Valeo joins Bosch, GM, others in pledge for carbon neutrality

PARIS -- Valeo has committed to carbon-neutral operations by 2050, joining companies such as Daimler, General Motors and Robert Bosch that have made similar pledges, as the auto industry increasingly focuses on reducing emissions and environmental impact becomes a key metric for investors and analysts. 

The supplier will invest 400 million euros ($480 million) to achieve its carbon targets, executives said at an online event Thursday, with cuts across the value chain, including Valeo's own operations, those of its suppliers and in the disposal of its products.

"The entire automotive industry is investing heavily to combat global warming," CEO Jacques Aschenbroich said in a statement. "The reduction of CO2 emissions has been central to our strategy since 2010."

He said Valeo sales from emissions-reducing solutions would grow to more than 10 billion euros in 2021 from 500 million euros in 2009.

Valeo's products in that area include 48-volt mild hybrid technology and alternator-starters that enable "start-stop" functions, and it has a joint venture with Siemens that makes electric motors and integrates electric powertrains.

Geoffrey Bouquot, Valeo's director of R&D and strategy, said at the online event that the supplier would reach 45 percent of its objective by 2030.

Jean-Luc di Paola-Galloni, director of public affairs and sustainable development at Valeo, said the supplier plans to take a regional approach to emissions reduction at its own plants. Factories in China, for example, will reduce carbon use by 1,500 metric tons annually, while those in the U.S. would cut 1,000 tons, those in eastern Europe 1,250 tons and those in western Europe 500 tons.

Di Paola-Galloni said 80 percent of Valeo's energy for operations would be sustainably generated by 2030, through wind or solar, compared with 5.5 percent in 2019.

Among Valeo's other goals:

• Transform the company's 100 most emissions-intensive plants to highly efficient sites, through technologies such as LED lighting and heat-recovery systems
• Increase the proportion of sustainable electricity used to 80 percent by 2030 from 5.5 percent in 2019
• Starting in 2021, emissions reduction and sustainable development will be a criteria for determining variable compensation for more than 1,500 top executives.

Valeo ranks No. 10 on the Automotive News Europe list of the top 100 global suppliers, with worldwide parts sales to automakers of $18.05 billion in 2019.

The announcements from the auto industry's biggest companies reflect the targets set by the world's governments in the Paris climate accord, which is meant to limit the impact of greenhouse gases on global warming. 

At the same time, environmental, social and governance (ESG) disclosures are becoming more important. Increasingly, regulators and investors are demanding such accountability, and companies that set and reach ESG targets may have an easier time gaining access to capital, whether through private sources or government funds.

In making its pledge Thursday, Valeo joins other major suppliers and automakers that have publicly committed to reducing their own emissions or becoming carbon neutral.

Robert Bosch, the No. 1-ranked automotive supplier, said in 2019 that its operations would be carbon-neutral by the end of 2020, a goal executives said has been met. Bosch plans to incur a total of 2 billion euros by 2030 in added costs by buying green electricity, engaging in carbon offset programs, and sourcing power from renewables, the company said. It will also invest one billion euros to make its factories more energy efficient. 

Bosch is also aiming to cut "indirect emissions," including those from purchased goods and services, business travel, and the transport and use of its products by 15 percent by 2030.

Continental, the No. 4 ranked supplier, said in 2019 that its production processes would be carbon neutral by 2040, and that energy used at its factories would be sustainably generated by the end of 2020.

Some of the pressure on suppliers to cut their emissions is coming from automakers that have set their own targets. Daimler, the maker of Mercedes-Benz, is requiring suppliers for electric vehicle platforms to commit to carbon neutrality, as the company aims for overall neutrality by 2039.

Audi, BMW, Ford, GM and Volvo Cars are among automakers that have recently announced targets for carbon neutrality, including tailpipe emissions from their vehicles and manufacturing operations.

GM CEO Mary Barra said last month that the company had set a goal of carbon neutrality by 2040 -- including halting sales of internal combustion engine vehicles by 2035.