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 isnt 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). Heres a review
of the automotive industrys recent actions as they relate
to this important debate.
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 nations
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 emissionsthose mainly from electrical
utilities supplying stores and other businessesrose 1.9 percent.
Given those statistics, it isnt 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 worlds 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 companys
Green Factory program encourages all Honda facilities
to reduce emissions and energy use, reuse more raw materials and
recycle manufacturing materials.
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 academys
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 SUVs
fuel use by 25 percent over the next five years. Since then, Detroits
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 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 todays
consumers and a growing investor class, who tend to look more favorably
on companies that espouse a respect for the worlds resources.
In the end, such strategies can lead to both a healthier planet
and healthier bottom lines.
Michael Radcliffe is a senior manager in KPMGs
Sustainability Advisory Services practice, author of Using the Balanced
Scorecard to Develop Metrics for Sustainable Development and co-author
of KPMGs Beyond the Numbers: How Leading Organizations are
Linking Value with Values to Gain Competitive Advantage.