Automakers, Academics Examine Cars’ Sustainability

VENICE, Italy – Automakers overflow with ideas to ensure they have a future in a changing world, but when they invite academics into the room with them, new light bulbs can go off over their heads.

A recent symposium of automotive sustainability here is a case in point. Managers from General Motors, Audi and PSA Peugeot Citroen described projects such as car sharing, electric and autonomous vehicles and reducing carbon dioxide and waste in their production processes.

The academic researchers want more: Make sure your whole supply chain is sustainable, improve faster than the industry and think in terms of systems.

The industry knows it has a problem.

“The auto industry is not sustainable in the current business model,” says David Dulauskas, director of sustainability at GM. The industrywide business model is “selling everyone a car, and 90% of them depend on petroleum.”

Walid Norris, a manager at the World Bank, says: “We are on a path to have 2 billion cars in the world in 2030, and we have about 1 billion now. Is that sustainable?”

High-end fabric supplier Alcantara sponsored the symposium, which was hosted by Venice International University. Alcantara gets 63% of its revenues from the automotive industry, so sustainability of its customers is strategic.

For Alcantara CEO Andrea Boragno, the symposium is an investment in its brand.

“We are CO2-neutral,” says Boragno. “We have reduced our own energy use, and most of the CO2 in our operations comes from the raw materials. We offset that with projects in developing countries. For us, sustainability is a competitive advantage.”

The problem for the industry is making a transition from what has worked for a century to something else, and that something is not clear. The sales boom in China and other emerging economies is among the elements that hinder transition to a new industry, because volume continues to grow for global car companies.

Still, common sense and public pressure push for environmental stability.

The industry’s first reaction is to conserve resources, which will prolong the current business model. Companies reduce waste and energy use, which cuts cost, but governments demand more fuel efficiencies from vehicles, which raises costs.

At Audi, says Uwe Koser, head of scientific projects. “It costs about €100 ($128) to reduce emissions by one gram of CO2/km, so a 30-gram reduction adds €3,000 ($3,840) to the cost of a car.” And higher prices, of course, reduce the potential pool of buyers.

There is some hope battery-electric vehicles will solve the fuel part of future mobility, and governments are helping push in that direction. Each of the 6,162 Nissan Leafs sold in the European Union last year saved the automaker €1,204 ($1,530) in taxes, says Christophe Midler, director of the management research center at the Ecole Polytechnique de Paris.

Not everyone agrees battery-electric vehicles will chart the course for mobility.

“We believe in all kinds of electrified vehicles, but electric vehicles are not something we have come to view in the future of mobility,” says Patrice-Henry Duchene, head of social responsibility policy at PSA Peugeot Citroen. He says PSA is investing in hybrid technology and services such as car sharing, which are expanding in Europe, where the economy is in the doldrums.

That there is no clear answer to what will be the most sustainable automotive technology is not surprising. In Denmark, there is not even a clear answer on the most sustainable apple, says John Thogersen, a researcher at Denmark’s Aarhus University. The apple consuming the least energy is a locally grown one at harvest time, but six months later it could be an apple imported from New Zealand, he says, because the local ones have had to be stored in climate-controlled conditions.

Consumers smudge the sustainability picture. While 95% of Europeans agree the environment is important or very important, it is one of the top two concerns for only 6%, well behind issues such as purchasing power, unemployment, security and taxes, Thogersen says. Consumer problems are both indirect, through what they purchase, and direct, such as polluting oceans with plastic bags they casually throw away.

The already ambiguous idea of sustainability is further obscured in corporate sustainability reports and academic papers. Alcantara, for example, has three categories: economic (a sustainable return on investment), environmental (conservation of resources) and social (workers and community). Audi has five elements of sustainability: product, environment, employees, society and operations.

'Experience Becomes Trap'

The fuzziness of the subject matter helps delay substantial change, yet climate change is resoundingly considered to be real. Throughout history, says Guido Palazzo, professor at the University of Lausanne in Switzerland, people have tended to rely on strategies that worked before, but that is the wrong response to sudden massive change.

“Experience becomes a trap,” he says. “If there is a crisis and you don’t understand the crisis, you react by relying on more of the same routines. Humanity is going through the fastest change we have gone through in our history.”

While the academic world sees the current rate of change as incredibly rapid and threatening, automobile manufacturing requires a minimum 3-year development cycle with returns coming over the following seven years. That focus on money can make it hard to deal with less familiar ideas like saving tons of CO2.

A big success at the Venice conference was a presentation that ties cash to environmental performance. For several years, students of Frank Figge, a professor at the Kedge Business School in Marseille, France, have been combing automotive sustainability reports for details with which they can establish industry norms.

While the results don’t state whether activities are sustainable, they show how companies compare against each other. A company that emits 10 tons of CO2 for an operating profit of €100 ($128) has a CO2 efficiency of €10 ($12.80) per ton of CO2 used. If the industry average is €6 ($7.68) of profits per ton, then the company earns €4 ($5.12) per ton more than its competition, and with 10 tons of CO2, it has generated a value of €40 ($51.20).

People may have a hard time relating to 10 tons of CO2, but they understand much better what €40 is. BMW, the automotive leader in CO2 efficiency in 2010, has done more for sustainability than the industry on average for a decade. GM, according to Figge, never has been as good as average.

For environmental indicators, the researchers used nitrates of oxygen, oxides of sulfur and volatile-organic-compounds emissions, as well was waste and water used. They used work accidents and employees for social sustainability indicators, and operating profit and total assets as economic indicators.

Looking at companies individually in the sustainability comparisons highlights problems and opportunities. Renault and PSA, says Figge, rank relatively poorly for VOCs because they have outdated paint shops. Those companies rank well for CO2 performance, however, because a significant number of their plants are in France, where CO2-free nuclear plants dominate electric production.

Using this value-added approach that is common in the financial world helps corporate leaders understand sustainability, Figge says. Boragno said after the conference he probably will start looking at ways to filter Alcantara’s sustainability programs with the operating-profit approach.

Assuming the industry and world survive, historians and economists of the future will decide where that leadership came from. California and Tesla are exceptions to the general perception here that the U.S. will not be the leader.

Tesla won praise at the conference for doing more than making fast, pretty, expensive electric cars. It also sells in new ways, builds recharging corridors in Europe and North America and its customers think their electric car is “cool,” from its door handles to its marketing material.

PSA’s Henry praises Tesla faintly, as “a very nice car, with real autonomy. It could be a real niche car for people with no kids, a bling-bling car.” But for Eugene Lolli, in charge of Alcantara sales in America: “They created a car, a company and a system. They are selling like crazy, more Teslas than BMW (5-Series) in California.”

California is a leader in promoting electric cars, fuel efficiency and clean air, but the U.S. in general appears less serious about sustainability.

“We (in Europe) all feel that the U.S.A. is more profligate than all of us,” says Umberto Vattani, president of Venice International University and a former Italian ambassador, in his summary of the conference.

Palazzo, who opened the conference, says: “I believe this can only come from China. America will not change. What can you expect when leading politicians deny global warming?

“In China, they have no choice. The air, water and food are toxic. They invent a radically new way of life or they collapse. It is about changing the way we live.”