive reports delineating the lifecycle analyses of their products, showcasing efforts undertaken to mitigate climate change repercussions.

Product Safety and Quality (S)

Maintaining high standards of safety involves not only the integration of advanced safety features and ensuring material durability but also fostering cybersecurity as autonomous driving technologies evolve. Adhering to international safety norms such as ISO 39001, which is focused on road traffic safety management, is essential. From a community perspective, approaches to product recalls further solidify consumer trust, portraying a brand that is genuinely committed to ensuring safety and quality

Supply Chain Standards (S)

As of 2021, up to 75% of the value creation in car manufacturing was done in the supply chain. Supply chain standards entail a strong focus on ethical procurement and adherence to labour norms, ensuring a responsible sourcing strategy that avoids conflict materials and promotes safe working environments. Technology can help provide greater traceability, and implement standards like ISO 14001, which emphasises an effective environmental management system (EMS) and can facilitate companies in maintaining sustainable operations while meeting ESG objectives.

ESG Development - 3D Printing

As the automotive industry moves towards a more sustainable future, 3D printing presents numerous benefits:

Environmental Benefits:

3D printing, also known as additive manufacturing, inherently promotes waste reduction as it allows for the precise use of materials, utilising only what is necessary to build components layer by layer. This process significantly minimises the production of scrap materials compared to traditional subtractive manufacturing methods, where large amounts of materials are often wasted. Moreover, through the optimization of design, 3D printing facilitates the production of lightweight components, directly contributing to the reduction in the vehicles' fuel consumption and CO₂ emissions.

Social Advantages

The technology enables localised production, reducing the need for extensive supply chains and promoting local job creation. Moreover, it enables for greater customised solutions, addressing individualised customer needs and innovation through the facilitation of prototype testing at much lower costs.

Governance Considerations

The flexibility and efficiency offered by 3D printing enable companies to adhere to stringent regulatory standards with greater ease. By allowing for rapid prototyping and testing, manufacturers can ensure safety and quality control standards are met, showcasing responsible governance.

Future Direction

With potential applications extending to the recycling of materials, promoting a circular economy in the industry, there is great potential for partnerships between automotive companies and tech companies to prompt further innovation in 3D printing technologies.

‍

Conclusion

The automotive industry’s transformative journey in sustainability is essential. With strides already made in production efficiency and waste reduction, the industry has a great level of influence on environmental and social footprints. 

Frameworks like EcoVadis provide a roadmap, helping manufacturers measure, compare, and continually enhance their ESG performances, especially in arenas like supply chain transparency and ethical labour practices.

Material ESG metrics, such as product carbon footprint and supply chain standards, highlight areas where the automotive industry can still make improvements. Innovations like 3D printing are just one example of the potential of technological advancements in mitigating material ESG impacts.

As consumer awareness heightens and regulatory measures tighten, there's higher pressure than ever for the industry to drive forward with its ESG commitments. By utilising technological advancements, adhering to global sustainability standards, and continually benchmarking their performances, automotive companies can navigate this transformative era, ensuring they not only produce vehicles that move us but also lead the way towards a greener, more equitable future.

‍

‍

Sources 

SMMT - Environment 

About EcoVadis 

MSCI ESG Industry Materiality Map

IEA Cars and Vans

ISS ESG inFocus Automotive Industry

10 Exciting Examples of 3D Printing in the Automotive Industry in 2021

‍