Unlocking the value of EcoDigital transformation

The automotive industry faces a world of opportunity in the form of EcoDigital transformation – the simultaneous advancement of digital and sustainable practices.

Also known as twin transformation, this dual approach is crucial for manufacturers looking to remain competitive in a rapidly evolving market that demands a faster, cheaper, resilient, software-driven and sustainable industry.

The supply chain is a decisive factor in achieving these goals. Effective partner ecosystem integration allows for real-time sharing of critical data and insights, enabling manufacturers, suppliers, and service providers to work together more efficiently. This collaborative approach not only accelerates the development of innovative solutions but also enhances overall operational performance while reducing the carbon footprint and complying with ESG regulations. In this article, we will explore why supply chain partner integration is paramount for driving the EcoDigital transformation with a data-powered, collaborative approach.

The importance of data collaboration in the automotive value chain

Data collaboration ensures that information is consistently available and accessible throughout the automotive value chain – from suppliers to manufacturers to end users to third parties (and back). Timely access to accurate data in a common single source of truth enables companies to make informed decisions quickly, reduce delays, react to critical incidents and improve overall operational efficiency.

In stock, on time and ethical

For example, real-time data on component availability can prevent production bottlenecks, allowing manufacturers to maintain steady output and meet customer demand without excess inventory. A seamless flow of data allows for real-time monitoring of production processes, inventory levels, and supply chain dynamics. Going further, clear commodity tracking can also help to quickly narrow down ESG risks and thus initiate effective joint countermeasures. For example, suppose a mining operation is using unethical employment practices. In that case, partner companies can use their shared data to uncover those practices, and then either pressure the mining operation to improve, or switch suppliers. Also, if data is used to derive product or process improvements, taking the value stream perspective prevents local optimization, leading to problem shifting towards up- or downstream elements.

Unfortunately, traditional data silos often hinder the effective use of this information. First and foremost, the silos within the company’s own boundaries must be overcome. Open data ecosystems break down these silos, facilitating seamless collaboration and communication among all stakeholders.

Cost reduction

Data continuity contributes significantly to cost reduction across the automotive value chain. By optimizing processes based on real-time data insights, companies can minimize waste, reduce operational inefficiencies, and lower production costs. Moreover, continuous data flow enables better demand forecasting, allowing manufacturers to adjust production schedules accordingly and avoid overproduction or stock-outs. It also significantly reduces the effort required for procurement and compliance with regard to the elimination of ESG risks and creates comparability of carbon footprints. This agility in operations translates into lower costs and improved profitability.

Data-driven insight

With continuous access to data, automotive companies can leverage advanced analytics and machine learning algorithms to derive insights that enhance predictive capabilities. This also opens up completely new opportunities for OEMs and suppliers to gain insights into the performance of their components in the field and to develop new business models. For example, manufacturers can analyze historical performance data to anticipate maintenance needs before failures occur. That way, predictive maintenance reduces downtime and repair costs while improving reliability. As an added bonus, predictive maintenance helps avoid vehicle recalls and repairs, reduces emissions and increases customer satisfaction.

Process mining

Another promising technique for optimizing cost, time, and carbon footprint with the use of data is process mining. This data-driven approach involves extracting knowledge from event logs to identify bottlenecks, inefficiencies, and opportunities for improvement. By analyzing the actual execution of processes based on real-time data, manufacturers can pinpoint areas where costs can be reduced, lead times shortened, and sustainability enhanced. For example, process mining can help identify the most efficient routes for transporting materials between suppliers and production facilities, minimizing fuel consumption and emissions while optimizing delivery times.

Understanding the EcoDigital transformation

In the section above, we saw the power of data. Now let’s look at what happens when data and sustainability are combined. The integration of digital technologies (such as AI, IoT, and digital twins) with sustainable practices (like decarbonization, ESG risk management, and circular economy) creates a synergistic effect that enhances the overall value stream in several ways.

• By using digital tools to monitor and optimize manufacturing processes, companies can reduce energy consumption and material waste.
• Digital twins allow for extensive testing and simulation before physical production begins. This capability not only accelerates the design process and reduces waste but also enables manufacturers to create more efficient and environmentally friendly products.
• The circular economy approach encourages automotive companies to integrate more secondary or biobased material in their products and to maximize the use of their assets, resulting in improved profitability. By implementing second-life strategies like remanufacturing and repurposing, for example, companies can significantly multiply revenues per vehicle.
• The focus on lifetime value and asset utilization also lowers total costs, making it easier for companies to offer competitive pricing while maintaining healthy margins. A lifetime view also helps manufacturers to think about more customer-friendly usage scenarios throughout the vehicle lifecycle.
• Continuous data flow from connected vehicles provides insights into customer usage patterns as well as into the current vehicle whereabouts and owner, which enables data-informed strategies for recycling and reusing materials. This data also makes software calibrations possible, to address individual driving behaviors. These – naturally consensual – insights into customer behavior enable many new business models that OEMs have not been able to consider to date.
• As regulations around emissions and sustainability become stricter, companies that embrace both digital and sustainable transformations are better positioned to comply with these requirements and to profit early from additional business potential such as data product monetization.
• Digital tools can streamline reporting processes and ensure that manufacturers meet environmental, social & governance standards throughout their operations.

Regulatory requirements

As regulatory frameworks rapidly evolve to support ESG responsibility initiatives –­ such as the EU Data Act – automotive companies must ensure compliance with multiple data-sharing mandates. Data continuity facilitates adherence to these regulations by ensuring that all relevant data is captured accurately and shared with appropriate stakeholders in a timely manner. This not only mitigates legal risks but also builds trust with consumers who are increasingly concerned about how their data is used. Key regulations include:

• Corporate Sustainability Reporting Directive (CSRD): Effective from FY 2025, this EU legislation mandates that large companies publish regular reports on their environmental and social impacts, where, among other requirements, reports must be fully machine-readable. It encourages transparency and accountability, helping stakeholders evaluate non-financial performance.
• Corporate Sustainability Due Diligence Directive (CSDDD): This directive requires companies to enforce higher human rights and environmental standards throughout their value chains. It emphasizes the need for responsible sourcing and production practices, which is simply not feasible with existing human resources without the targeted use of digital tools and component traceability.
• Carbon Border Adjustment Mechanism (CBAM): CBAM aims to equalize carbon costs between EU products and imports, impacting industries like automotive that are raw-material intensive. It necessitates that companies account for emissions associated with imported goods e.g., steel, aluminium and cement, thus promoting greener production methods.
• Ecodesign for Sustainable Products Regulation (ESPR): This initiative sets sustainability requirements for products, including digital product passports, increased secondary material use, and a reduced carbon footprint, as we have reported here. Batteries, as those used in electric vehicles, are the first product group to require digital passports, enabling lifecycle tracking and transparency in sourcing and recycling. Expansion to full-vehicle passports is expected soon.

These regulations collectively create a framework that drives automotive companies toward more sustainable practices while fostering an environment conducive to open data sharing.

Catena-X – the first operational data collaboration framework for automotive

One prominent initiative in this realm is Catena-X, an open and collaborative data ecosystem designed specifically for the automotive industry. It aims to standardize data flows between multiple stakeholders, enabling seamless information exchange. By integrating all players – from manufacturers to recyclers – Catena-X addresses critical challenges such as supply chain resilience and compliance with sustainability regulations. With a comprehensive set of benefits for its participants, Catena-X provides a strong foundation for companies to accelerate their sustainability efforts and remain competitive in an evolving regulatory landscape. And the strong standards also help incentivize the important supplier landscape to actively participate in the data ecosystem.

Some features of Catena-X include:

• Enhanced Traceability: Catena-X enables improved tracking of components from raw materials to recycling, ensuring compliance with environmental and social standards, and optimizing recycling processes. This traceability is achieved through unique business partner numbers, part IDs and scalable standards like APIs and semantics.
• Real-Time Data Access: Participants can access real-time information about supply chain dynamics, enabling quicker responses to disruptions and better resource management. The decentralized peer-to-peer data exchange model ensures that data stays within each company and is only shared with direct partners ensuring full control by the data owner.
• Sustainability Metrics: Catena-X facilitates accurate lifecycle assessments to quantify the environmental effect across the value chain, replacing secondary data (average values, e.g. for the electricity mix or steel production, mostly based on association data) with more and more primary values that reflect each company’s real impact. This data can be used to optimize processes and report on sustainability metrics like Product Carbon Footprint and a company’s share of secondary material.
• Reduced Interfaces: Instead of managing hundreds of interfaces with customers and suppliers, Catena-X provides a single platform where companies can choose software based on their needs. All certified software works together seamlessly, reducing complexity and costs.
• Regulatory Compliance: Catena-X offers a “speedboat solution” for complying with upcoming regulations like Product Carbon Footprint, Product & Battery Passes, ESG reporting, and the Corporate Sustainability Due Diligence Directive. Common rulebooks are defined to ensure all participants meet these requirements. This is achieved in cooperation with many other initiatives (e.g., TFI, GRI) to ensure the international reach of the standards.
• Collaborative Innovation: By breaking down data silos and enabling radical collaboration, Catena-X allows companies to jointly develop innovative solutions to industry challenges. The open ecosystem approach and standardized data flows accelerate time-to-market for new sustainability initiatives, while also serving the business case for sustainability.

Conclusion

In one of the Capgemini Research Institute reports – Sustainability in Automotive: From ambition to action, we examine the various aspects of sustainability in automotive in depth. The EcoDigital Transformation of the automotive industry is essential for creating a more efficient, cost-effective, and sustainable value stream. By integrating these two dimensions and fostering partner integration through open data ecosystems, automotive OEMs can not only enhance their operational capabilities but are also perceived as pioneers in terms of sustainability. While challenges remain, the potential benefits in terms of cost savings, operational efficiency, and environmental & social impact are clear.

As stakeholders across the value chain come together to embrace this dual-sided (r)evolution, they will not only contribute to a greener industry but also position themselves for long-term success in an increasingly competitive and conscious market environment. Those who first embrace change will most likely become the ones leading the way into the future of the industry. The time to act is now, as the path to the EcoDigital Era requires collective action and a shared commitment to the planet and people.