With roughly a third of all emissions coming from the way we move, the transport industry is one of biggest sources of emissions globally, and it’s no secret that an urgent transition to sustainable practices is needed. More specifically, 15% of all these emissions come from road transport, including the cars and trucks we rely on every day. While mobility is a prerequisite for our modern society to function, the flip side is that increasing production of carbon and greenhouse gases pose a crucial threat to the planet, and concomitantly to our health.
Despite numerous commitments and pledges to reach net zero, the transition to sustainable transportation is not happening fast enough, creating an ‘execution gap’ between the ambition businesses have communicated, and the actions and investments needed to actually get there. This impacts not only the pace of transition itself, but also businesses that suffer from trying to make both ends meet by working towards sometimes unrealistic goals, while continuing to satisfy their business objectives.
And while some governments are stepping up to do their part – with the sale of petrol and diesel cars set to be stopped in the UK by 2030 and £1.3 billion committed to accelerating the roll-out of charge points for electric vehicles across England following COP26 – it is the entire transport industry that requires rapid and extensive efforts to decarbonise. The task is by no means easy, but solutions do exist for private companies to do their part and deploy, scale, and improve initiatives to bridge this ‘execution gap’.
Creating a roadmap
One of the first steps lies in the necessity for organisations to look beyond the destination of set targets and lay out a clear road map outlining how to get from the position we’re in now, to where we want to be in the next few years. This needs to be a defined path with achievable targets that explicitly point to how much emissions need to be reduced to reach net zero by a certain time, what type of investments are required to achieve that target and what actions can be taken today to move towards that goal.
In that sense, progress relies on businesses’ ability to invest into practical objectives that fit within that road map and can be actioned straight away. One way to tackle this is to start by breaking down those goals and targets into manageable chunks of short, medium and long-term objectives for all business units, to create sizeable actions. Note the “for all business units”. Sustainability cannot be a topic for the sustainability department alone, it requires extensive work in procurement, innovation, design, manufacturing, sales and all other functions as well. Just like with any other business strategy plan, this also provides an occasion for regular progress check-ups and assessments of the role and impact of a business on the environment at every level. The road map can then be adapted and tailored accordingly based on real time insights.
It is only with these specific metrics in mind that companies can quantify the true value of sustainability for their business, as well as examine their own position within the sector to establish clear priorities and direct investment in the right areas. In essence, all organisations should update their business models to reflect the true value of sustainable solutions and more importantly, the cost of inaction. With the current pace of industry disruption, every business endeavour and investment needs to bring sustainability impact, or risk being wasted.
Pushing for investment
Private investment to realise that road map is essential. And while some investments can create change here and now, some investments will take longer to materialise winnings. This sometimes means that businesses prioritise the short-term investments, but this might end up being a costly strategy. Solutions directed towards sustainable mobility and renewable energy can no longer wait for the next generation of corporate leaders and require direct funding to action plans. This is no longer a problem ‘for the next CEO’.
Ultimately, as funding within the sector should continue to increase, climate related and sustainable principles will need to be embedded directly as part of the wider business strategy to create impact. Big moves in the industry such as Volkswagen’s €52 billion investment into its factories and electric cars, or Daimlers €40 billion investment in electrification, including giga factories, are prime examples of what the right investments can bring to the sector as a whole. But the wider benefit from such initiatives, and the increasing venture capital investments we’re seeing in the industry, lies in the power they hold to encourage rapid action on the ground at every level, and in turn generate more funding to deploy where needed.
Beyond the tailpipe
Whilst the main focus has been on electrification and lowering emissions from products in use, we now see increasing pressure for transparency on sourcing and value chain emissions. This is in part being driven by bespoke electric vehicle manufactures like Polestar openly sharing data on emissions and calling on the entire industry for more sustainable production. For sure, there is still a long way to go when it comes to owning, capturing, measuring and reducing Scope 3 emissions. Businesses can only do so much to manage the indirect emissions cost across an entire value chain, and one of the challenges of achieving sustainable targets and goals rests in the fact that activity not necessarily under a company’s control is hard to identify and quantify.
However, as sustainability targets are developed with longevity and scalability in mind, finding ways to accurately measure and address Scope 3 emission is becoming increasingly evident. Focus is now shifting from the tailpipe alone to circular and/or more sustainable materials, green steel production, and human rights issues in the sourcing of batteries, to name a few areas. This will require new considerations in procurement, segmenting suppliers using sustainability as a core metric. It will also require innovation and updated design principles to make sure vehicles still meet the required quality standards, while lowering CO2 emissions. A new race has started – the race to a zero-emission car.
Unleashing the power of collaboration
A clear sign that change is already unfolding comes from some of the more unlikely partnerships that we are seeing coalesce around sustainable action. Volvo Group, TRATON and Daimler announcing their joint venture agreement for a European high-performance charging network raised eyebrows when first announced, but is an excellent example of partnership as the new paradigm. As put by Volvo Group’s CEO Martin Lundstedt in 2016, it shows that organisations are ‘going from word to action’ by joining forces together to address an issue that is of concern to all.
Collaboration is creating a new leadership model, whereby companies can support each other to transition to sustainable practices by sourcing materials, logistics and infrastructures. With mutually beneficial sustainable supply chains that offer potential for lucrative and innovative partnerships, organisations can drive the industry forward. This is not only when it comes to factoring external actors into their own road map, but also more directly in relation to infrastructure and capabilities within the sector. This is the case with the project of the green energy grid, a necessary step towards any successful transition for the automotive sector for many companies to power the predicted 8.2 million electric vehicles and which crucially relies on the collaborative works of several stakeholders to keep up with ramping demand.
Ultimately, while each business can do their part to turn their pledge into action, the move toward sustainable practices is an ambitious one that will only benefit from multistakeholder action and implementation of effective plans across an entire business – going beyond a target and a single sustainability officer. In fact, while successful leaders will act with sustainability at the forefront of their plans, they should see collaboration as one of the enablers of greater business success and profitability, too.
The race to net zero is already well under way for the transport industry and creating tangible results. But the transport and automotive industry holds the potential for greater change, and we need to see this acceleration in our efforts to truly meet the challenge of net-zero.
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