What CSRD best practice looks like in reality for automotive companies

03 Oct 2024

Ahead of the game in driving sustainability, in this blog we explore how the automotive sector is responding to the CSRD.

It's no secret that the global automotive sector has been speeding ahead in the race to become more sustainable for several years, with advancements including Electric Vehicles (EVs) and advanced connectivity features rapidly shaping the road ahead.

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

Accelerated sustainability-focused change

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.

Looking beyond climate change

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.

Catherine Beare, Intertek Regional Director for Business Assurance UKI & Iberia, explains: "Current automotive company targets focus almost exclusively on climate change, which is to be welcomed. But as part of the CSRD, there is an increasing regulatory expectation on the sector to set targets that extend far beyond climate-related matters, for instance, biodiversity and pollution, as well as social and governance issues."

The CSRD stipulates that automotive companies should publish their current Environmental, Social and Governance (ESG) targets. These targets need to be incorporated within their strategies and processes and align with existing initiatives, such as carbon accounting. (To learn more about the current CSRD landscape, read 'Exploring the impact of CSRD so far.')

What this looks like in reality

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. 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:

• 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
• 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

How has the automotive sector responded to the CSRD so far?

Collaboratively. Thanks to Drive Sustainability, we've seen automotive companies really come together and work collectively to improve supply chain sustainability and simplify entire supply chain journeys.

"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," explains Catherine.

"It also provides helpful tips and guidance on optimising implementation, and ultimately, the 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."

Identifying materiality

To identify materiality, organisations should start with a materiality assessment, i.e. a formal exercise aimed at encouraging stakeholders to identify how important a specific ESG issue is to them.

The most successful materiality assessments are based upon a clear understanding of the key stakeholders. This enables a cross-functional approach to assessing risk to take place.

Automotive CSRD best practice – in action

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

Who: Volkswagen Group

What the company has been doing:

• Sustainability reports - Volkswagen publishes extensive sustainability reports that adhere to GRI and TCFD standards. It also details its 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

Who: BMW Group

What the company has been doing:

• 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

Who: Daimler AG (Mercedes-Benz Group)

What the company has been doing:

• Sustainability reports - Daimler publishes comprehensive sustainability reports that follow GRI and SASB standards and cover the company's environmental and social performance
• Ambition 2039 - Mercedes-Benz has set the Ambition 2039 strategy, which is aimed at achieving a carbon-neutral new passenger car fleet by 2039
• Battery technology - the company has made significant investments in developing sustainable battery technology and ensuring the ethical sourcing of raw materials

Who: Tesla, Inc.

What the company has been doing:

• 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

Leading the charge

The road to achieving a net zero world is undoubtedly long, but it is a road that presents an exciting opportunity for all sectors to reduce their environmental impact and play their part in ultimately helping to protect 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.

For further insight about the automotive sector's ESG journey, read 'ESG in the automotive sector.' And for more information about the CSRD, visit our dedicated Corporate Sustainability Reporting Directive Resource Hub, which includes a wealth of webinars and podcasts with our experts, FAQs, factsheets and more.