Dive Brief:
- Better communication and collaboration between automakers and their suppliers would accelerate the automotive industry’s efforts to reduce climate pollution, according to a Center for Automotive Research report last month.
- Suppliers said they often struggle to balance climate targets with other goals like quality, safety and cost. They need automakers to clearly and consistently value climate goals, the report says.
- Greater standardization of targets and measures and a workforce that is more knowledgeable about climate and sustainability issues would help the automotive industry reach net-zero emissions globally by 2050.
Dive Insight:
Automakers have increasingly set social and environmental targets and implemented initiatives related to greenhouse gas emissions, water conservation, responsible sourcing and equal pay. But it’s challenging for suppliers to help vehicle manufacturers achieve their goals because they often lack actionable and measurable data, and automakers’ reporting requirements vary significantly.
“While vehicle manufacturers also stressed the importance of open and consistent communication with their suppliers as a critical part of their strategy, the tools utilized, and frequency of engagement varied depending on the manufacturer,” the report says.
CAR carried out supplier roundtable sessions, interviewed vehicle manufacturers and reviewed publicly available industry information for the report.
Vehicle manufacturers should develop and communicate clear implementation plans to ensure their suppliers can achieve the automaker’s targets, according to the report.
“These plans should go beyond high-level goals to help suppliers understand how to modify operations, strategically re-calibrate business practices, and develop new offerings to meet a changing environment,” the report says.
For example, one vehicle manufacturer said it periodically met with its suppliers — through webinars, stakeholder dialogue and leadership committees — to achieve its short- and long-term sustainability goals.
The report says regular industry forums, or another industry-specific approach, addressing automakers’ and suppliers’ sustainability initiatives would help the automotive industry achieve its goals and curb misunderstandings among the stakeholders.
CAR also found that automakers’ supply chain sustainability efforts focus too much on Tier 1 suppliers, reducing their effectiveness. Automakers must also engage Tier 2, 3 and 4 suppliers to make good on their climate commitments, the report says.
Vehicle manufacturers told CAR it was important to make long-term investments in climate and sustainability goals, but suppliers said they needed more guidance from automakers to make such investments. Automakers and suppliers must develop relationships that prioritize long-term climate investments over “short-term transactions,” according to CAR.
“Making the necessary investments in climate solutions is possible for suppliers,” the report says. “Still, it will need a fundamental shift in the [original equipment manufacturer-supplier] relationship and will require investments and contracts that value a longer runway.”
If automakers’ plans to address recycled content minimums for steel, aluminum and electric vehicle batteries were more consistent across manufacturers, the auto industry could lower supply chain emissions faster, the report says.
Automakers could also address climate issues more effectively by engaging in cross-industry education, training and knowledge sharing before new product categories go to market.
“Pre-competitive forums could help advance climate activities on behalf of the entire industry. This would reduce the burden on individual vehicle manufacturers and suppliers when defining specific sustainability and circularity solutions,” the report says.
CAR recommends streamlining reporting and measurements, improving supplier training on standardized metrics and coordinating lobbying efforts to standardize regulations related to sustainability targets.
“As vehicle manufacturers get behind policies that support initiatives like green steel and sustainable sourcing of raw material, they not only demonstrate to their supply base the importance of these initiatives but also help their suppliers meet targets,” the report says.
The report also recommends that automakers, suppliers and other stakeholders work together to identify and overcome skill and knowledge gaps related to sustainability in the workforce. That may include developing workforce expansion programs with academic institutions or professional training organizations for people employed in the automotive industry, the report says.
