Heading towards Paris with the brakes on
We need to talk about commitments and target setting but the bottom line is we are not on track to meet the Paris Agreement and keep global warming well below 2 degrees. No more is this the case than in the automotive sector which is moving towards the energy transition but with the brakes on. Together with CDP and ADEME’s ground-breaking ACT (Assessing low Carbon Transition®) methodology, the World Benchmarking Alliance has looked at 25 of the most influential car companies in the world by their impact on the ultimate end goal – the decarbonisation of the economy and meeting the Paris Agreement. Overall, these car companies are not selling enough low carbon vehicles and lack of investment in low-carbon means that the sector is sliding away from meeting the transformative change the world needs to see.
The WBA automotive benchmark finds that the bulk of companies have a low carbon vehicle in their range but are not selling enough right now and are not ready to scale up as needed to meet the Paris goals. Some 22 of the 25 companies assessed had a low-carbon vehicle on the market in 2017. However, only five of them currently meet the share of low-carbon vehicles needed to stay on track with the Paris goals. They are Groupe PSA, Renault, Ford, Mazda and Nissan. For 16 of the 25 companies assessed, low carbon vehicles represent less than 1 percent of total annual sales. A multi-stakeholder approach is critical to meeting the transformation of this sector. Companies have so far failed to shift consumers and markets away from high emission vehicles. Automotive manufacturers need to reshape their industry around low-carbon transport and infrastructure to support it and work with policymakers and investors to create markets which reward this.
The findings of the WBA automotive benchmark are also a warning to the automotive companies themselves. This is a sector that is being disrupted and fast through policy and eventual consumer behaviour. These companies are aware of and now need to plan for this rapidly changing landscape or they might find their business models are completely outdated. Ambitious target setting around fleet emissions demonstrate a company’s commitment to its own future business model and take the necessary actions to decarbonise the economy and deliver on Paris. Mazda and Nissan are the only companies that have set long-term fleet emissions reduction targets as far as 2050. The building blocks are in place for a shift to low carbon vehicles and business models, but this is being stalled by lack of market incentives and leadership in this sector. This includes appointing climate change experts to their board – and doing more to push their trade associations to lobby for climate safe transport. To date, only one company (VW) has appointed a climate change expert to its board.
We only expect pressure in the sector to increase. We looked at the automotive sector first because it is ready and waiting to transform with the potential to do so at scale. That is why we believe it is in prime position and expectations will mount due to the influence on other high emitting sectors.
There are some great examples coming through the benchmark. More than half of the companies in the ranking showed examples of car-sharing, car-pooling and other innovative services around the design and manufacturing of vehicles to facilitate the shift to different modes of transport, such as Tata Motors’ electric buses. There are several other examples of existing opportunities that companies could further develop and scale. They include BAIC’s ‘Optimus’ initiative for solar battery charges and swap stations, and Honda, Nissan and Toyota’s joint collaboration (with the development bank of Japan) to accelerate the construction of Fuel Cell Electric Vehicle fuelling stations. However, the lack of substantive planning, financial commitment and wider strategic integration means that real action is needed to ensure the low carbon transition.
At WBA we want to take these learnings and apply them to other carbon intensive sectors like utilities, oil and gas and the wider transport sector as part of our work to decarbonise the economy with the Climate and Energy benchmark.
For the automotive sector this is a race against the clock. In the rear mirror you have the policymakers, increased consumer activism, pressure on business models and pricing means the auto companies are running out of road. The starting blocks are there for the shift to low carbon vehicles and business models. We now need the acceleration phase with increased market incentives and real company leadership in this sector. This is a race that the automotive companies need to win, that can motivate others and we all need to win.