Automotive manufactures need to reduce CO2 emissions to remain competitive in the current business environment. On one hand, strict regulation is forcing automotive companies to rethink their manufacturing processes to comply with the new rules. On the other hand, a growing penetration of electric vehicles with a more environmentally conscious supply chain, puts additional pressure on the conventional car industry. Therefore, a key management concern is how to reduce CO2 emissions and become more sustainable across all of the company\u2019s processes. Supply chain processes are key in this strategy since traditional supply chain emissions can be greater than those from direct operations.<\/p>\n
BMW is the example of a company that is redefining its business model in reaction to the effects of climate change. In 2016, BMW was named the world\u2019s most sustainable automotive company by the Dow Jones Sustainability Index[1]<\/a>. The company aims to reduce at least 50% of its CO2 emissions by 2020[2]<\/a>. In order to do so, BMW is focusing on four key areas of its business supply chain.<\/p>\n Development of a sustainable strategy and organization in supply chain<\/em><\/strong>\u00a0<\/em><\/p>\n BMW\u2019s 2020 vision includes sustainability as a key area of development. The BMW Group is the most successful and sustainable<\/u> premium provider of individual mobility[3]<\/strong><\/a>.<\/em> To achieve its vision, the company has created a Sustainability Board that is in charge of executing the sustainability strategy and cascading it to the rest of the organization. Specifically, in supply chain, the company has set its 2020 goal to Develop<\/em> a sustainable resource efficient supply chain[4]<\/strong><\/a><\/em>. \u00a0To execute its goal the company has established a decentralized sustainability team in the supply chain area with key short term and medium-term goals.<\/p>\n Increased supply chain transparency<\/em><\/strong><\/p>\n By 2020 The BMW Group plans to increase supply chain transparency through the Supplier Sustainability Standards, <\/em>which establishes the minimum requirements a supplier needs to meet to work with BMW. In order to ensure compliance, the company has created an industry wide sustainability questionnaire in which it analyzes the supplier overall commitment with sustainability. The questionnaire is a key resource for decision making in the tendering process.<\/p>\n In addition, BMW encourages its suppliers to report their CO2 emission targets. In 2016, 69% of BMW\u2019s suppliers publicly reported their emissions[5]<\/a>. With these metrics, BMW can benchmark and push suppliers to achieve specific sustainability goals. BMW\u2019s plan for 2020 is the requirement that all suppliers report their sustainability metrics. By doing this the company is indirectly generating competition among suppliers to become more sustainable.<\/p>\n Training suppliers<\/em><\/strong><\/p>\n In order to help suppliers achieve sustainability standards, BMW has created a training program for suppliers. During 2016, more than 150 purchasers[6]<\/a> participated in BMW\u2019s trainings. \u00a0Moreover, BMW identified key suppliers with high CO2 emissions and designed specific trainings for those suppliers. In addition to these training programs, BMW started a sustainability awareness program in which they participate in industry wide events with key talks on sustainability. By 2020, the company expects to increase the number of supplier trainings and expand its awareness programs to Latin America and USA.<\/p>\n Reduction in the consumption of key supply chain resources<\/em><\/strong><\/p>\n In order to excel in its production processes, BMW has set a goal for the supply chain to: reduce its resource consumption (energy, water, waste, solvents) per vehicle produced by 45% by 2020[7]<\/strong><\/a>. <\/em>The role of the supply chain team to achieve this objective is to find more efficient sources of energy and to identify opportunities of vertical integration to reduce energy consumption. For instance, 63% of the company energy purchases in 2016 came from sustainable energy sources that at the same time are low CO2 emissions.<\/p>\n Post 2020 goals<\/em><\/strong><\/p>\n Post 2020 the company has different specific areas of action to become more sustainable: Become a leader in the electric car market, implement vertical integration of suppliers to reduce CO2 emissions and monitor supplier sustainability metrics through digital platforms.[8<\/a><\/p>\n Additional suggested actions<\/em><\/strong><\/p>\n I would recommend that BMW act across two dimensions to in response to climate change and the increased pressure on its supply chain. First, BMW should try to develop pilots for purchasing non-conventional materials for car manufacturing. For instance, develop prototypes to replace aluminum and cobalt (which are high emission sourcing processes), by more green products e.g. recycled products. As a second area of action, I believe BMW should take a more drastic approach towards suppliers that don\u2019t comply with sustainability metrics. Specifically stop sourcing from those providers or define penalties in long term contracts if the sustainability goals are not achieved.\u00a0<\/em><\/p>\n Additional important questions:<\/em><\/strong><\/p>\n 1-What additional incentives should governments implement to shift car manufacturers\u2019 current business models towards sustainability?<\/p>\n 2-If the electric car is not the most cost-effective solution for car manufacturers to address climate change, what other disruptive technologies are worth exploring?<\/p>\n (786 words)<\/p>\n [1]<\/a> BMW press release (Munich 8 September 2016): BMW Group once again sector leader in the Dow Jones Sustainability Index. World\u2019s most sustainable automotive company in 2016<\/p>\n [2]<\/a> BMW Sustainable value report 2016<\/p>\n [3]<\/a> BMW vision, BMW Annual Report 2016<\/p>\n [4]<\/a> BMW Sustainable value report 2016<\/p>\n [5]<\/a> CO2 emissions reported in CDP Supply Chain Report, BMW Sustainable value report 2016<\/p>\n [6]<\/a> BMW Sustainable value report 2016<\/p>\n