Decarbonization Depends on the Data

The race to zero carbon emissions among car manufacturers is in full swing. Earlier this month, the world’s largest producer, Volkswagen Group (VW), indicated it would support more ambitious CO2 emissions targets, catching European rivals off guard and putting them under pressure to follow suit.

But the race to “net zero” for the automobile industry is still in the first lap, and the route promises to be long and arduous. Greenhouse gas emissions from the industry account for more than 9% of global emissions – equaling those of the entire European Union. To achieve their individual sustainability targets, companies are dependent on each other for reliable and verifiable data.

Decarbonization Is All About the Data

Becoming carbon neutral requires managing the carbon footprint of individual products in the supply chain, and to achieve this companies need transparency into the carbon footprints of their upstream suppliers – referred to as scope 3 emissions. The problem is that only 21% of business executives are satisfied with the quality of their environmental data, according to a global research study from SAP.

But more accurate carbon footprint data is on the way. “Until now, companies have been using averages to calculate carbon footprint at a product level because there’s been a lack of accurate, granular emissions data and no consistent methodology,” said John Revess, director Net Zero Transformation at the World Business Council for Sustainable Development (WBCSD). “To remain a part of global supply chains, it will be necessary for companies to accurately calculate the carbon footprint of their products based on measured values,” predicted Revess. As a member of WBCSD, SAP and other companies are defining a Value Chain Carbon Transparency Pathfinder for the exchange of carbon emissions data.

“To meet our decarbonization goals, we depend on credible data from our suppliers on the carbon footprints of the components we build our vehicles with,” said Ralf Pfitzner, global head of Sustainability at Volkswagen, at the SAP Sustainability Summit.

The two-day online meeting focused on how companies are applying new technologies to reduce their environmental footprint and manage limited resources. “We decided to join SAP in the co-innovation of a digital carbon tracking tool and database, and this is really exciting because there is obviously a demand,” said Pfitzner.

Volkswagen and SAP are working together toward decarbonization in other ways. In 2020, their CEOs Herbert Diess and Christian Klein joined the CEO Alliance for Europe’s Recovery, Reform, and Resilience. The Alliance’s 10 European business leaders have committed 100 billion to decarbonizing their companies and products and are calling for far-reaching climate protection measures.

Massive Investments Necessary in Electrification and Digitalization

VW is investing a hefty €73 billion to help put its decarbonization challenges in the rear-view mirror. The underlying reasons for companies’ investments in environmental issues varies, spanning industry regulations (29%) to society’s approval of their organization (27%) and strengthening company reputation (26%). Uncertainty as to how to embed sustainability into business processes and IT systems is seen as the greatest barrier to implementing plans for action, one study concludes.

Despite the challenges, VW’s Pfitzner is optimistic about achieving the company’s decarbonization targets. VW’s head of sustainability expects digitalization to play a major role in this transformation. “Beyond green electricity, there are plenty of opportunities where digitalization will help us reduce our carbon footprint, for example by hooking the manufacturing data into the cloud and having more efficient programming of robots,” he said.

Pfitzner reiterated VW’s 2050 goal of carbon neutrality along the entire lifecycle of its cars, emphasizing the need for intermediate milestones. “The coming decades will be essential for the transformation of transport and the car industry. By 2030, we intend to reduce the lifecycle carbon footprint of our passenger car portfolio by 30% compared to 2018,” said Pfitzner.

No Carbon Neutrality in Isolation

Although nearly two-thirds of the global economy is covered by net zero targets, achieving them will require systems thinking and collaborative action among businesses of a type and scale that has never been done before, said Hannah Routh, partner, Deloitte UK. “The proof will be in the implementation,” she predicted.

“No business or country can become net zero in isolation,” said Routh. “Whether you are looking at energy supply, transportation, infrastructure, government, or communities, they all need to act in a coordinated way.”

One of the biggest challenges for companies, says Routh, is embedding climate transformation into their business strategies and decision-making processes. This requires data transparency, she emphasizes, noting that there is no shortage of data, but the quality and usability of the data must be ensured.

Nicolas Peter, BMW’s chief financial officer, agrees. “Digitalization helps in a significant way to increase data quality, and, from an auditor’s perspective, data quality is key in order to perform his responsibility in the audit process,” he said at SAP’s Sustainability Summit. Peter left no doubts that BMW is counting on new technologies to help it achieve its climate targets: “The trend to sustainability has to be accompanied by digitalization. There is no alternative,” said Peter.

Digitalization Supports Decarbonization

“CEOs need transparency into their supply chains,” said Thomas Saueressig, head of Product Engineering and member of the Executive Board of SAP SE. “Through its strategic initiative Climate 21, SAP is launching new solutions that help customers reduce their emissions and manage their carbon footprint.”

A new integrated set of solutions announced at the SAP Sustainability Summit includes SAP Product Footprint Management, which treats greenhouse gases like a ‘currency’ in the value chain. “Our sustainability management solutions enable companies not only to optimize their production facilities according to top line and bottom line, but also according to greenhouse gas emissions,” said Saueressig. As part of several joint sustainability initiatives with Accenture, SAP and Accenture are working to develop new SAP solutions that address sustainability and enhance existing core technologies.

The Need for Speed

Setting data quality issues aside, the most important factor for transforming businesses to net-zero is speed, said Deloitte’s Routh. “I think the world can master this, but my concern is whether it can do it quickly enough. The businesses that are going to succeed are the ones that understand and embrace the urgency.”