Policy engagement

Module 8, policy engagement, assesses companies’ political influence from the perspective of three indicators:

1. Does the company have a policy on what action to take when industry organisations to which it belongs are found to be opposing climate-friendly policies?
2. Does it engage with any climate-negative trade associations through board membership or funding?
3. Does it publicly support or obstruct climate-friendly policies?

Each indicator is equally weighted in this module, which together accounts for 1.2 out of the overall performance assessment score of 20.

Vehicle specifications, such as fuel efficiency, are often regulated. This applies particularly to fuel efficiency because this has implications for consumer fuel costs, local air pollution and greenhouse gas emissions. Regulation affecting the auto manufacturing sector is usually developed in a consultative fashion due to the need for technical inputs. This allows significant room for companies to influence these regulations, potentially in a way that is negative for the climate. Since the industry is currently a major source of greenhouse gas emissions, timely and robust regulation will help ensure that scientific limits are considered and that there is a level playing field for businesses in this sector to approach transition to a low-carbon economy.

The assessments reveal the need for significant improvements in policy engagement approaches for the 30 keystone companies assessed. Policy engagement is an area where companies can leverage their influence to demonstrate low-carbon leadership – yet for the 25 companies included in both the current and previous assessments, a decline in average sample score across all three policy indicators (28.3 percent of in the current assessment, 36.6 percent previously) suggests companies are failing to do this.

All the companies assessed were found to engage with trade associations to some degree, excluding Tesla who appears to be actively distancing itself from trade groups in the US. Of the 29 engaging with trade associations, more than half were found to be on the board or providing more than traditional membership funding to trade associations with climate negative positions. Engaging with such associations could suggest indirect opposition to climate policies, regardless of the company’s public climate rhetoric. For example, for eight of the keystone companies – BMW, Daimler, Fiat Chrysler, Ford, Groupe PSA, Nissan, Suzuki and Volkswagen – their stated public support of specific climate policies were found to be misaligned with their trade association engagements.

Despite the high levels of trade association engagement found, 27 out of the 30 keystone companies assessed have not set a policy to govern the action to be taken if a supported trade association adopts a climate negative position. Of the three that do – Kia, Toyota and Volkswagen – none have all three markers of strong policy governance, namely full coverage of business, highest (board) level oversight and a clearly defined course of action. Interestingly three (Mahindra & Mahindra, Tata and Tesla) of the four companies tied in first place of this module ranking have no policy for trade association interactions. However, given these companies were not identified to engage with any climate-negative associations, such a policy is arguably less necessary.

Whilst indirect opposition to climate policies via trade associations is relatively high across the companies assessed, direct opposition is less common. Only three companies were found to be directly obstructing climate-friendly policy. General Motors, Toyota and Fiat Chrysler all supported the Trump administration’s decision to reduce the ambition of the Corporate Average Fuel Economy (CAFE) standard and have opposed California’s decision to maintain the more stringent previous standard introduced under the Obama administration. All three companies are weak performers on the climate policy support indicator as a result.

The general trend to emerge from the direct and indirect policy engagements of the companies assessed is a tendency to oppose policies that would increase costs for the company. For example, fuel economy and emissions regulations have been directly opposed by General Motors, Toyota and Fiat Chrysler and indirectly opposed by trade association such as the European Automobile Manufacturers’ Association (ACEA), the Japan Automobile Manufacturers’ Association (JAMA) and the German Association of the Automotive Industry (VDA). However, policies that will directly support low-carbon vehicle sales are backed by Tata Motors and Mahindra & Mahindra. Several of the companies, including Groupe PSA, Ford, BMW and General Motors are calling for greater electrification support from legislators. By contrast, the Association of the German Automotive Industry opposed the resolution to ban internal combustion engines in Germany by 2030, passed by the Bundesrat.

Overall, in an area where auto manufacturers have an opportunity to demonstrate climate leadership and drive sector-wide transition to the low-carbon economy, performance on policy engagement is disappointingly poor. The keystone companies assessed implement the AAA framework for climate policy leadership, and use their “political influence as a tool in the fight against climate change”. If the sector does not shift its position it is hard to see how sufficient emissions reductions will be made in time to achieve the Paris Agreement goals.