The data driven road to a net zero automotive industry

The automotive industry plays a vital role in the global economy, but it’s also a key contributor to climate risk, due to the emissions generated from vehicles. In fact, in the 5 minutes that you spend reading this blog the industry will have emitted the equivalent of 11,400 hot air balloons of CO2e, totally 6 billion metric tons of carbon dioxide equivalent (GtCO₂e) per year. In total, the industry is responsible almost 16% of global CO2 emissions emitted each year^[1].

Whilst sustainability is a board-level issue in every major OEM, practical actions can often take too long to trickle down to operational staff, customer facing functions and retail partners. To support the collective industry effort to decarbonise, Capgemini Invent have developed the Carbon Reduction Canvas. A framework setting out the practical steps that an automotive organisation should take to address the challenge of Carbon Reduction.

Capgemini’s Carbon Reduction Canvas

The first stage of our Carbon reduction canvas is arguably the most important measure.

At a minimum, assessing your carbon emission baseline is critical to creating any sort of carbon reduction plan. Without a baseline understanding of your current carbon emissions, companies leave themselves completely blind to the core problem areas within their value chain.

Yet, despite this, many organisations are yet to create a robust Carbon Reporting strategy, resulting in only 22% of organisations measuring their full scope 1, 2 and 3 emissions ^[2]. This lack of full carbon lifecycle transparency often results in companies not having the insight required to tackle the global challenge of carbon reduction.

The increasing need for a Carbon Reporting Strategy

The requirement within automotive companies to robustly measure, monitor and report on your carbon emissions has been deprioritised in many cases, due to other industry challenges and pressures, such as electrification, supply chain disruption and the cost of digital transformation. As the largest source of emissions in a typical automotive OEM is from the burning of fossil fuels in ICE vehicles, the most obvious step towards decarbonisation is to move to electric vehicles. Companies would be right to focus on this, as the tailpipe emissions during the use phase of a vehicle account to 88% of the total emissions within a vehicles entire value chain^[3].

However, electrification is not the answer all problems. As the shift to EV continues to progress, attention will turn to other areas of the production and supply chain to ultimately achieve the industry’s net zero ambitions. The Scope 3 upstream emissions of an EV are around 60% of it’s lifetime emissions^[4]. This is a significantly higher weighting compared to that of an ICE vehicle (where around 9% are Scope 3 Upstream)^[3]. Without clear insight and data, decarbonisation of the supply chain will simply not be possible.

External demands to provide a robust carbon reporting framework have also ramped-up over the past few years due to the following factors:

Regulation:

New regulatory requirements are coming into place within the next 1-3 years. Ensuring your organisation is suitably prepared from an ESG data standpoint is critical. These regulations include:

• EU Taxonomy: is a cornerstone of the EU’s sustainable finance framework and an important market transparency tool. The taxonomy is a classification system that defines criteria for economic activities that are aligned with a net zero trajectory by 2050 and the broader environmental goals beyond climate action^[5].
• Corporate Sustainability Reporting Directive (CSRD): EU rules require large companies and listed companies to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment. A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability. The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025 ^[6] .    
• UK Sustainability Disclosure Standards (SDS): will set out corporate disclosures on the sustainability-related risks and opportunities that companies face. The new UK Sustainability Disclosure Standards (SDS) will be published in the UK on or before July 2024, and expected to take effect January 1, 2025^[7].

Customer Demands:

60% of consumers consider sustainability to be an important factor in their decision-making process for future products and services^[2]. Clearly embedding emissions data in sales and marketing content can become a USP as it provides customers transparency to understand their sustainable options.

Investor & Shareholder Pressure:

ESG strategy has become a key factor to investor and shareholders who are increasingly driven to ensure that their investment portfolios have a limited environmental impact. Readily available access to your ESG data is therefore important to gain future investment and maintain shareholder value.

Technology has a critical part to play

A carbon reporting strategy is impossible without the use of intelligent carbon reporting platforms to provide measurement and intelligence into the carbon emissions of your value chain.

There are many innovative technology platforms that have created effective solutions to report on carbon emissions seamlessly and robustly. They provide efficient insight and enable organisations to focus their time and efforts on the levers that will ultimately reduce their carbon impact.

The need to carefully select the right carbon reporting platform is crucial to your business. However, the marketplace for carbon reporting platforms is highly complex and the process of selection is a challenging one for several reasons:

1. Highly populated market: There are dozens of systems all claiming to have many of the same features and capabilities across Scopes 1, 2 and 3 reporting. Therefore, differentiation is a real challenge for buyers.
2. Industry Data Relevance: There is wide variation between quality of data available from each provider. Certain platforms are far better suited and have more accurate emission factor data sets for specific sectors and industries. Selecting the right platform for your industry is important.
3. Ecosystem Integration: Client technology infrastructures are unique and the ability to select an ESG data platform that will integrate effectively to your ecosystem is of high importance. This allows accurate and efficient data collection from across the business without the need for large manual entry.
4. Reporting Requirements: The standardised & bespoke reports available within various reporting platforms will vary. Ensuring your selected platform meets the needs of your regulatory reporting requirements and sustainability strategy is required.

Capgemini Invent have supported multiple organisations on their net zero data strategy, enabling them to build a core foundation to drive their decarbonisation ambitions. Leveraging an extensive network of technology partners and substantial investment in our ESG Data toolkits, we are dedicated to accelerating the transition to sustainable mobility.

For more information on how we can support your company, please reach out.

References:

[1] World Business Council for Sustainable Development

[2] Capgemini Insight | DATA FOR NET ZERO

[3] Capgemini Desk research via multiple OEM sustainability disclosures

[4] T&E | How clean are electric cars?

[5] EU Taxonomy

[6] Corporate Sustainability Reporting Directive (CSRD)

[7] UK Sustainability Disclosure Standards (UK SDS)