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Driving Sustainability in Automotive Supply Chain

How procurement is playing a crucial role in the development and orchestration of automotive supply chains that meet today’s sustainability demands.

Defined as an action or entity that meets the needs of the present without compromising the ability of future generations to meet their own needs, sustainability permeates every corner of the business world.

The automotive sector is no exception to the rule. Always looking for new ways to reduce fuel consumption, minimize pollution, and otherwise reduce drivers’ carbon footprints, the industry is putting even more elbow grease into overall supply chain sustainability.

“In the past few years, sustainability has become a topic of considerable importance throughout the automotive industry,” Brian Hoey points out in Sustainability in the Automotive Supply Chain. “As the automotive supply chain becomes increasingly globalized, businesses are now more than ever faced with the Herculean task of managing not just the logistics and costs associated with a complex web of global suppliers, but with the environmental impact and long-term sustainability of the associated businesses practices.”

Many businesses are finding that discussions of sustainability bring up questions and dilemmas that they’ve never faced before, Hoey writes, from deciding on acceptable trade offs between sustainability and profitability and uncovering areas where sustainability increases profitability, to developing new key performance indicators (KPIs) for managing vendors and suppliers.

Lessening the Impact

Focused on lessening the environmental impact of their business practices—and that of their suppliers—the automotive industry is involving more procurement professionals in these conversations and decision-making.  

In April, Bridgestone Group updated the world on its Global Sustainable Procurement Policy. Focused on creating thriving, sustainable supply chains—and aligning with the firm’s promise to use 100% sustainable materials by 2050—the policy finds Bridgestone assessing suppliers’ current sustainability practices and, in some cases, helping those vendors improve their own sustainability practices.

“We stand behind our commitment to sustainable procurement practices and have reinforced our efforts over the past year to understand how our suppliers are performing against our expectations for ethical, environmental, social, and quality standards,” Bridgestone’s Christine Karbowiak said in a press release.

“Real improvements in sustainability come when we work with collaborative partners across the supply chain,” she continued, adding that Bridgestone is also a founding member of the Global Platform for Sustainable Natural Rubber (GPSNR), which is working on socioeconomic and environmental performance in the natural rubber value chain.

According to Bridgestone, 98% of the company’s Tier 1 tire material suppliers have acknowledged its sustainability policy. Additionally, the company has trained hundreds of procurement, legal, technical, and customer-facing teammates, among others across the enterprise.

Raising the Bar

The automakers themselves are also focusing more on supply chain sustainability and on the role that procurement and suppliers play in the related initiatives. “The North American auto industry is now heavily invested in more environmentally conscious products,” Automotive News reports, “[including] lower-emission vehicles, components made of lighter-weight materials, vehicle systems that siphon off less engine power, and a widespread adoption of electric technologies and more efficient factory processes.”

In another example, Volkswagen Group said it will soon begin awarding more business to suppliers that focus on sustainability (while punishing those that do not), according to Automotive News Europe. “The automaker plans to introduce a performance rating this year that takes account of environmental impact and social responsibility, and could add another layer that focuses specifically on each supplier’s effort to reduce carbon dioxide emissions,” the publication reports.

The automaker will begin analyzing its Tier 1 suppliers on aspects such as social responsibility and environmental impact, it adds, with ratings that will be based on answers to a sustainability questionnaire that will require comprehensive documentation as well as on-site audits.

Other recent auto sustainability initiatives include Nikola Motors’ plan to build a North American hydrogen-fueling network of 700 stations by 2028 in addition to zero-emission trucks; Mercedes-Benz’s use of blockchain technology for more transparency in complex supply chains; and Volvo’s XC60 T8 Twin Engine plug-in hybrid SUV, which contains high levels of recycled plastics.

Expect to see more automotive makers—and their suppliers—sharpening their sustainability pencils and coming up with newer, better ways to lessen environmental impacts and improve end-to-end supply chain sustainability. As this trend continues, procurement will continue to play a bigger role in bringing these initiatives to fruition.

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