Cars Must Be Green Across The Entire Supply Chain

BMW was one of the early pioneers of electric vehicles. Its i3 only recently went off sale after nearly a decade, and apart from having a lower range than more recent models, is still one of the best EVs to drive. Since launching new models such as the i4, iX and i7, BMW has refreshed its fortunes in the electrification market, becoming the third bestselling EV brand in the UK in 2022, for example. However, BMW sees EVs as only one factor in making the automotive industry more sustainable. The entire supply chain must be decarbonized. I recently had the chance to talk to Dr Thomas Becker, VP Sustainability and Mobility Strategy for the BMW Group, about how his company is getting on with promoting this message.

“We defined our targets two years ago,” says Dr Becker. “For the Neue Klasse, we have concluded a vast number of agreements in different countries where the reduction of the CO2 footprint of the materials we use has been defined. We are on track to reach the targets we set for 2030. In terms of EV sales, we’re meeting our objectives. We are also encouraged by what we are seeing in purchasing. In the energy, steel, aluminum, and plastic sectors we see a lot of innovation.”

BMW considers decarbonizing production is a key factor. “We are going for renewable energy instead of natural gas in our factories,” continues Dr Becker. “We want to reduce the footprint. That includes the production of minerals as much as the electricity footprint of electric cars. We want to cut our own emissions by 80%, the so-called Scope One and Two, meaning the energy we use ourselves, like the gas that we burn or electricity that we purchased. And we want to reduce the footprint of the supply chain by 20%. That 20% is more ambitious than it seems. Bringing that average down by 20% is not just about seeking to bring down the CO2 footprint of the battery manufacturing, but also of steel, of aluminum and the rest of the vehicle. The more electric vehicles we sell, the higher the share of our overall footprint is happening in the value chain. This means that the strategic focus will shift over the next two years more and more away from tailpipe emissions.”

“Sustainability became predominantly a CO2 and fuel consumption topic in the early 2000s,” explains Dr Becker. “This has shifted into a technology topic in the electric era, and it is now becoming a value chain problem. The focus is spreading from the car on its own towards the entire system. We have various elements at the regulation level that accelerate that. One is, for example, the European Battery regulation, which will set requirements for the footprint of the battery, not only of batteries that drive cars, but batteries in general. However, if you look at the future reporting requirements, you will have to provide details on your entire footprint.”

“Whether you are compliant with the Paris Agreement or not will not be defined only by one piece of the chain like the battery but by its entire footprint,” argues Dr Becker. “This is the kind of commitment that will be expected, and rightly so, from industrial companies across the board. This is not an automotive specific topic. The automotive industry is special because if you take a steelmaker, the big piece of their CO2 responsibility is in-house. It’s the furnace, the Scope One and Two. The automotive industry has a very big part in the Scope Three downstream – in the usage phase of the product and in the value chain. So between sectors, you must have very different profiles.”

BMW is trying to lead the way in improving its Scope Three profile, and this requires much more detailed analysis of the supply chain than existed in the past. “It’s one thing if you put a car on a test bed and measure its NOx emissions, another saying you need a reliable CO2 figure for the making of it in combination with its 30,000 parts. It’s not about technical measuring, it’s an accounting issue.” This is where BMW’s involvement with the Catena-X Automotive Network comes in. “You need a digital infrastructure where you can rely on the numbers being aggregated. The fact that we now have more than 130 members of that association is encouraging, because people understand it won’t make sense if everybody does their own calculation. We need to make sure that if two steelmakers supply their steel to two different OEMs, the number that goes into the reports is calculated on the same basis.”

“This is where Catena-X comes into play,” says Dr Becker. “We want to replace national averages by real data with agreed procedures and quality requirements to make sure that differences can be demonstrated. These are the crucial areas of development for the next two years or so. In terms of methodology and political acceptance, we need to make progress and not as industry alone. We need to work with scientists, we need to work along the value chain. We need to work with technical certification institutions, we need to talk to governments, and in the NGO landscape. Professor Karthik Ramanna from Oxford University is focusing on this accountancy topic together with the Harvard Business School.”

“Now that we have 133 participating companies contributing to Catena-X, we can demonstrate that the approach is working,” continues Dr Becker. “We have also published, after consulting with many stakeholders, a first set of standards and references, which are the sum of the do’s and don’ts for how you define the figures that go into the system. Now we are seeking collaboration with other players like the International Sustainability Standards Board, and relevant academic players, namely in the field of accountancy. The dimensions of the technical data transfer, including securing data protection for competitive sensitive information, is crucial. That’s why the numbers can make their way across the chain. You can’t disseminate things that companies expect to be held secret. So in an ideal world, everybody in the chain will be able to rely on a supplier’s data being verified according to the same standards just like the Euros, the pounds, the dollars they use for monetary transactions. Obviously, we’re not there yet. But the long-term vision is that in a value chain, you have a currency that is money and a currency that is CO2, and this is fully integrated into the business processes.”

However, Dr Becker doesn’t see a time where the greenness of a vehicle’s supply chain has a rating like tailpipe emissions anytime soon. “This would have to be based on something that is as reliable as the technical standard,” he argues. “Can we assess how much we are improving? Yes. Can we say this is the most likely a highly reliable figure? We’ve got that. But we don’t have the exactitude yet for a court to say whether you are compliant or not based on a tiny difference, such as 10kg too much CO2. The way we can really make a difference is in comparing one supplier to another. It will also offer a basis to say this car has improved significantly in its footprint. The initiatives that are running at the European level called Product Environmental Footprint are all targeting the idea of having a CO2 number for products, but we don’t know when we will get that precisely enough that you can tie legal consequences to it.”

BMW has also been focusing on making its commitments to sustainability as visible as possible, such as the partnership with National Parks in the UK to supply on-site charging for employees and visitors. Less visibly, BMW is aiming to decarbonize as much of its own supply chain as possible, while working on industry-wide initiatives like Catena-X for the longer term. “Half of the aluminum used in the current i7, for example, is from recycled stuff, and as much as 70% recycled aluminum in the wheels,” says Dr Becker. “We use recycled PET bottles for the covering of the vehicle’s pillars. From 2024 onwards, we will use aluminum wheels manufactured with 100% green power. Roughly 50% of our copper is recycled, which saves a lot of energy. Copper has a big indirect environmental impact. To get one kilogram of copper out of the earth, you must move up to 300kg of material to get to it. Beyond CO2, from a resource efficiency point of view, the case for circular becomes even more compelling and that is why we are so strongly pursuing this pathway.”

However, there are considerable difficulties along this pathway. “The challenge with steel and aluminum is the purity of the material that comes out of scrap cars, because you have different grades of alloy in one car,” explains Dr Becker. “If you put it through a shredder, you must separate the crumbles to a level of precision that will not compromise corrosion, resistance, and stiffness. That’s even harder for plastic because what comes out of shredders is very hard to use at automotive grade requirements.” There is a different difficulty for recycling batteries. “The challenge for battery materials is having them in the first place.” This is because so few EV batteries have reached end of life yet, despite the popular myth that they will need to be replaced after 3 years.

Nevertheless, battery material is valuable, so recycling is worth doing, and this is true to a lesser extent for metals, making them a fundamental focus for BMW. “The likelihood of closing the loop for economic reasons is high,” concludes Becker. “For the i4, for example, we are at roughly 40% recycled aluminum and a third of the steel. We will rev that up maybe 2% or so per year. We really have set ourselves ambitious objectives right from the outset. It is not just about weight and fuel consumption anymore. It’s now about the management of the entire system.”