Automotive
Industry

Risks and Opportunities

The automotive industry is known to have a sizeable ecological footprint. Overall, there is a high concentration of risks in lower supply chain tiers and they all need to be addressed accordingly. Many upstream processes, including steel, aluminium, glass and battery production, consume huge volumes of energy and water. Vehicle manufacturing also requires copious amounts of mined minerals and metals, plastic, natural rubber and leather.

The sourcing of these raw materials has been linked to a wide range of controversial practices. The extraction of cobalt for battery production, mica for paints and other conflict minerals for electronics has been marred by reports of child labour, poor working conditions and pollution. At the same time, hazardous chemicals are widely used. Tanneries, for instance, resort to harmful substances for leather production which can cause adverse environmental implications and associated risks for workers and local communities alike. Besides, the production of natural rubber, contained in tyres, has been tied to incidents of deforestation, the large-scale application of pesticides or herbicides and inadequate working conditions.

In sum, lower tiers related to resource extraction and processing are responsible for many of the industry’s social and environmental woes. This, in turn, means that dedicated efforts to mitigate risks and enhance positive impacts in upstream supply chains can provide companies with a great opportunity to effect change that cascades through the value chain.

Regulators are also distinctly aware of emissions caused during the use phase. Exhaust emission standards in the EU go as far back as 1992. In 2022, EU lawmakers set a zero-emissions sales target for new cars and vans by 2035. Separate legislation for trucks and heavy duty vehicles is expected in 2023. The goal is to ensure that all vehicles in the EU are zero emissions by 2050 through general fleet churn. The decarbonisation of mobility thus paves the way for novel business models and innovative product design along the value chain. It is equally set to entail favourable knock-on effects for emissions abatement in other sectors such as transport, logistics or construction.

The afore-mentioned focus on GHG emissions is expediting the uptake of alternative powertrain technologies, especially electric vehicles, which will further intensify demand for critical metals and rare earth minerals such as cobalt, lithium, nickel, copper and manganese. This makes the case for stringent due diligence procedures to mitigate risks related to water stress, the release of pollutants, human and labour rights. The responsible and sustainable sourcing of raw materials and components is therefore of pivotal importance.

How IntegrityNext
can help

IntegrityNext provides a platform for comprehensive ESG supply chain risk management that allows you to meet due diligence requirements and improve your sustainability performance:  

1. Carry out a carbon footprint assessment and benefit from enhanced visibility into your suppliers’ emissions data, reduction efforts and targets.
2. Analyse the most relevant environmental, social and governance risks as part of a five-step risk management process.

It includes an abstract country and industry risk analysis to deliver initial insights into your supply chain’s risk exposure. Based on more detailed pre-built assessments, which draw on authoritative international standards and conventions, you can monitor your suppliers with respect to the main ESG risks:

Note that the supplier self-assessment questionnaires (SAQ) of Drive Sustainability can be accepted as additional proof of evidence for our evaluations.

We help you identify suppliers with the most severe impacts so that you can develop a coherent strategy and target your preventive and remedial measures accordingly. The results gleaned from the assessments are synthesised in a GRI-certified report that can be readily used for your disclosures.