A new Refinitiv report delves into the carbon-intensive auto sector, and analyzes how the world’s major automakers have prepared for climate change and deep decabonization.
- How do different manufacturers in the auto sector currently compare in the climate impact management stakes?
- When comparing the climate impact management capabilities of different companies, it is important to look at changes over time in a company’s goals, intent and execution.
- In our exclusive report, we conclude that there is still much work to be done in order to achieve meaningful change in the product mix away from internal combustion engine (ICE) models and towards alternative drive vehicles..
For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.
A new Refinitiv report — Sustainability trends and the automotive industry: Truckification and Electrification — describes the coming decade as one in which we are likely to witness historic transformation in the carbon-intensive automobile industry.
The report highlights that companies in the auto sector face a sustainability imperative similar to the quality, digitalization and globalization imperatives of previous decades.
Both incumbents and disruptors are striving to formulate and execute decarbonization strategies, build competitive advantage, and optimize new capabilities that will allow them to prosper in a changing landscape. But how do different manufacturers compare in the climate impact management stakes right now?
Company comparison in the auto sector
When comparing the climate impact management capabilities of different companies within the sector, it is important to look at changes over time in a company’s goals, intent and execution. It is equally important to use data that is fact-based and granular, and which takes account of past performance, rate of change, and future plans.
Environmental, social and governance (ESG) data has an important role to play in any such analysis.
Refinitiv offers the most comprehensive ESG dataset in the industry, but also recognizes that accurately understanding corporate intent and effectively measuring the ability of firms to execute their planned decarbonization strategies is not possible using ESG data alone.
We have therefore partnered with Constellation Research, which has developed an innovative method of generating advanced analytics that leverage granular, forward-looking operational and sales data alongside Refinitiv’s ESG data to provide insights into companies’ climate policy, transparency and reporting.
Watch — Refinitiv Perspectives LIVE: Climate Risk Analytics: A Higher Resolution Picture
The Constellation model centers on maturity curve analysis and asserts that, as companies move up the maturity curve, they follow four distinct stages.
The four stages of maturity
The maturity curve model outlines the following stages:
- Stage 1: Initial engagement: This stage begins with creating a reporting policy on emissions and reporting emissions impacts.
- Stage 2: Systematic management: This stage incorporates the verification of emissions impacts; and is followed by developing public emissions reduction targets and finally looking at the energy intensity of vehicle production.
- Stage 3: Transforming the core: This stage considers the implementation of company governance structures to decarbonize; the current percentage of sales of alternative drive vehicles; company projections and future targets for alternative drive vehicles; and the emissions performance of the fleet.
- Stage 4: Competitive differentiation: The final stage looks at market share and sales leadership in zero-emission and plug-in hybrid vehicles. It considers alignment with the 2°C pathway to 2030, which refers to the international long-term goal to limit global warming to less than 2°C above pre-industrial levels.
What did the analysis show?
The Constellation maturity curve analysis revealed that the disruptors (such as Tesla and BYD) are already demonstrating a significant capacity to innovate and decarbonize.
Many of these disruptors, however, fall short in the initial stages of our curve, for example in terms of transparency and impact analysis.
It is apparent that these disruptors are starting at the top of the curve and working their way down. Their challenge will be scaling-up production and improving disclosure and governance.
In contrast, the incumbents are moving up the curve and demonstrating a more traditional approach. Many have already implemented the policies and impact reporting outlined in Stage 1 above, but are challenged by new technologies and methods.
The findings show that some leading incumbents, such as VW and Daimler, may have limited prior success in building and selling alternative drive vehicles, but nevertheless present some of the most aggressive plans for transformation.
Interestingly, Toyota is the incumbent leader in alternative drive vehicle production, but is less clear about its future plans relating to climate impact management leadership.
Furthermore, there is a sizeable group — including Tata, Suzuki, Isuzu, and Mitsubishi — showing limited experience and a lack of publicly available transformation plans and targets.
Where now for the auto sector?
Our report concludes that there is still much work to be done in order to achieve meaningful change in the product mix away from internal combustion engine (ICE) models and towards alternative drive vehicles:
- In 2019, only 4.9 percent of global production was in the alternative drive vehicle category.
- Only 10 of the 27 automakers analyzed in our report are on or near the required 2°C pathway to 2030, and a further 10 show an alarming lack of experience and forward planning in the alternative drive arena.
A number of factors will determine when and how global decarbonization targets meaningfully translate into reality, and efforts will be needed on multiple fronts to create workable solutions.
Ultimately, success needs to involve collaboration among a wide range of stakeholders, from consumers, to manufacturers, and from regulators to governments. Only by working together can we achieve any true measure of success.
