EY: Decarbonisation is Only Part of Automotive’s ESG Agenda

Automotive Firms are Focused on Sustainability yet Concerned About Profitability, so EY Explains how to Shift Their Focus and Without Neglecting ESG

We’ve witnessed immense growth in sustainable initiatives across the European automotive sector over the past few years. The EU aside, the whole world is on a more sustainable trajectory as car makers assess their positions in climate change and take action, most notably in the form of electric vehicle (EV) manufacturing and innovation. 

However, there seems to be a major emphasis on EVs when there remains an abundance of factors driving up the global temperature. And while automotive still accounts for 15% of the European Union’s (EU) emissions, there is more work to be done to bring down the rate of change and do so in a lucrative way. 

During the period of 2006 to 2021, the earth has been relieved of much strain from the EU’s car manufacturing sector as it saw a 45% reduction in emissions. From 2012 to 2021, emissions from tailpipes decreased by roughly 22%, showing a remarkable improvement, yet still more work to be done. It’s also unclear whether these figures factor in shifts within the EU, for example, the UK’s exit from the institution.

EY’s Andrea Weinberger, Partner EY Sustainability for Automotive, and Craig Coulter, Global Advanced Manufacturing & Mobility, Strategy & Operations and Sustainability Leader, co-wrote an article that really sums up the state of Europe’s automotive sector and the focus for businesses when it comes to prioritising sustainability or profitability. 

To address the point of sustainability becoming a burden on businesses, they explain that companies shouldn’t look at environmentally friendly practices as a hindrance of performance. 

Here are some important points expressed by the pair (in a nutshell). 

  • Challenge the prevalent mindset within the automotive industry which often equates increased sustainability with reduced profitability. It's important to understand that sustainability and profitability can, and indeed should, complement each other.
  • Take control of your future rather than merely reacting to actions of regulators or competitors. Being proactive doesn't necessarily require a company to be the first to act, but it does involve developing a vision and strategy that genuinely represents your company's legacy and its current strengths.
  • Emphasise regular activities that normalise and simplify sustainability. Failing to do so can lead to becoming overwhelmed by the vastness and intricacy of such a significant change.

What are the focus points for automotive sustainability? 

Of course electrification is key, however, this approach to sustainability is one that hinges on the growth of technology, the sourcing of necessary components at suitable prices, and the development of infrastructure to support an all-electric economy. 

What the leaders at EY stress in the above points is that, yes, collaboration is key to decarbonising, but car makers must look at the local impacts they can have on their businesses in order to address the overarching global challenges. Cost reduction, component shortages, and growth of energy systems are all factors in the success of automotive and therefore garner their attention. 

Global component shortage: It’s no surprise that shortages in technical components stunt the growth of the industry. The semiconductor conversation is one that impacts a number of industries, but for the automotive sector it reduces the potential to deliver EVs at scale. Companies local to semiconductor manufacturers will not only get the best prices, but lead the way in reducing the cost of building their cars. 

Cost reduction: Currently, car companies are focused on cost reduction, which is mainly driven by the high prices of EV battery packs. Until solid-state batteries (SSBs) and other forms of energy-dense power become available, the cost of purchasing an EV will be high, which cuts the market for new vehicle owners. 

Energy infrastructure demand: Aside from the cost of ownership, infrastructure is still in its growth phase, which is a key factor in switching drivers to more sustainable vehicles, i.e. electric cars. 


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