The Journey to Net Zero : How the Automotive Industry Can Make Its Transition To Electric Vehicles Truly Sustainable

WHITE PAPER2THE JOURNEY TO NET ZERO: HOW THE AUTOMOTIVE INDUSTRY CAN MAKE ITS TRANSITION TO ELECTRIC VEHICLES TRULY SUSTAINABLEFor the automotive industry to keep pace with its bold greenhouse gas reduction goals, it must change gears and start taking bold steps – especially in the Scope 3 category. GEP analyses show that Scope 3 emissions account for 97.5% of the total emissions for an automotive company. This presents a great opportunity through which the industry can focus its carbon emissions reduction efforts.But electric vehicles (EVs) alone will not save the planet. In this whitepaper, we dive deep into how internal combustion engines (ICE) vehicles fare against EVs in the most concerning Scope 3 sub-categories and explore how automotive companies can chart a path to net zero by getting the EV transition right. Here are some of the highlights: • Companies expanding EV offerings could end up emitting 1.5x higher emissions in the purchased goods and services category.• Despite significant potential advancements in battery manufacturing, emissions from purchased goods and services for an EV will be higher than for ICE.• ICE vehicle manufacturers’ carbon emissions are an estimated 3x higher than EVs in the use of products sold category.• By ensuring 2/3rds of their sales are EVs by 2030, manufacturers can reduce their emissions by 45%.Setting the pace toward carbon neutrality includes understanding major sources of emissions, determining short-, medium- and long-term targets, collaborating with the relevant partners, establishing continuous-improvement governance plans and optimizing infrastructure.There is a great amount of scrutiny on how vehicle manufactures are managing and actively reducing emissions across their supply chain. Expanding EV offerings is only a small part of the answer.EXECUTIVE SUMMARY WHITE PAPER3THE JOURNEY TO NET ZERO: HOW THE AUTOMOTIVE INDUSTRY CAN MAKE ITS TRANSITION TO ELECTRIC VEHICLES TRULY SUSTAINABLETYPICAL EMISSIONS FOR AUTO MANUFACTURERSGHG emissions for companies are measured across three main sections: Scope 1, Scope 2, and Scope 3.Scrap generat edin t he pr oductionfacilities GHG EmissionsCompanyScope 1Scope 2Direct emissions from acompany’s controlled facilitiesIndirect emissions fromprocured energy Investments in jointventures, M&A, holdingcompaniesEnd-of-life disposaland treatment ofproductsTransportationand distributionScope 3Scope 3Indirect emissions from downstream stagesDownstreamEmissions fromfranchisesUpstreamEmbedded emissionsin leased buildingsand vehicl esEmissions due toprocessing, sellingand usage of productPurchase of materialsand services Emissions linked tofossil fuel extraction,T&D losses Employee ai rand rail travel, carrental sIndirect emissions from upstream stagesEmbedded emissionsin buildings andequipmen tEmbedded emissionsin leased buildingsand vehicles Transportationand distributionDaily commuteof empl oyees Combustion of natural gasand other fuels in ownedfacilitiesPur chase of electricity,steam and heat in company-owned facilitiesSource: GEPAs one of the largest emitters of greenhouse gases (GHG), the automotive industry is under significant pressure and scrutiny to implement a robust carbon emissions reduction plan.The industry has, in fact, set ambitious targets to achieve GHG reduction goals for 2030 and carbon neutrality by 2050. Major automotive original equipment manufacturers (OEMs) have also focused their intents on reducing GHG emissions across their supply chain and product portfolio. WHITE PAPER4THE JOURNEY TO NET ZERO: HOW THE AUTOMOTIVE INDUSTRY CAN MAKE ITS TRANSITION TO ELECTRIC VEHICLES TRULY SUSTAINABLEUpon analysis, the findings for automotive company emissions across the value chain are eye-opening. A massive 97.5% of all industry emissions originate from Scope 3. Scope 1 and Scope 2 emissions combined contribute a mere 2.5% of all emissions.Within Scope 3, which is broken down into 15 categories, Category 1 (purchased goods and services) and Category 11 (use of sold products) on average account for approximately 95% of industry emissions. This gives automotive companies an incredible opportunity to significantly reduce their GHG emissions simply by focusing on these two categories.The Impact of Scope 3 EmissionsScope 1Scope 2Indirect Company EmissionsScope 3Category 1Purchased Goodsand ServicesCategory 2Capital GoodsCategory 3Fuel and EnergyCategory 4Upstream Transportationand DistributionCategory 5Waste Generated inOperationsCategory 6Business TravelCategory 7Employee CommuteCategory 8Upstream Leased AssetsCategory 9Downstream Transportationand DistributionCategory 10Processing of Sold ProductsCategory 11Use of Sold ProductsCategory 12End-of-life Treatment ofSold ProductsCategory 13Downstream Leased AssetsCategory 14FranchisesCategory 15InvestmentsGraph not to scaleLess than 0.5%Up to 2%Up to 15%Less than 0.5%Less than 0.5%Less than 0.5%Less than 0.5%Less than 0.5%Less than 0.5%Less than 0.5%Less th