CSRD Series- Part 15: What CSRD best practice looks like for automotive companies.

The global automotive industry has been making remarkable progress in its journey toward sustainability, driven by innovations like Electric Vehicles (EVs) and advanced connectivity features. These advancements are shaping a more sustainable future for the sector, but there’s still much work to be done.

In this episode, we dive into how the automotive sector is responding to the Corporate Sustainability Reporting Directive (CSRD). We'll discuss the necessity of setting ambitious targets that go beyond just climate change to include critical areas such as biodiversity, pollution, and social governance.

Join us as we uncover the challenges and opportunities that lie ahead in this evolving landscape. Tune in now!

Speakers:

• Catherine Beare - Intertek Regional Director for Business Assurance in the UK & Iberia
• David Muil, Intertek Vice President for Sustainability

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Transcript

Catherine Beare:  

Hello and welcome to our series of podcasts dedicated to the EU Corporate Sustainability Reporting Directive, CSRD.  

I’m Catherine Beare the Regional Director for Business Assurance in the UK & Iberia and I am joined by David Muil, Vice President for Sustainability. David is going to dive into how the automotive world have been responding to the implementation of CSRD. 

And David’s background has very much been embedded in the automotive industry over the years, so that combined with his sustainability knowledge will make a very interesting podcast today. 

Hi David and welcome. Would you mind kicking us off with some thoughts on how you see sustainability progress in general in the automotive industry?  

David: 1:03 

Absolutely and thank you Catherine for the intro. I’m glad to here. It’s no secret that the global automotive sector has been speeding ahead in the race to become more sustainable for many years now, they are one of the first movers for sure. With advancements including Electric Vehicles (EVs) and advanced connectivity features they are rapidly shaping the road ahead for all the others to follow. 

Other key measures include reducing emissions and meeting some very stringent standards alongside greener manufacturing processes. The level of innovation and the rate at which it has been adopted industry-wide is truly remarkable.  

The drive and desire for the automotive sector to embrace sustainability-focused change has accelerated year-on-year, particularly since the Paris Agreement in 2015 and the unveiling of the European Commission’s Fit for 55 measures that call for all new passenger car and light commercial vehicles to be CO2 emissions-free by 2035. So it’s quite a statement.  

But while it is positive to see the sector has already taken so many significant strides forward in its quest to become more sustainable, it is important to note that wider - Corporate Sustainability Reporting Directive (CSRD)-related change - is also required above and beyond what they are doing today.   

So when you peel back that onion of the CSRD, you start to realise that the current automotive organisation targets really have focussed almost exclusively on climate change, the low hanging fruit, which of course is welcomed by all, but as part of the CSRD, there is an increasing regulatory expectation on the sector to set targets that extend far beyond just simple climate-related matters, for instance, biodiversity and pollution, and of course the focus on social and governance is now coming to the forefront aswell.  

The CSRD stipulates that automotive companies should publish their current Environmental, Social and Governance (ESG) targets. But these targets need to be incorporated within their strategies and processes and align with existing initiatives, such as carbon accounting. 
 

Catherine: 3:51 

Sure but if we take a step back David, what do you think that looks like in reality for the automotive sector? 

David: 3:59 

While companies do not have to develop and implement a new set of ESG targets, they are required to present them in accordance with the CSRD legislation. Unfortunately, this is no small feat. In fact, it has been widely recognised as being a complex and time-consuming challenge due to the fact all of this is required and I’ll walk you through some of these now to give an example:  

• Comprehensive ESG metrics data - that maps every single relevant detail  
• Accurate, reliable and consistent data - from various sources across the supply chain 
• ESG data that integrates - with existing financial and operational reporting systems 
• Relevant ESG data - from suppliers, who may not be familiar with such detailed reporting  requirements 
• A clear and traceable data path - that spans the entire supply chain 
• The necessary IT infrastructure - to support comprehensive ESG data collection and reporting 
• Continuous innovation - aimed at improving sustainability practices and the associated reporting mechanisms 
• Reporting consistency – across different regions and countries 
• CSRD compliance - in line with other international sustainability standards and frameworks 

Catherine:  5:34  

So David, you have a lot of experience with the automotive sector, but even today you do a lot of work with our key automotive customers and are connected within the industry, so given what you just said, how have you seen some of those companies within the automotive sector responded to the CSRD so far? Have you actually seen them being progressive and doing something on this already, even if they are not within the first wave of reporting? 

David: 6:16  

It’s a great question and I am still involved with a number of Automotive networking groups and we stay very connected and collaboratively, thanks to Drive Sustainability, initiatives we’ve seen in Europe, we’ve seen automotive companies really come together and work collectively to improve supply chain sustainability and simplify entire supply chain journeys. So they are working together, they are communicating, it is being led and driven by a lot of the OEMs under that Drive sustainability initiative, so it's great to see first adopters and early movers for sure.   

However more specifically, this has involved the development of a standardised supplier assessment questionnaire, which is essentially a value-added tool that walks suppliers through the ESG journey from the automotive community’s perspective.  

So the automotive OEMs  have taken the concept of ESG and all of the requirements, and distilled it down into a very useful standardised checklist and support document that these organisations can walk through as a first step, to help them gage where they really are in their overall journey.    

It provides guidance and tips for companies too, which is terrific, how to optimise implementation, and ultimately, they do get an overall score. However, it’s important to note that the tool itself is only a starting point. To achieve a value-added return on investment, organisations must adopt the principles of defining materiality. So the one concept is ‘where are you now? But you’ve got to move into that space of materiality and understanding that and how it applies to the organisation. 

Catherine:  8:18 

Ok so can you tell me a little bit more about companies approaches to materiality and we know with CSRD it’s all about  Double Materiality and if you can reference any good practice examples that you’ve seen or read about recently? 

David:   8:39  

Sure. So materiality is probably one of the and double materiality of course are some of the  most important aspects for an organisation to internalise. This is what sets you down your ESG journey and your path. Every company is different. So until  you really understand what's material to the organisation, you know you really don't have a good framework to build your strategy on.  But organisations have to go through a formal exercise, to first of all identify key stakeholders and get their feedback on what is important to them, what is material to them in terms of an ESG issue or activity.  

The most successful materiality assessments are based upon a clear understanding of those key stakeholders. They are the ones that matter, they are the voice that you want to capture. And then because they are so unique diverse this enables a cross-functional approach to assessing risk and understanding what is material to the company, so  you can’t stress that enough.  You have to identify those stakeholders and understand what is key, what is important and why is it important to the organisation.   

In terms of examples, several major automotive companies have proactively embraced the CSRD reporting requirements, integrating comprehensive sustainability practices and reporting into their own operations. Here are a few notable examples: 

Volkswagen Group 

• Sustainability reports - Volkswagen publishes extensive sustainability reports that adhere to GRI and TCFD standards. It also provides a very good summary of the ESG performance 
• Carbon neutrality - the company has set ambitious targets for carbon neutrality, which includes plans to reduce CO2 emissions across the entire lifecycle of its vehicles 
• EV investment - Volkswagen has substantially invested in EV technology and sustainable mobility solutions  

So they really are walking the talk with respect to these initiatives  

BMW Group 

• ESG reporting - BMW’s sustainability reports align with the GRI standards and the UN Global Compact principles, providing detailed information on its ESG initiatives 
• Sustainable manufacturing - the company focuses on sustainable manufacturing processes, which includes using renewable energy and recycling materials 
• Circular economy – BMW is committed to the principles of the circular economy and aims to increase the use of secondary materials within its production processes. So no longer looking at cradle to grave, but moving that process through a complete cycle and understanding how those materials can be used for a secondary for a secondary life – either in the manufacturing process or in the vehicles themselves. So they are very proactive with respect to these sustainability concepts.   

Tesla, Inc. 

• Impact report - Tesla’s annual Impact Report provides detailed information about its environmental impact, which aligns with GRI standards 
• Sustainable energy solutions - Tesla is focusing on sustainable energy solutions, including solar energy products and energy storage systems 
• Supply chain transparency - the company is committed to ensuring a sustainable and transparent supply chain, particularly in relation to sourcing raw materials for batteries. It’s such a large component for that group.  

Catherine  13:20  

Great insights there, thank you David. Thanks for those examples. Any parting words of wisdom to the audience?  

David: 13:46  

Yes I think we all need to keep it in perspective. The road to achieving a net zero – not carbon neutral – is undoubtedly a long road that presents exciting opportunities for all sectors to reduce their environmental impact and play their part in ultimately helping to protect the planet. We all have to contribute, and really hold these organisations accountable, we hold ourselves accountable, to do our part, every piece adds up to protecting the planet. The automotive sector is among the industries to be leading the charge in achieving this important global vision which, coupled with a wider CSRD perspective, promises to deliver even more pioneering developments in the future. I can’t wait to see what happens in the next few years as innovation and these concepts of improvement take over in all industries.  

Catherine: 15:01  

Thank you very much David for sharing your insights with us today.   

As a reminder on how Intertek can help on CSRD, there are 4 ways:   

1. To understand your current CSRD readiness, we can help you to undertake a gap analysis to ensure you have a clear view of your organisation’s current readiness and will work with you to define clear action plans to address any gaps to prepare you for your first submission.  
2. Through training to ensure everyone understands what’s required to prepare for your submission. This can be delivered to a range of different teams and functions across your organisation and will be bespoke to best fit your requirements. 
3. We can also provide auditing solutions - In some markets we will also be able to act as the auditor of your CSR Directive reports, as one single provider supporting you from your early preparations through to audit of submission. 
4. And finally, we have also partnered with ESG Playbook - a leading SaaS reporting and solution provider bringing in one tool all required data collection, aggregation,  tracking and reporting for your ESG needs. 

For more information visit www.intertek.com/assurance/eu-csrd 

So, this concludes today’s podcast. Thank you for listening, watch out for further CSRD episodes to help with your journey to compliance.