As new members of the World Benchmarking Alliance, we have been delving into their work to understand how WBA benchmarks corporate performance in terms of their contribution to the UN Sustainable Development Goals.
WBA’s approach aligns closely with Cornerstone’s thinking: they recognize that transformational, systems-based change across key sectors and issues is critical to achieve a regenerative and inclusive global economy. Recognizing that the private sector has a tremendous role to play in bringing about such change, and that clear and consistent measurements of progress are essential to the effort, WBA is creating benchmarks or indices for key focus areas:
- gender equality and women’s empowerment;
- food and agriculture;
- climate and energy;
- seafood stewardship;
- and digital inclusion.
At an upcoming event in Davos on January 23, WBA will launch the SDG2000, a list of the keystone companies with disproportionate influence on the SDGs. Without these companies aligning their business models and operations with the SDGs, they simply won’t be delivered.
Below we offer highlights from WBA’s recently released assessment of the automotive industry, part of its climate and energy benchmark.
Measuring the world’s 25 most influential auto manufacturers
Given the transport industry is responsible for 15% of the world’s greenhouse gas emissions, automotive companies play a vital role in decarbonizing our economy. To measure their progress toward reaching the Paris Agreement goal of limiting global warming to well below 2°C, WBA analyzed the world’s leading automotive companies to determine if they can meet that target. We have summarized their key findings below.
Destination Decarbonization: Stuck in the Slow Lane
Companies are stalling in the low-carbon transition. Of the 25 companies, only Groupe PSA, Ford, Renault, and Mazda have established fleet targets that are fully aligned with the pathway required for the low-carbon transition, with only Mazda and Nissan setting long-term targets that reach as far as 2050. In addition to beefing up target emissions reductions, companies need to map out a clear strategic plan to achieve those targets. Groupe PSA is the only one of the 25 companies assessed that has embedded reduction targets into a publicly available low-carbon transition plan.
Driving with the Brakes On
A company’s investment in new battery technologies and electrification is a strong indication of its commitment to decarbonization. Some companies are making progress in boosting their low-carbon vehicle sales. BAIC, for example, boosted its share of low-carbon vehicle sales from less than 1% of total annual sales in 2013 to 7% in 2017. Likewise, BMW grew its low-carbon vehicle sales from less than 1% in 2012 to nearly 6% in 2018.
However, for 16 of the companies assessed, low-carbon vehicles accounted for less than 1% of sales. Several of these laggards have, encouragingly, made quantifiable commitments to rapidly increase their sales to transition to a low-carbon economy.
Sales: Customers Taking the Road Most Travelled
Though the auto sector is renowned for its high-profile marketing campaigns, less than half of the companies benchmarked show noticeable efforts to market low-carbon vehicles as a more favorable option. According to the WBA, there remains significant room for improvement from automotive companies to shift consumers towards low-carbon vehicles to help decarbonize the automotive industry.
Of the 25 companies, Tesla plays a strong role in shifting the passenger vehicle market toward electric vehicles by actively engaging consumers, increasing the number of showrooms, and creating unique customer experiences. BMW and Groupe PSA also actively promote their electric vehicles and encourageconsumer uptake. Efforts to shift the consumer mindset would require automotive companies to actively promote low-carbon models across multiple sales regions through a variety of methods.
Revving up Public Commitments to Climate Policy
There is an industry-wide reluctance for automotive companies to publicly commit to a positive, transparent and proactive approach to climate policy. None of the companies assessed show leadership in engaging with trade associations or regulatory bodies to help mitigate climate change. Nor does the industry as whole systematically safeguard against influencing climate-related regulations in a negative way, directly or indirectly, in consultations with regulators.
Though all of the companies – with the exception of Tesla – show a level of engagement with a trade association or regulatory body, none have a publicly available engagement plan, which is widely considered a best practice. That said, Ford, Groupe PSA, General Motors and Renault have established more defined positions relating to “climate-friendly” policies and what actions to take if an affiliated trade association has climate-negative positions.
Driving Change: The Future of Mobility
To better prepare for a low-carbon economy and remain profitable, auto manufacturers need to identify new business opportunities that move away from traditional passenger vehicle ownership. While automotive companies like Tata Motors, Tesla, BAIC, Honda, Nissan, and Toyota are exploring alternative business activities, they are far from scaling up operations: most companies do not offer a scope of operation, a sense of market share or profitability, and lack expansion plans with a defined timeline. This suggests that these activities may not have been given sufficient consideration in terms of the broader business strategy. To facilitate the transition to a low-carbon economy and help achieve the goals of the Paris Agreement, auto manufacturers could further demonstrate action towards diversifying their business models.
Car companies have a responsibility to current and future generations to change the high-emission mobility culture. Change can only occur if manufacturers proactively increase investments in and marketing of low-carbon vehicles, engage with policymakers on low-carbon solutions, and seek out new business opportunities.
Most companies have a low-carbon vehicle, but there is insufficient investment in this market. There also needs to be a more positive and proactive approach for companies to market low-carbon vehicles to consumers. As a whole, the industry needs to work with trade associations and react to climate policy. In sum, the WBA’s report illustrates that the 25 auto manufacturers are not on track to meet the goal set by the Paris Agreement.
For the full assessment please visit https://climate.worldbenchmarkingalliance.org/