The automotive industry is shifting into high gear on the journey to sustainability, and carbon reporting is the road map. Beyond just producing vehicles, manufacturers now face the challenge of understanding and reducing their total carbon footprint—from raw materials and supply chains to assembly lines and customer use.For instance, The U.S. Environmental Protection Agency (EPA) reported that in model year 2022, the average estimated real-world CO₂ emission rate for all new vehicles fell by 10 grams per mile to 337 g/mi, marking the lowest level ever measured. Additionally, real-world fuel economy increased by 0.6 miles per gallon to a record high of 26.0 mpg. This improvement represents the largest single-year enhancement in CO₂ emission rates and fuel economy in nine years.Why does this matter? Because the game's rules have changed, governments demand compliance, consumers prefer transparency, and investors reward companies taking bold action. Carbon reporting isn’t just about keeping score; it’s about making smarter, greener decisions that drive real change. For companies looking to enhance their reporting processes, tools like carbon accounting software can simplify and standardise emissions data collection across all operational boundaries.This blog will delve into the intricacies of carbon reporting in the automotive sector, a critical industry for addressing climate change and reducing global emissions. It will highlight industry best practices, emerging trends, and technological innovations shaping carbon reporting in the automotive sector.
Key Takeaways
Use robust systems to track emissions.
Engage suppliers for accurate data.
Leverage digital tools for reporting.
Align with GHG Protocol and CSRD.
Set measurable reduction targets.
Adopt recycling and reuse practices.
Improve reporting for compliance and competitiveness.
Why Carbon Reporting in the Automotive Industry is Important?
Addressing carbon emissions in automotive manufacturing isn’t just about compliance; it’s about driving a sustainable future where automotive carbon reporting becomes the key to innovation, accountability, and achieving climate neutrality.
1. Understanding the Full Carbon Footprint
Carbon emissions in the automotive industry aren’t limited to what comes out of a vehicle’s exhaust pipe. The true impact includes emissions from raw material extraction, manufacturing processes, global supply chains, and end-of-life recycling. Carbon reporting provides a comprehensive view of these emission sources, allowing automakers to pinpoint where reductions can be made. Without this understanding, it’s impossible to implement effective sustainability measures or work towards net-zero goals. For specific examples of emissions across the manufacturing process, refer to our guide on Scope 1 and Scope 2 emissions examples.
2. Meeting Regulatory and Consumer Demands
Governments worldwide are tightening emission regulations, and consumers increasingly expect transparency and eco-friendly practices from brands. Carbon reporting ensures automakers comply with these requirements while building trust with their audience. Companies that fail to report or improve their carbon footprint risk losing market share to competitors that embrace sustainability.
3. Driving Innovation and Competitiveness
Beyond compliance, carbon reporting sparks innovation. By identifying inefficiencies in production or supply chains, manufacturers can adopt greener technologies, optimise operations, and reduce costs. It’s not just about reducing emissions—it’s about staying competitive in a market that rewards sustainability. Brands that lead in carbon reporting and reduction efforts position themselves as industry pioneers, attracting customers, investors, and partners aligned with green values.
Challenges in Carbon Reporting for the Automotive Sector
The automotive sector's journey toward sustainability is fraught with challenges, particularly when it comes to accurately measuring and reducing carbon emissions across complex supply chains and production processes. Some of these are;
1. High Emissions in Production Processes
Manufacturing processes for vehicles, particularly those involving materials like steel and aluminium, are energy-intensive and contribute significantly to emissions. For instance, producing 1 tonne of steel emits approximately 1.85 tonnes of CO₂, highlighting the scale of emissions tied to core production. Automotive companies can better manage emissions from production by exploring solutions like Mavarick's AI-powered decarbonisation tools, which identify areas for process improvement.
2. Complexity of Supply Chains
Original Equipment Manufacturers (OEMs) in the automotive industry depend on intricate, multi-tiered supply chains that span across the globe. Tracking emissions data becomes challenging as OEMs often lack visibility into their suppliers' carbon footprints, especially beyond Tier 1 suppliers.
3. Data Collection and Standardisation
Gathering consistent and reliable emissions data from diverse suppliers is a major hurdle. To address this issue, adopting advanced platforms that focus on data accuracy in carbon accounting can help ensure transparency and compliance.Did you know? A recent report by CDP found that only 38% of automotive suppliers disclosed Scope 3 emissions, underscoring the gaps in transparency across the supply chain.
4. Regulatory Pressures and Compliance Costs
Automotive manufacturers face stringent regulations like the EU’s Fit for 55 package, which aims to reduce emissions by 55% by 2030. Non-compliance not only results in hefty fines but also damages reputation and market position.
5. Transition to Electric Vehicles (EVs)
While EVs reduce tailpipe emissions, their production often involves significant emissions due to battery manufacturing.While EVs are celebrated for reducing tailpipe emissions to nearly zero, their production process, especially battery manufacturing, presents a significant environmental challenge. The primary contributor to these emissions is the energy-intensive process of extracting and refining raw materials like lithium, cobalt, and nickel, which are essential for lithium-ion batteries.1458349453
5 Ways to Prepare for Carbon Reporting in the Automotive Industry
Preparing for carbon reporting in the automotive sector involves leveraging technology, engaging stakeholders, and staying ahead of regulatory requirements. Here are five actionable steps:
1. Implement Robust Data Collection Systems
Accurate carbon reporting starts with comprehensive data collection. Automotive companies must establish systems to track emissions across all operations, including Scope 3 emissions. Mavarick’s supply chain and scope 3 emissions tracker simplifies the process by consolidating emissions data from multiple sources into a single, accurate report.
2. Engage and Educate Suppliers
Collaborate with suppliers to ensure they understand and meet carbon reporting requirements. Provide training and resources to help them accurately report their emissions, fostering transparency throughout the supply chain.
3. Set Clear Emission Reduction Targets
Define specific, measurable goals for reducing emissions in line with industry standards and regulatory requirements. Regularly monitor progress and adjust strategies as needed to stay on track. Learn how effective goal-setting ties into choosing the best carbon reporting software.
4. Stay Informed on Regulatory Changes
Keep abreast of evolving regulations and standards related to carbon emissions in the automotive sector. This ensures your reporting practices remain compliant and up-to-date.
5. Leverage Technology for Reporting Efficiency
Adopt digital tools and platforms that facilitate efficient carbon reporting. Technologies like IoT sensors and cloud-based platforms can enhance data accuracy and streamline reporting processes.
CBAM and its Importance in the Automotive Sector
The European Union's Carbon Border Adjustment Mechanism (CBAM) is a pivotal policy aimed at curbing carbon leakage and promoting global decarbonisation efforts. Its implications for the automotive sector are significant:
Impact on Raw Material Costs: CBAM targets carbon-intensive imports such as steel and aluminium, essential materials in automotive manufacturing. The mechanism is expected to increase the cost of these materials, potentially raising vehicle production expenses.
Supply Chain Restructuring: Automotive manufacturers may need to reassess and modify their supply chains to source materials with lower carbon footprints, ensuring compliance with CBAM regulations and maintaining competitiveness.
Regulatory Compliance and Reporting: CBAM introduces new reporting obligations for importers, requiring detailed disclosures of the carbon content of imported goods. Automotive companies must establish robust data collection and reporting systems to meet these requirements. Read more about it in our guide here on CBAM reporting.
Incentive for Decarbonisation: By imposing a carbon price on imports, CBAM incentivises automotive manufacturers to adopt greener technologies and processes, aligning with global sustainability goals.
Carbon Reporting in Automotive Supply Chains - Key Insights
The automotive industry’s supply chain emissions are under growing scrutiny as sustainability and regulatory pressures mount. From raw material extraction to logistics, every stage presents both a challenge and an opportunity for manufacturers to reduce their carbon footprint. Here are five key insights into the importance and challenges of carbon reporting in automotive supply chains:
1. Supply Chains Account for the Majority of Emissions
Did you know that, Up to 60% of a car’s lifecycle emissions come from its supply chain, primarily driven by the production of raw materials like steel and aluminium. In industries where supply chains dominate emissions, effective tracking is no longer optional. Accurately tracking these emissions is critical for meeting regulatory frameworks such as Scope 3 reporting under the GHG Protocol. Explore how Scope 3 emissions in manufacturing contribute to these figures and what can be done to reduce them.
2. Regulatory Compliance is Increasingly Demanding
With the implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM), automotive manufacturers face rising costs for carbon-intensive imports. These added costs are designed to reflect the carbon emissions associated with producing these materials in non-EU countries, levelling the playing field for EU manufacturers subject to stricter emissions regulations. For automotive companies, this means re-evaluating sourcing strategies to prioritise low-carbon or recycled materials to mitigate these additional expenses.
3. Data Collection and Standardisation Remain Challenging
Automotive manufacturers face significant hurdles in collecting consistent and reliable emissions data from suppliers. The lack of uniform standards and reporting frameworks makes it difficult to ensure accuracy, especially in complex, multi-tiered supply chains. This gap in data transparency often complicates compliance with regulatory requirements and undermines sustainability goals.
4. The Shift Toward Circular Supply Chains
The transition to a circular supply chain model is gaining traction as companies aim to reduce waste and emissions. This approach involves reusing materials, recycling components, and designing products with end-of-life in mind. By adopting these principles, manufacturers not only lower their carbon footprint but also create cost efficiencies and resource security in the long term.
5. Technology is Driving Change
Technological advancements are revolutionising carbon reporting in supply chains. Digital platforms, IoT-enabled tracking, and carbon accounting software are empowering companies to monitor emissions with greater precision. These tools streamline reporting, enhance data accuracy, and enable manufacturers to align their operations with sustainability benchmarks, paving the way for a low-carbon future.
Emerging Trends and Innovations in Automotive Carbon Reporting
The automotive industry is experiencing significant advancements in carbon reporting, driven by technological innovations and evolving regulatory landscapes. Key emerging trends include:
1. Integration of Advanced Analytics and AI
Automakers are leveraging advanced analytics and artificial intelligence to enhance the accuracy and efficiency of carbon reporting. These technologies enable real-time data processing and predictive modelling, facilitating proactive emission reduction strategies. Mavarick's analytics tools take this further by providing automated data processing and actionable dashboards tailored to your reporting needs.
2. Adoption of Blockchain for Transparency
Blockchain technology is being utilised to create immutable records of carbon emissions throughout the supply chain. This ensures transparency and accountability, allowing stakeholders to verify emission data and track progress toward sustainability goals.
3. Implementation of IoT Sensors for Data Collection
The deployment of Internet of Things (IoT) sensors in manufacturing facilities and vehicles provides granular data on energy consumption and emissions. This real-time monitoring supports more accurate carbon accounting and identifies areas for improvement.
4. Development of Standardised Reporting Frameworks
Industry-wide efforts are underway to establish standardised frameworks for carbon reporting, simplifying compliance and benchmarking. These frameworks aim to harmonise reporting practices, making it easier for companies to disclose emissions and for stakeholders to assess environmental performance.
5. Emphasis on Supply Chain Decarbonisation
Recognising that a significant portion of emissions originates from the supply chain, automakers are collaborating with suppliers to reduce carbon footprints. This includes setting emission reduction targets and providing support for implementing sustainable practices. By embracing these innovations, the automotive industry is enhancing its carbon reporting capabilities, leading to more effective emission reduction strategies and contributing to global sustainability efforts.
Key Regulations and Standards of Automotive Carbon Reporting- EU Region
The automotive industry in Europe, including Ireland, is governed by several key regulations and standards aimed at reducing carbon emissions and enhancing sustainability. Understanding these frameworks is essential for compliance and effective carbon reporting.
1. EU CO₂ Emission Performance Standards for Cars and Vans
The European Union has established CO₂ emission performance standards to limit the average emissions from new passenger cars and light commercial vehicles. These standards set specific targets for manufacturers, aiming to reduce the environmental impact of road transport.
The CSRD mandates comprehensive sustainability reporting for large companies operating within the EU, including those in the automotive sector. It requires detailed disclosures on environmental, social, and governance (ESG) factors, emphasising transparency in carbon emissions reporting.
3. Ireland’s Implementation of CSRD
Ireland has transposed the CSRD into national law through the European Union (Corporate Sustainability Reporting) Regulations 2024. These regulations came into effect on 6 July 2024, obligating Irish companies to adhere to the enhanced sustainability reporting standards outlined in the CSRD.
4. Car Labelling Directive
The EU's Car Labelling Directive requires that consumers are provided with accurate information regarding fuel economy and CO₂ emissions of new passenger cars. This directive aims to promote informed purchasing decisions and encourage the adoption of low-emission vehicles.
5. Emissions Standards for the Automotive Sector
The EU has implemented stringent emission standards for vehicles to protect air quality and reduce greenhouse gas emissions. These standards apply to both light-duty and heavy-duty vehicles, setting limits on pollutants and CO₂ emissions.
How Automotive Companies Can Improve Carbon Reporting?
Accurate and transparent carbon reporting is critical for automotive companies to comply with regulations, enhance sustainability, and build stakeholder trust. Here are five key strategies to improve carbon reporting:
Establish Comprehensive Data Collection Systems
Automotive companies must invest in robust systems to track emissions across the entire value chain, including Scope 1, Scope 2, and Scope 3 emissions. These systems should integrate data from suppliers, production facilities, and logistics partners to ensure a complete emissions profile.
Engage with Suppliers
With a significant portion of emissions originating from the supply chain, engaging suppliers is essential. Automotive companies should provide guidance on emissions measurement and reporting, while encouraging the adoption of low-carbon materials and processes.
Leverage Digital Technology and Tools
Digital platforms and carbon accounting software can automate reporting processes, improve accuracy, and ensure compliance with global standards. Solutions that offer predictive analytics, audit trails, and scenario modelling can significantly enhance reporting efficiency.
Align with Global Standards and Frameworks
Adherence to established frameworks like the GHG Protocol, CDP, and TCFD ensures consistency and transparency in carbon reporting. Staying updated with evolving regulations, such as the EU’s CSRD and CBAM, is critical to avoid non-compliance penalties.
Set Clear and Science-Based Targets
Establishing science-based emissions reduction targets not only aligns with sustainability goals but also provides a structured approach to carbon reporting. Automotive companies should regularly review these targets and report progress transparently to stakeholders.
Bottom Line:
Improving carbon reporting is no longer optional for automotive companies; it’s a critical step toward compliance, sustainability, and industry leadership. By leveraging advanced technologies, engaging suppliers, aligning with global standards, and setting ambitious reduction targets, manufacturers can not only meet regulatory requirements but also gain a competitive edge in the race toward a low-carbon future. Discover how to ensure your climate reporting data remains accurate with robust solutions.Ready to take the next step? Contact us to explore how Mavarick can simplify your carbon reporting journey while accurately reporting and managing your carbon emissions.
