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green@work : Magazine : Back Issues : Nov/Dec 2001 : Corporate Acts

Corporate Acts
The Auto Industry Responds

Recent actions by automakers address growing concerns regarding global climate change.


A s might be expected, the international debate over global climate change is having a direct affect on the automotive industry. Greenhouse gas emissions and their potential link to global climate change, as well as proposals to demand greater fuel efficiency, are two aspects of that debate that have recently drawn the most attention. But the joint challenge of lowering emissions and raising fuel economy isn’t new to automakers; the industry was addressing them well before the recent swell of attention. Automakers have acknowledged that global climate change is indeed a problem that needs to be addressed and have pledged to improve the gas mileage of their cars and trucks, especially sport-utility vehicles (SUVs). Here’s a review of the automotive industry’s recent actions as they relate to this important debate.

Climate Change
The debate over climate change continues to divide politicians, policy makers, environmentalists and the scientific community. For its part, the automotive industry appears to have accepted the view that greenhouse gas emissions must be reduced. Certainly, other industries also recognize the importance of reducing greenhouse gas emissions, but it is the automotive industry that attracts the most attention because automobiles are seen as one of the nation’s biggest sources of carbon dioxide. According to the U.S. Environmental Protection Agency (EPA), greenhouse gas emissions from combustion of gasoline and diesel fuels rose 3.4 percent between 1998 and 1999. By comparison, commercial emissions—those mainly from electrical utilities supplying stores and other businesses—rose 1.9 percent.

Given those statistics, it isn’t surprising that General Motors has said, “Whether emissions from human activity will cause climate change, and what the impact will be, is uncertain, there is enough cause for concern to take moderate cost actions to reduce global greenhouse gas emissions and the risk from potential change.” The automaker also notes that over the past 30 years, it has reduced emissions from its cars and trucks by 98 percent. Also, emissions from its North American manufacturing facilities have declined by 24 percent over the past two years.

In May, Ford Motor Co. went even further when it acknowledged that its production plants, new production vehicles and all Ford vehicles on the road contribute 400 million metric tons, or 1.7 percent, of the world’s carbon dioxide emissions. To address this issue, the company has established a team of top executives to look for ways to further reduce greenhouse gas emissions from its products and production plants.

Some companies, such as Honda, are already using advanced technologies to reduce emissions from both of these sources. Since 1997, Honda has been producing the Accord Ultra-Low Emission Vehicle; the Insight, an electric hybrid, went on sale in December 1999. The company has also moved to make its factories cleaner. Honda has cut emissions at its U.S. plants by 65 percent in five years. The company’s “Green Factory” program encourages all Honda facilities to reduce emissions and energy use, reuse more raw materials and recycle manufacturing materials.

Fuel Efficiency
A recent National Academy of Science panel said that car companies are capable of making their vehicles, especially SUVs, more fuel-efficient. The panel recommended that the corporate average fuel efficiency, or CAFE, system be based on tradable fuel economy credits. The academy’s recommendations appear to be on hold, at least for now; however, higher automotive fuel efficiency appears to be a central ingredient in automakers’ response to the climate change issue.

As late as 1999, auto companies rejected the idea that making popular light trucks and SUVs more fuel-efficient was possible. That all changed a year later when Ford made a pledge to lower its SUV’s fuel use by 25 percent over the next five years. Since then, Detroit’s leading automakers have each announced plans to increase the gas mileage of their light trucks, especially the SUVs. GM says it has increased fuel efficiency by 130 percent in passenger cars and 75 percent in trucks over the past 30 years.

Automakers are also experimenting with new energy technologies to create high-mileage, low-emission vehicles. For example, GM plans to release its first hybrid SUV using its ParadiGM system in 2004. Its fuel economy is expected to be about 20 percent better and its emissions about 20 percent lower than the average SUV. DaimlerChrysler has placed an emphasis on developing alternatively fueled vehicles. In late 2000, the company unveiled a vehicle fuel-cell drive system that uses methanol as a hydrogen storage medium. This system uses the potential energy in the fuel at almost twice the efficiency of a gasoline engine. Meanwhile, Bayerische Motoren Werke (BMW) is working to develop technology to allow hydrogen to become an alternative fuel. In July, BMW introduced a prototype of its seven-series luxury sedans outfitted with V12 engines to burn hydrogen rather than gasoline. Ford plans to produce an Escape SUV hybrid-electrical vehicle in 2003 that is capable of achieving up to a 40-mpg efficiency.

The Benefits
The auto companies’ continued demonstration of sensitivity to environmental concerns can reap benefits in a number of ways. Companies realize that taking voluntary steps in addressing environmental concerns can be used to persuade government officials to adopt less stringent regulations down the road. Also, a positive strategy for the environment can be used as a marketing tool with today’s consumers and a growing investor class, who tend to look more favorably on companies that espouse a respect for the world’s resources. In the end, such strategies can lead to both a healthier planet and healthier bottom lines.

Michael Radcliffe is a senior manager in KPMG’s Sustainability Advisory Services practice, author of Using the Balanced Scorecard to Develop Metrics for Sustainable Development and co-author of KPMG’s Beyond the Numbers: How Leading Organizations are Linking Value with Values to Gain Competitive Advantage.

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