Look for automakers to lean on the supply chain to meet climate net-zero commitments

THE ALIXPARTNERS AUTOMOTIVE BRIEF

The automotive industry has been identified as a major source of global emissions. Automakers are responding, with many publicly committing to meet net-zero emissions targets (i.e., achieving a balance between the amount of greenhouse gas produced and the amount removed from the atmosphere) by midcentury, if not sooner.

Talk of decarbonizing supply chains is easy, but the actual work is extremely complicated. For automakers to meet their net-zero commitments, AlixPartners estimates that suppliers must drive 25% to 50% of the improvements. That is largely because Scope 3 emissions—emissions that come from indirect sources ranging from upstream purchased goods and services to downstream logistics (see chart)—account for the lion’s share of total automotive-related emissions.

A shift to electric vehicles is not enough, and at times may fight with the Scope 3 measures. AlixPartners’ 2022 Global Automotive Outlook highlights many of the challenges automakers and suppliers will face.  Automakers will need to focus their resources on “carbon hot spots”—areas in the supply chain with the greatest impact. And for their part, suppliers will need to focus on being proactive—and transparent on the measures taken and the short-term costs involved—in addressing the net-zero challenges in their respective parts of the value chain.

Success for all will hinge on making smart, pragmatic decisions, based on deep analysis and a commitment to speed. It starts with measurement and pragmatic planning.