Seven years after Volkswagen’s effort to evade vehicle requirements with rigged software came to light, the automaker has paid an enormous price for landing on the wrong side of the green line — the tally of costs, penalties and fines incurred by the company is well into the tens of billions of dollars. And that’s in addition to the immeasurable damage the scandal has inflicted upon the Volkswagen brand.
Yet as much as VW’s reputation and bottom line have suffered because of that transgression, the company has managed to rebound by generating a wave of positive public sentiment for its efforts on the sustainability front thanks to its electric vehicle program.
VW epitomizes how, for better and sometimes for worse, sustainability-related issues today touch virtually every aspect of an automaker’s operation and brand. The question automakers (and, really, all companies involved in the mobility marketplace) must answer is how to turn sustainable behavior into a lasting advantage in a market that is fast shifting to new business models built around electrification, connected vehicles, mobility as a service and the like.
In my estimation, doing so requires automotive companies to start putting in place three building blocks for success:
1. Automotive consortiums. Building a vehicle today takes a high level of orchestration and communication between business partners, as does tracking the carbon footprint of parts and subcomponents. Meeting net-zero and carbon-reduction requirements and other sustainability goals is going to require connectivity and information-sharing across industries, among automotive manufacturers, dealer associations and suppliers, utility companies, public agencies, providers of applications and platforms, raw material and recycling companies, etc. What we’re talking about here is establishing ecosystems in which stakeholders overcome their trust issues and agree to share data within a secure, neutral and interoperable framework.
One such consortium is the first-of-its-kind Catena-X Automotive Network, which hit the ground running in 2021. Originating in Europe, the alliance was created to foster uniform standards for the secure, transparent exchange of data and information among auto manufacturers, suppliers, dealers, and software and equipment providers. It focuses on addressing real use cases, such as material traceability, carbon footprint management, demand and capacity management and the circular economy, and may well serve as the model for collaborative automotive networks of the future.
2. Traceability. With the open ecosystem as the foundation, we turn to the next building block, traceability of raw materials, vehicles, components and parts across organizations, from cradle to grave or, in a circular economy, from cradle to cradle. The ability to trace things such as vehicle serial numbers, batches and components across organizations, even when the ownership of that item changes over time, is critical to keeping sustainability at the heart of an automotive business.
Let’s say, for example, you have the ability to track all the elements of a vehicle, down to the raw materials used to make its component parts. This is obviously extremely useful for managing issues related to quality recalls, and for regulatory compliance. It also can be helpful in topics of circular economy — for instance, providing recyclers with data to inform decisions on automotive component reuse, recycling and/or recovery strategies. Being able to trace origins of materials such as the cobalt in lithium ion batteries also supports limiting human rights abuses and modern slavery. Factors such as these carry increasing weight in consumer purchasing decisions.
3. Digital twin. The third building block on which automotive companies can construct a thriving, sustainability-focused business is digital twin. Digital twin is essentially a digital representation of a physical item such as a vehicle or a component. You can’t trace an item across its automotive life cycle or supply chain, nor optimize sustainable pathways for an item, without having a digital representation of that item. A digital twin of a vehicle or a component such as a battery, for example, is a must for figuring out how to maximize the sustainability of that product.
Every year we use more resources than the planet can sustainably provide in the long run. Global challenges cannot be solved with fragmented partnerships and collaborations. We need to be conscious that by solving one challenge, we don’t create others. Automotive companies that have these three building blocks in place will be positioned to cement their place in the mobility market of the future.