Going forward, all manufacturers within the automotive industry will be required to report on their carbon emissions. Carbon reporting will be as integral, and as embedded into daily operations, as safety testing. 

Wherever you lie within the auto industry – whether you’re part of an original equipment manufacturer (OEM) car maker, or whether you’re part of the supply chain – you’ll need to provide comprehensive carbon emissions data. 

For a more comprehensive view of the carbon reporting environment, see our Guide to Sustainability and Carbon Reporting in Manufacturing.  

List of OEM Car Markers’ Carbon Reporting and Sustainability Goals 

Some OEM car manufacturers have leapt forward to produce sustainability performance targets for themselves. A few are listed below 

• Volkswagen: Net Carbon Neutrality by 2050 

• Hyundai: Neutralise CO2 Emissions at All Stages of Production 

• Ford: First American Automaker Aligned with the Paris Agreement 

• Peugeot: Reduce GHG Emissions by 75% by 2030 

• Nissan: All Major-Market Nissans will be Electric by 2035 

• BMW: More than 50% of all Vehicles Produced are Electric by 2030 

Carbon Reporting in the Automotive Industry – Unique Challenges 

Automotive manufacturers have a complex web of supply partners. It’s not uncommon for auto manufacturers to manage hundreds or even thousands of relationships with Tier 1 manufacturers, who directly supply auto parts. Tier 1 suppliers include complex systems such as engines or transmissions, or information / entertainment systems. Each Tier 1 supplier in turn manages dozens or hundreds of their own suppliers – for parts or raw materials. From the perspective of the auto manufacturer, these producers would be “Tier 2” suppliers. Tier 2 suppliers are then supplied by Tier 3 manufacturers, for raw materials or component parts such as washers and bolts.  

In this way, each supplier that directly provides goods to the automotive manufacturer (AKA Tier 1 suppliers) is like a pyramid of complicated relationships with Tier 2 and Tier 3 suppliers. 

The complexity isn’t unique to auto manufacturers. Certainly, aerospace manufacturers face similar challenges.  Similar to the aerospace industry, supply chain visibility is critical in the auto industry. Automotive manufacturers must have line-of-sight down to raw materials, to ensure quality and minimise risk. 

Unlike the aerospace industry, the automotive industry must rapidly respond to changes in consumer preferences. The need to respond to changing consumer preferences causes auto manufacturer supply lines to be more volatile.  

Consumer preferences may involve simple aesthetic or utilitarian aspects – such as the current preference for hatch-back vehicles. Or consumer preferences might involve holistic shifts in the industry, such as the current evolution towards electric power.  

What are the Main Challenges to Carbon Reporting in the Auto Industry? 

Some carbon reporting challenges in the auto industry are unique to the industry. Others cut across different manufacturing industries. 

Below we explore the top 3 challenges to reporting carbon emissions in the automotive industry. 

Bad Data 

Obtaining accurate and consistent data will be a challenge for automotive manufacturers. This is the case due to complex and volatile supply chains and internal dynamics of OEM car manufacturers.  

Internal manufacturing operations within an OEM car maker can be dizzyingly complex. Volkswagen, for example, has manufacturing operations in China, Chatanooga and Chemnitz. Components such as engines, transmissions, and batteries are manufactured by an independent entity called Volkswagen Group Technology (VGT). VGT operates independently but is wholly owned by Volkswagen AG. 

Quality and consistency of data can be an issue for a global car manufacturer, as it spans geographic territories and different management structures. Variations in data collection methods can introduce errors and discrepancies.  

Across management structures, leadership may employ different calculation methodologies, such as spend-based versus activity-based. Some departments may still rely on manual processes for emissions data collection and reporting.  

For all these reasons, internal processes within OEM auto manufacturers can lead to inconsistent data or gaps in data.  

Carbon Reporting in the Auto Industry – Scope 1 and Scope 2 Challenges 

Many automotive manufacturer’s operations span multiple sites around the globe. This so called “multi-site” sprawl can raise issues when they try to report on their own internal carbon emissions. 

Europe has put in place legislation, via the Corporate Sustainability Reporting Directive (CRSD) mandating that manufacturers track and report their carbon emissions from operations. CSRD divides carbon emissions into 3 types, or “scopes”: 

• Scope 1: Direct emissions from your operations’ manufacturing processes  

• Scope 2: Indirect emissions from energy used in manufacturing processes  

• Scope 3: Indirect emissions from all sources along the value chain 

Scope 1 and 2 involve emissions arising from manufacturer’s own operations. Scope 3 covers emissions that are produced during upstream production of supplies, components and raw materials, as well as downstream emissions involved with distribution, usage, and disposal of manufactured goods. 

Tracking carbon emissions in a multi-site operation can present extreme challenges for automotive manufacturers. The data quality and data consistency issues mentioned above multiply for multi-site manufacturers. Many OEM manufacturers struggle to generate clear pictures of their Scope 1 and Scope 2 emissions due to the different tracking methodologies and tracking capabilities at different manufacturing locations. 

Carbon Reporting in the Automotive Industry – Scope 3 Challenges 

Due to the complexity of supply chains in the automotive industry, the tracking and reporting of Scope 3 emissions can present a challenge.  

As discussed in the Complete Guide to Sustainability and Carbon Reporting in Manufacturing, manufacturers must provide reporting on carbon emissions beyond their own operations. Emissions beyond their own operations are referred to as “Scope 3” emissions. 

Scope 3 emissions include both “upstream” emissions emanating from their suppliers’ operations, as well as “downstream” emissions involved with the usage and disposal of their vehicles.  

Gathering data from upstream suppliers – and their suppliers’ suppliers – will be a challenge for auto makers. Again, difficulties with different (or absent) carbon tracking methodologies of suppliers can present themselves.  

Some suppliers may utilise “spend-based” data collection methods, while others deploy “activity-based” measurements or even manual tracking. These different approaches to measuring carbon emissions may require the OEM automotive manufacturer to reconcile emissions reporting of suppliers via a single method. Other suppliers may track some emissions but not others. Some upstream suppliers might forego tracking altogether.  

Beyond this, there isn’t a single universally accepted method for calculating Scope 3 emissions. The most common standard, the GHG protocol, offers flexibility that can lead to inconsistencies. 

Example of Carbon Tracking and Reporting in the OEM Auto Industry 

At this point, an example can help pull all of the above information together. Please see the below hypothetical example for carbon tracking in the OEM auto manufacturing industry. 

Let’s say you are an American OEM automotive manufacturer, but you import turbochargers from a supplier in Germany. What are the upstream carbon emissions you’ll have to consider in your own carbon reporting? Focusing only on the Tier 1 supplier of turbochargers from Germany, this is an example of what you’d face.  

Your German Tier 1 supplier is itself supplied by Tier 2 manufacturers of components such as bearings as well as raw materials such as steel and aluminum.  

This turbocharger manufacturer sources raw steel from South Korea. In order to produce that steel, the South Korean manufacturer must extract, process and transport the steel to Germany. A typical diesel turbocharger requires around 10 kg of steel which can require 12 kg of carbon emissions to produce, and another 4 kg of carbon to transport. 

The German turbocharger manufacturer also sources aluminum, but from within Germany. Assuming a typical turbocharger requires 5kg of aluminum, we’re looking at carbon emissions of 50kg per unit. Transporting within Germany is less expensive than from Korea, but it still adds around 0.5kg per unit. 

Beyond these raw materials, the German turbocharger maker also requires components, such as bearings. A typical turbocharger manufacturer would source various bearings from different geographic locales, including from Japan or Czechia. Transporting bearings from Japan would again require overseas shipping, with a carbon emissions cost of around 0.3kg per kilogram, while trucking from Czechia would produce around 0.02kg per kilogram of bearings. 

After sourcing all supplies, the turbocharger manufacturer would then turn its attention to its own production processes. Processes like machining and components manufacture generate CO2 in and of themselves. Assembly requires electricity consumption, as do leak testing and packaging. 

Once packaged, the turbochargers can then be sent to America. They are trucked from the manufacturing plant to the port city, loaded onto ships, transported to America, and then shipped to the American car manufacturer.  

All of these activities, from the sourcing of raw materials, to the machining of turbocharger components, to assembly and transportation to the states, must be reported by the American OEM automotive manufacturer as Scope 3 emissions.  

Now consider the effort required to assemble a holistic picture of carbon emissions across multiple production sites, each fed by hundreds of Tier 1 suppliers. This is the Herculean task that OEM automotive manufacturers are being asked to perform. 

How Mavarick can help Track & Report Carbon Emissions in the OEM Automotive Industry 

Mavarick’s Carbon Emissions Reporting solution provides consistent real-time tracking of direct emissions from all manufacturing operations, as well as tracking of all energy used to power those operations.  

Beyond this, Mavarick’s Carbon Emissions Reporting solution utilizes artificial intelligence to integrate with supplier’s systems to automatically compile Scope 3 emissions data. 

Mavarick’s solution helps OEM automotive manufacturers pull all carbon emissions data from multi-site operations into a single transparent interface, providing not only a complete view of carbon emissions across sites, but also the ability to drill down to find actionable insights to reduce carbon footprint.  

Contact Mavarick today to learn more about how you can accurately report and manage your carbon emissions.