July 15, 2024
Guest commentary: In race to reduce emissions, all eyes on ESG standards

While a sweeping, industry-specific deadline to meet emissions standards does not exist, automakers have a little time to build environmental, social and governance, or ESG, standards into the cost of doing business — but not much.

In the global Race to Zero efforts, the United Nations calls for emissions to be reduced by 45 percent by 2030 and reach net zero by 2050.

Ford, General Motors, Toyota, Nissan, Volvo and other automakers were among more than 90 companies who have joined the U.S. Department of Energy’s Better Climate Challenge to reduce portfoliowide greenhouse gas emissions by at least 50 percent within 10 years.

As automakers prioritize ESG, it increases pressure on manufacturers and suppliers to document, codify and comply with new standards to remain competitive. Downstream suppliers are facing a stream of requests from customers for disclosures and data that may be new and not readily available. However, this evolution within the industry also presents opportunities for differentiation by implementing sustainable practices and demonstrating a real, impactful commitment to ESG.

ESG’s ubiquity

Initially, many businesses focused on the environmental aspect of ESG, but now they are analyzing the social, economic and data-driven impacts they have on the world and the people around them.

For the automotive industry, the impact on the environment is still a primary focus. The EPA reports transportation accounts for about 27 percent of greenhouse gas emissions in the U.S., and governments, consumers and automakers want to cap and minimize those numbers to combat climate change.

Auto manufacturers and zero-emission vehicle states are making commitments to change production, vehicle emissions and other standards to achieve carbon neutrality. Due to issues with capacity, infrastructure, and access to raw materials like lithium, the target date range is broad for now but narrows every day.

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