The ability to independently travel from location to location based on nothing more than a simple desire to move about freely is a powerful and historical concept that breeds individuality, builds personal character, and spurs innovation through the free exchange of ideas and cultures. Personal mobility has long been quintessential in the development of the United States, especially when considering the early 19th and 20th centuries where transportation slowly evolved from the stage coach, to railroads, to streetcars and subway systems. Throughout this transformation, however, steam remained the primary power source for self-propelled vehicles. Interestingly enough, gasoline was thought to be little more than a useless by-product of the oil refinement process—that is, until Henry Ford’s new and innovative design approach to automobile manufacturing drastically changed the status quo and put gasoline automobiles at the forefront of personal mobility.

Fast forward a hundred years and automobiles, and the entire transportation industry for that matter, are still completely reliant on the same antiquated oil based power source. While the relationship between fluctuating oil prices and economic output has long been considered standard analysis, the corporate risk of relying on such fuels has been a contested topic of debate recently—especially when considering the affect this risk has on a company’s stock price and valuation. Although many investors have yet to be convinced of the inherent and intangible risks that accompany operating in our climate challenged world, a few large, influential, and forward looking corporations are paving the way towards a vehicular future that relies on alternative energy sources for power.

While Tesla has been in the investor and consumer spotlight ever since they announced their Model S premium electric sedan at the Frankfurt Motor Show in 2009, BMW has been quietly working on a comprehensive and groundbreaking concept for sustainable urban mobility: the BMW “i” line. BMW’s vision is clear; inspire design and create a new understanding of what it means to offer a premium, sustainable product. In their mission of re-creating the status quo, BMW now offers their first fully electric, city focused vehicle, the BMW i3, and will soon offer the BMW i8—a progressive and hybrid sports car with the heart of the all-time favorite E36 M3, but that also happens to do 0-60 MPH in only 4.4 seconds. While a series of manufacturers are starting to produce electric vehicles for the U.S. and global markets, BMW is a clear cut above the rest when it comes to creating a sustainable design that focuses on the entire value chain, analyzing everything from the material extraction process to reusing materials at the end of the luxury vehicle’s useful life.

From a design perspective, it becomes readily apparent that BMW has invested significant capital, both human and financial, to developing a product line that 1) reduces the dependence on gasoline in order to mitigate their exposure to the uncertain future of oil based products, 2) addresses the need for increased regulatory compliance due to the increasing reduction targets for carbon emissions, and 3) puts sustainability at the heart of the company’s long term efforts. According to its ISO 14040/140441 certificate by TÜV SÜD Technical Inspectorate2, the BMW i3 is capable of emitting 30-50% less total life cycle greenhouse gases than comparable conventional vehicles, depending upon the source of its electricity. The 30% reduction is achieved by using the EU’s traditional mix of electricity, while the 50% reduction uses purely renewable forms of electricity, such as solar or wind power. The large reduction in emissions is due to a wide range of innovative solutions BMW has applied throughout the material sourcing and manufacturing processes. The “LifeDrive Architecture” creates a passenger cell manufactured from carbon fiber-reinforced plastic (CFRP) that is mounted to an aluminum chassis, made up of secondary aluminum produced from melted production scrap and requiring 95% less energy than using primary aluminum ore. Although CFRP is usually reserved for high-end performance supercars, BMW decided to manufacture the CFRP themselves in order to reduce costs, increase efficiency, and become the first car manufacturer to use CFRP for mainstream production. Staying true to their vision, BMW has now created the world’s first CFRP recycling concept, where various body components, production waste, and even parts from damaged i3’s will be re-incorporated into production and worked back into the vehicle.

The design plan that BMW has created with their i brand initiative is an exemplary model for all companies faced with the challenge of operating in a world littered with the unforeseen risks and challenges that climate change has created. BMW has recognized that they will be forced to comply with tougher CO2 emissions regulations, and have thus been proactive in solving the problems at hand by re-designing the manufacturing process to reflect the challenges not just of today, but of the future as well. Compared to their traditional manufacturing facilities, their new plant in Leipzig, Germany uses four wind power systems to provide all the power needed for production, and creates a 50% savings in energy and 70% savings in water—the resource that very well may be the most sought after commodity in the world in the not too distant future. Additionally, in creating the Lithium-ion battery system that both the i3 and the i8 will use, BMW engineered the system so that after 1,000 charges the battery can be serviced and put to use as short term solar storage units for residential energy consumption.

BMW’s long term vision for a sustainable and luxury product is a welcome and necessary change to a design model that has dominated the transportation industry since the 19th century. As the company shifts its sight to create a mobile, urban population that increasingly relies on renewable sources of energy and materials to power their vehicles, consumers will be quick to notice and redefine their personal expectations and values to favor products capable of being stripped down and recycled at the end of their useful life. There is no doubt that other manufacturers will quickly follow BMW’s charge forward once they see consumer demand shift; whether or not these newcomers will be too late to catch up is a question that every manufacturer—and every investor—should be vehemently analyzing.

Juan Lois is a Director of Business Development at Cornerstone Capital Group.
1 ISO 14040/14004 are international standards for lifecycle assessment.
2 TÜV SÜD Management Service is a neutral independent verification agency.