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The automotive sector, facing intense scrutiny, stands at a pivotal juncture in its decarbonization efforts. Central to this transformation are Original Equipment Manufacturers (OEMs), which are tasked with navigating complex challenges to meet their Scope 1, Scope 2, and Scope 3 emissions targets. This responsibility places OEMs in the spotlight, driving them to push their suppliers — the companies manufacturing various parts for the cars — toward more stringent measures to ensure they adopt decarbonization best practices.
The largest automotive suppliers — often referred to as “tier 1 suppliers” — under this pressure from OEMs and regulatory bodies, face a shift to more environmentally friendly products that entail higher production costs and the use of energy-intensive materials. Additionally, there are complexities in navigating the supply chain in less regulated markets. And this industry-wide transformation is occurring under the watchful eyes of governments, shareholders, and regulatory agencies, all of whom demand accelerated decarbonization efforts.
While progress has been made in reducing Scope 1 and Scope 2 emissions, a more aggressive approach is necessary, especially for Scope 3 emissions, which involve the broader supply chain — demanding innovation and collaboration across the industry especially the suppliers.
The automotive industry's decarbonization journey involves three main strategies:
OEMs reducing emissions from manufacturing processes (Scope 1 and Scope 2), though a small part of the overall value chain, is essential. These emissions are directly controllable and improve public perception, setting a positive example for the sector.
A significant portion of emissions comes from the production of car components. Players are shifting to sustainable materials and forming partnerships to find alternatives, aiming to transform the entire upstream ecosystem.
Transitioning to green mobility solutions, like electric and hydrogen vehicles, involves ensuring the entire lifecycle, including energy sourcing for production, aligns with decarbonization goals. This requires innovation in product design, business models, and vehicle lifecycle management.
Within each of these approaches, decarbonization strategies can be divided into those targeting OEMs' own emissions and those addressing Scope 3 emissions. For Scope 1 and 2, programs such as Energy Savings as a Service (ESaaS), on-site solar implementation, and green supply/power purchase agreements can reduce costs and emissions. Energy procurement and global green electricity approaches offer long-term benefits, essential for the extensive manufacturing footprint of the automotive industry. However, substantial capital expenditure requirements pose a barrier, necessitating models like "As A Service" to balance capex limitations with the need for cleaner energy sources.
Addressing Scope 3 emissions involves mapping suppliers and identifying those with the most significant impact — as well as engaging and collaborating with them in a meaningful way. Material replacement and strategic partnerships are crucial for those that cannot be replaced.
The automotive industry's journey towards decarbonization, marked by ambitious targets and substantial investments, is crucial for a sustainable future. Collaboration across the sector, supported by government policies and investments, will drive progress toward achieving a greener, more sustainable automotive landscape. As the world addresses climate change, the sector’s commitment to decarbonization serves as a model for other sectors as well — highlighting the importance of coordinated action in driving global sustainability efforts.
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