A more sustainable shift to EVs

The shift to electric vehicles (EVs) is an essential element in our efforts to decarbonise transport. But just building more EVs is only part of the answer. How the vehicles are manufactured is also important.

For many a ‘clean car’ is about more than just what powers the engine. It also encompasses a fossil-free supply chain that has the lowest possible negative impact on human health, biodiversity, resource depletion, and ecosystem resilience. And a supply chain that respects the rights of Indigenous Peoples, workers, and local communities.

The Lead the Charge Leaderboard measures these aspects, and tracks the work of the various global automotive Original Equipment Suppliers (OEMs). The 2024 scoreboard was recently published, and it reveals a mixed picture. Some good progress, but still a lot of work to do.

The big highlight was the material improvement by the US OEMs. To quote from the report ...

“with notable improvements from US automakers coupled with inertia from some European automakers (particularly VW, Renault and Volvo), this year saw US auto companies overtaking their European peers: scoring 31% on average compared to 28% (European automakers scored an average of 26% last year, and US automakers 21%).

If relative improvements are replicated next year, other European automakers risk being overtaken by peers like GM and Geely that are making faster progress.”

The top scoring Automotive OEM was Ford, followed by Mercedes Benz, Tesla, Volvo and Stellantis. But, as the table below shows (from the report), none of the OEMs are scoring highly, and some are scoring quite poorly. This seems to especially be the case for sustainable supply chains.

This is not just about sustainability as a values and ethics issue. Over time, having a more sustainable product offering could become a material competitive advantage. One obvious lever is regulation. For instance, as Human Rights and Supply Chain rules get tightened up, these will become increasingly important issues for OEMs

But it's not just about the stick of regulation. There is a carrot element as well. We are starting to see that some consumers are either taking sustainability issues into account when they make purchase decisions and/or are willing to pay a (small) premium for a greener and more sustainable product.

A recent Boston Consulting group report suggested that "57% of respondents said that they would “definitely” or “probably” consider net zero production when purchasing their next new passenger vehicle or home appliance. And some 88% of respondents stated they are willing to pay at least a 0.4% green premium for net zero production of passenger vehicles and appliances."

In many cases, their analysis shows that even this low level of price premium would be enough to cover the increased costs faced by the OEMs.

This is not just an Automotive OEM issue. We wrote a blog recently on how premiumisation could be a mechanism for ensuring that coffee growers get paid a fair return.

You can read it here 👉🏾 https://www.thesustainableinvestor.org.uk/sunday-brunch-premiumisation-as-a-sustainablity-stratgey/

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