As a result, environmental, social, and governance (ESG) initiatives, such as the demand to reduce greenhouse gas (GHG) emissions to meet the Paris Agreement target of limiting global warming to 1.5°C, have become increasingly commonplace across all aspects of automotive operations. Agencies such as the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) seek to further guide industry reduction of CO2 emissions, reaching net-zero emissions globally by 2050. As a result, many vehicle manufacturers have carbon neutrality targets in place, commonly announced through public annual sustainability reports, showcasing their sustainability efforts and goals. Topics included in these reports range from renewable energy to human rights efforts. These announcements are critical

in signaling to investors and stakeholders public-facing organizational sustainability initiatives. Still, some companies are limited in providing actionable and measurable data and often lack consistency in reporting from one manufacturer to the next. Despite the challenges from this significant shift in the automotive industry, there are also opportunities to further align across stakeholders, make additional commitments to broader climate initiatives, and advocate for more comprehensive regulations. A coordinated effort is an important step in achieving sustainability goals now that the industry has recognized accelerated action is required to limit global automotive operations’ environmental and social impact.

CAR researchers conducted supplier roundtable sessions, and interviews with vehicle manufacturers, and assessed publicly available industry information to help gain a better understanding of industry action in this area. The vehicle manufacturer interviews were a cornerstone of the research, which were conducted to explore sustainability efforts in the automotive industry across six topic areas including (a) Corporate Goals and Commitments, (b) Carbon, (c) Social, (d) Sourcing and Suppliers, (e) Products and Materials, and (f) Moving Forward. These interviews intended to gain a more comprehensive understanding of existing sustainability goals, strategies for meeting these goals, the existing obstacles to progress, and possible pathways to resolve these obstacles.

Based on these findings, this study has identified recommendations and targeted industry action that can help the automotive industry increase collaboration and accelerate efforts to achieve 1.5°C, limiting climate change throughout the supply chain.

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The IRA Clean Vehicle Credits attempts to address many challenges regarding consumer acceptance of BEVs and other advanced propulsion technologies. One key objective of the regulation is to support President Biden’s goal of reaching 50 percent EV market share by 2030 while ensuring a strong domestic supply base for this critical technology. The U.S. has recently faced supply chain challenges causing long wait times, along with serious national security concerns due to foreign markets controlling large portions of the EV supply chain. In response, the law aims to limit the role of China and other foreign entities of concern role in the sourcing of EV critical minerals, raw materials, and battery components to the U.S. market. However, the IRA’s clean vehicle credit nuances may hinder the EV market at a time when automotive and battery manufacturers are investing billions in the industry. Manufacturers will face challenges in the coming years as they work towards building a domestic chain to meet the Clean Vehicle Credit requirements. Additionally, the complexity of the regulation could lead to confusion and frustration among potential consumers.

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Sustainability is complex and challenging. At its core, sustainability contains three pillars: environmental, social, and governance, commonly referred to as ESG. The Affiliates guided CAR to focus initial efforts on the environmental pillar of sustainability. Given the enormous challenges environmental sustainability presents, it is a logical starting point. However, CAR and its Affiliates understand the social and governance pillars are critical and worthy of equal attention in the coming years.

In the fourth quarter of 2021, CAR convened two roundtable discussions with Affiliates to explore environmental sustainability challenges. Participants included representatives from material suppliers, part and component manufacturers, consulting firms, and service firms. CAR designed the roundtables to understand industry stakeholders’ most critical concerns in developing an environmental sustainability plan. The two roundtables included a total of 15 people from different companies. The participants were a diverse group with many different perspectives.

CAR researchers designed the roundtables to accomplish three main outcomes. Better understand stakeholders’ perspectives on their companies’ sustainability strategies and challenges; gather insights on their perspectives regarding their customers (the vehicle manufacturers) sustainability expectations and; the role CAR should play in supporting stakeholders’ sustainability efforts. This report summarizes the roundtable outcomes and possible next steps.

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