The Climate of Business #82: How will the tightening of sustainability regulations reshape the automotive and fleet industry?

Climate Change Reality

• El Ni?o is forecast to return in 2023. Here’s what it means for extreme weather and global warming (Euro News )
• How old coal mines can help the climate (BBC Future Planet )
• Scenes of South Florida flooding after historic storm (CNBC )
• ‘End of the fossil age’: Wind and solar broke energy records last year, report reveals (Euronews Green )
• California’s Historic Wet Winter Risks Making Wildfire Season Even Worse (Bloomberg )

• Air pollution: Sandstorms cover China, South Korea and Thailand in a yellow blanket of dust in pictures (The Guardian )
• The Massive ‘Batteries’ Hidden Beneath Your Feet (Wired )
• A new tool could make Russia pay for environmental damage in Ukraine (Financial Times )
• ‘End of fossil age’ has begun, analysts say (Euractiv )

Business Climate Reality

• E-fuels: Are these synthetic fuels a good alternative to electric cars (Euronews )
• How Timberland, Vans, VF Corp. are making sure their cotton isn’t ‘greenwashed’ (CNBC )
• Corporate leaders are greenwashing — and they know it (GreenBiz )
• Be excited about EPR, even if it’s not a silver bullet (GreenBiz )
• The Case for Flying Cars as a Climate Solution (Bloomberg )

• Investing in public transport could give economy ￡50bn annual boost, says TUC (The Guardian )
• Hong Kong to make climate disclosures mandatory for issuers (Reuters )
• More EV Options Thanks to Tougher Emissions Rules (Wired )
• EU Regulators Propose Changes to Sustainable Finance Disclosure Rules (ESG Today )
• European aviation industry claims bill of €800bn to reach net zero emissions (Financial Times )

Reality Check

Last week’s newsletter highlighted the extent to which transport influences global carbon emissions. This week, the focus will be shifted towards more specifically the global automotive and fleet industry; from the impact of this sector upon global greenhouse gas emissions (GHG) - to the sustainability and ESG policies relevant to this industry.

The carbon footprint of the global automotive and fleet industry

Tailpipe emissions from road vehicles account for almost 75% of carbon emissions within the mobility sector, equating to around 6gt of CO? per annum and around 15% of global CO? emissions. Meanwhile, the fleet industry’s carbon footprint is vital; with road transport accounting for 72% of all EU domestic and international transport GHG emissions. Whilst such emissions associated with the fuel combustion of a vehicle’s engine are detrimental to the global decarbonisation agenda, this is further exacerbated by the carbon emissions created across the wider supply-chain of the automotive and fleet industry.

Such an immense impact upon global greenhouse gas emissions (GHG) ultimately necessitates the decarbonisation of the automotive and fleet industry. Not only will this sector be required to replace fossil-fuel dependent vehicles with low-carbon alternatives, such as electric vehicles (EVs) or hydrogen fuel-cell operated vehicles, but in order to truly sustainably transition this sector, automotive and fleet manufacturers and companies must make sustainability a priority within every aspect of their supply chain.?

ESG and sustainability policies affecting the automotive and fleet sector

On a global scale, governments and regulatory bodies are introducing policies which aim to pave the way to a low-carbon automotive and fleet sector. Within the European Union, targets to reduce road transport emissions have been introduced alongside a range of policies aimed at reducing fossil fuel usage within the automotive industry.?

• The EU’s new CO? targets which aim to reduce road transport emissions, through cutting harmful emissions from new passenger cars and light commercial vehicles, incorporates Intermediate emissions reduction targets of 55% for cars and 50% for vans by 2030. An agreement on such targets was reached in October 2023 , and it was approved by parliament in February 2023.
• In June 2022 , the European Commission proposed a ban on the sale of new petrol and diesel cars from 2035.
• The EU has proposed various other measures to complement such CO? targets, including: a new emissions trading system (ETS) for road transport and buildings, an increased share of renewable transport fuels, the removal of tax advantages for fossil fuels, and a revision of the alternative fuels infrastructure legislation to expand capacity

Such proposals aim to significantly reduce carbon emissions within the wider transport sector - where GHG emissions have increased by 25% since 1990. In doing so, the EU aims to achieve ambitious climate goals, such as zero emissions on European roads by 2035, along with the European climate goal which makes the goal of reducing EU emissions by at least 55% by 2030 a legal obligation. Meanwhile, enforcing said legislation will be key to encouraging a Europe-wide shift towards zero carbon vehicles - thus leading to better air quality, energy savings, cost savings, and innovation within the field of low-carbon technologies.

Adapting and leveraging such policies

Companies and organisations involved within the automotive and fleet sector will increasingly be influenced by the net-zero agenda, through both ESG policies and increasingly sustainable consumer values.

It is vital that such companies take the lead on such a vital topic, through developing and implementing a sustainability strategy which incorporates monitoring and reporting upon carbon emissions, whilst actively taking steps to enact decarbonisation across their wider supply chain. The following steps should be used as a guide:

• Understand the regulatory environment and the relevance of certain policies: In light of increasing regulations within the automotive and fleet industry across the EU, and worldwide, it is vital that organisations gain an understanding of the general and industry-specific policies which are relevant to the organisation both now, and in the future.??
• Make sustainability a strategic priority: Sustainability must become a central focus of the organisation’s long-term value-proposition and strategy. Increasing regulations and changing consumer preference within the automotive and fleet industry, alongside greenwashing inevitably no longer being an option, means that companies must undergo a strategic transition towards sustainability immediately.?

• Embed sustainability leadership within organisations: Ensuring that sustainability-focused leadership is embedded within the organisational structure of a company, such as a Chief Sustainability Officer who reports directly to the CEO - is essential to developing and implementing an organisation-wide sustainability strategy, whilst also aligning all departments to ensure ESG requirements are met.?
• Collect data and monitor emissions: Companies within the automotive and fleet industry must start collecting data immediately so that their Scope 1,2 and 3 emissions from their wider supply chain can be accurately monitored, and thus reduced. This is vital to sustainability transitioning, whilst also avoiding vast expenses associated with not following ESG requirements. Plan A offers a comprehensive platform for data collection, carbon accounting, monitoring, reporting and reduction.?
• Leverage existing and future technologies: Utilising existing and future technologies to assist within the monitoring and reduction of carbon emissions; particularly within carbon-intensive sectors such as the automotive and fleet industry.?

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