Volvo aims to be climate neutral by 2040

LOS ANGELES -- Volvo Cars aims to be climate neutral by 2040 and to get there it will slash its life cycle carbon footprint by 40 percent to 31.8 tons of CO2 per car by 2025 from 53 tons in 2018, the company said Wednesday.

Crucial to achieving the goals is a lineup of full-electric cars led by the XC40 P8 AWD Recharge, which debuts here today. Volvo’s first battery-driven model is also the automaker’s first car to carry the word Recharge in its name. The name will be attached to all Volvos that have either a full-electric or a plug-in hybrid powertrain.

"Instead of making symbolic, long-term pledges we asked: What can we do now? We will start by presenting the full-electric XC40 Recharge. Another full-electric car will follow every year so that by 2025 every model in our lineup will be available as a battery-electric vehicle," Volvo CEO Hakan Samuelsson told Automotive News Europe. "That means within the next five years a Volvo car will have a total carbon footprint including everything -- supply chain, logistics, usage -- that is 40 percent lower than a Volvo we build today."

Starting with the XC40 EV, Volvo will disclose the average life cycle carbon footprint for each new model it offers. The data will be available in the second half of 2020 after the compact SUV goes into production.

The intensified focus on sustainability is part of Volvo’s effort to honor the 2015 Paris Climate Agreement, which seeks to limit global warming to 1.5 degrees Celsius above pre-industrial levels. To stay in line with that target Volvo has committed to doing the following by 2025.

• Increase full-electric car sales to half its global volume from 0 percent now while mild and plug-in hybrids will account for the other half of its worldwide sales, up from less than 20 percent now. These steps are expected to account for the majority of the targeted reduction, halving CO2 per car to 15.6 tons by 2025 from from 31.3 tons last year (see table, right).

• Cut CO2 emissions related to the global supply chain by 25 percent to 14.4 tons per car from 19.2 tons last year. This will be achieved by increasing sourcing of sustainable materials in future cars, for instance the use of recycled plastics will rise to 25 percent by the deadline from about 5 percent now. Volvo will also require that its direct suppliers use renewable energy in their production.
• Reduce carbon emissions generated by the company’s overall operations, including manufacturing and logistics by 25 percent to 1.8 tons per car from 2.5 tons last year. Volvo has already made progress in this area as 80 percent of the electricity used at its plants globally comes from renewable energy. In addition, Volvo’s engine plant in Skovde, Sweden, became carbon neutral in January 2018. To continue making gains in this part of the business Volvo will also look to reduce emissions at its retailers.

Volvo plans to help cover the high cost of reducing its carbon footprint by carving out its engine unit and combining it with the powertrain arm of parent Zhejiang Geely Holding Group. This will allow Volvo to invest more in the development of full-electric drivetrains.

"That's one way that we can afford the investments we are making to become climate neutral, by prioritizing," Samuelsson said. "We have to keep the investment into r&d at around 5 percent or 6 percent of revenue."

Volvo’s climate neutral target year is a decade ahead of the European Union, which wants to become the first major economy to go climate neutral by 2050, but 20 years behind supplier giant Robert Bosch, which plans to eliminate all net new carbon emissions at its 400-plus global sites starting next year.

To do this Bosch will buy more green electricity in the near term and compensate for unavoidable CO2 emissions with carbon offsets.

Roughly three quarters of all industry CO2 emissions are generated during a car's operation over its lifetime, but 18 percent still comes from the supply chain, according to investor research and autos specialist at Carbon Disclosure Project.

"As sales of battery-powered vehicles displace their combustion engine rivals, that share will steadily become more important over time," CDP senior analyst Luke Fletcher said.

Another reason Volvo, Bosch and other companies are taking steps to cut their carbon emissions is because lenders and asset managers are being warned to take action to reduce their portfolio exposure to high-carbon clients. They are doing this because they are worried about significant effects on the economy from climate change.

"Investors are now realizing that climate risks aren't at some distant point in the future but are affecting us now," said Georg Kell, who advises Volkswagen as head of its independent sustainability council. The former founding director of the world's largest voluntary corporate sustainability initiative, the UN Global Compact, argues that financial markets have woken up to the hidden costs inherent in the fossil fuel economy.

"They want to know whether companies are fit for the future and whether they have a plan to deal with the constraints of a low-carbon world," Kell said.

Fletcher's CDP estimates $4 trillion worth of assets are at risk from climate change by 2030.

Added Samuelsson: "We are doing this because we think it's right and we think it will make Volvo better."