There has been a strong shift toward net zero within the automotive sector, with numerous industry leaders such as BMW, Ford, Renault, Mercedes-Benz, PSA, Volkswagen and Volvo setting ambitious targets for the reduction of Scope 1, 2 and 3 emissions.
However, there are still several key players that have not begun the transition to net zero.
In the past, automotive brands have shied away from reducing emissions associated with the production of vehicles. However, recognizing the damaging impact of these emissions, manufacturers have been putting pressure on key suppliers within their supply chain.
Consequently, a number of Tier 1 suppliers such as Robert Bosch, Faurecia and Valeo are also moving toward net zero.
While these efforts need to be accelerated, this can be considered an important first step in looking at the broader impact of the automotive sector, rather than solely focusing on the emissions produced during the a vehicle’s life cycle.
So, what can automotive manufacturers do to expedite their journey to net zero? To be successful, there are three critical challenges that need to be addressed: Developing a strategy and addressing the implementation gap; informing funding decisions; and stakeholder engagement.
Getting your net zero strategy in gear
Developing a strategy is the first hurdle for most players in the sector. Yet, even when organizations have set goals they often struggle with implementation. For example, once the targets have been set, many struggle to understand which projects should be pursued to achieve the necessary carbon reductions.
To address these challenges, automotive manufactures should look to industry experts to fill in any significant knowledge gaps.
Drawing from a pool of decarbonization experts means that manufacturers can capitalize on their knowledge on existing technologies.
Consequently, efficiency and energy-reduction improvements can be maximized.
Additionally, they can help navigate a greater array of energy-related opportunities, including the procurement of renewables, demand-side opportunities, and supply purchasing strategies. All of which can help businesses reduce emissions while simultaneously reducing spending.
Funding blind spots
In the face of competing demands manufacturers often de-prioritize energy-related spending. However, pitting net zero measures against critical business investments misses a crucial point: investment in a decarbonization strategy will eventually pay for itself.
A lack of familiarity with other models of financing can be a blind spot for many automotive manufacturers that often refuse to pursue decarbonization-related projects without internal funding.
But increasingly, up-front capital is being made available for decarbonization-related projects through a variety of financing models. These models allow automotive companies to shift the investment burden. Helping organizations meet their goals, while saving money.
Taking stakeholders along for the ride
Even when a viable strategy has been developed, it can still be difficult for businesses to implement decarbonization plans.
Key to overcoming this challenge lies in engaging stakeholders from the outset of your project.
By engaging stakeholders at every level and embedding your net zero strategy into company culture it will be easier to convince decisionmakers of the associated benefits.
Moreover, it’s up to those leading the project to make stakeholders aware of the numerous advantages of a decarbonization strategy.
Those companies that invest heavily in net zero will improve their bottom lines as they reduce costs, unlock new revenue streams, attract and retain the best talent, create a competitive advantage and be financed through cheaper capital.
Map a journey
By overcoming the above challenges, the automotive sector can begin its journey to a greener future.
The organizations that fail to chart a path to net zero will find themselves left behind, as regulatory pressure grows and consumer confidence falls. The sector needs to understand that the transition to carbon neutrality is no longer an option, but rather a business imperative.
