Sustainability regulations will hold an immense influence upon the automotive and fleet industry

Sustainability regulations in the automotive and fleet industry

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The urgency for greener, more sustainable alternatives is reshaping the automotive sector.

As the world grapples with the repercussions of climate change, such as extreme weather events and rising sea levels, the focus intensifies on sustainable practices across all sectors. The automotive industry, a central player in this global narrative, finds itself uniquely positioned to make a significant contribution to achieving net-zero carbon emissions and thus benefiting all stakeholders of climate change. As the demands for vehicle production and advanced mobility escalate in line with growing populations and industrialisation, sustainable solutions and regulations are more crucial than ever.

Increasing populations, industrialisation, and a requirement for advanced mobility has created an immense demand for wide-scale vehicle production and reliance. Accordingly, one key sector which stands as a central lever for change within the global journey towards net-zero is the automotive and fleet industry. Upcoming sustainability regulations will undoubtedly challenge, yet concurrently offer opportunities to the industry, catalysing innovation and steering the move towards a cleaner, greener future. This underscores the central role of the automotive industry in the global journey towards environmental sustainability and its impending impacts on their operational landscape.

As such, this article will examine the impact of the global automotive and fleet industry upon global greenhouse gas emissions (GHG), the sustainability and ESG regulations impacting this industry, and how businesses within this sector can adapt to and leverage such regulations to reap the long-term benefits of sustainability. 

The carbon footprint of the global automotive and fleet industry

The carbon-intensive nature of the automotive and fleet industry demands a transition towards sustainability immediately. Transportation accounts for approximately 23% of the energy-related  CO₂ emissions around the globe, whilst road transport accounts for 72% of all EU domestic and international transport GHG emissions. Meanwhile, tailpipe emissions from road vehicles account for almost 75% of carbon emissions within the mobility sector. This equates to around 6gt of CO₂ per annum and around 15% of global CO₂ emissions.

Changes in emissions levels by sector since 1990
An increasing population has driven the expansion of domestic transport, and thus the carbon emissions within this sector. Credit: European Environment Agency

Such an immense contribution to global greenhouse gas emissions (GHG) places the automotive and fleet industry as a vital lever for change within global efforts towards net-zero targets. Meanwhile, shifting consumer values and increasing regulations means companies within this sector will ultimately be required to replace fossil-fuel dependent vehicles with low-carbon alternatives, such as electric vehicles (EVs) or hydrogen fuel-cell operated vehicles. Meanwhile, whilst reducing the volume of emissions caused by the fuel combustion of a vehicle’s engine is paramount to global decarbonisation efforts, manufacturers and companies  must make sustainability a priority within every aspect of their supply chain through taking action to reduce the scope 3 emissions. In doing so, companies will ensure that sustainability is at the forefront of their long-term strategy. 

A visual representation of transport emissions in the European Union
Transport emissions in the European Union. Credit: European Environment Agency

Climate regulations within the automotive and fleet sector

On a global scale, governments and regulatory bodies are introducing policies which aim to pave the way to a low-carbon automotive and fleet sector. Meanwhile, within the European Union, targets to reduce road transport emissions have been introduced alongside a range of policies aimed at reducing fossil fuel usage within the automotive industry. 

CO₂ targets and fuel bans

  • The EU’s new CO₂ targets which aim to reduce road transport emissions, through cutting harmful emissions from new passenger cars and light commercial vehicles, incorporates Intermediate emissions reduction targets of 55% for cars and 50% for vans by 2030. An agreement on such targets was reached in October 2023, and it was approved by parliament in February 2023. Furthermore, In June 2022, the European Commission announced a ban on the sale of new petrol and diesel cars from 2035; thus further confirming that the automotive and fleet sector will inevitably be forced to undergo green transition. 

Emissions Trading System (ETS)

  • The EU has proposed various other measures to complement such CO₂ targets, including: a new emissions trading system (ETS) for road transport and buildings, an increased share of renewable transport fuels, the removal of tax advantages for fossil fuels, and a revision of the alternative fuels infrastructure legislation to expand capacity.

Corporate Sustainability Reporting Directive (CSRD)

  • The Corporate Sustainability Reporting Directive (CSRD), which comes into play within the 2024 FY,  is the new EU legislation requiring all large companies to publish regular reports on their environmental and social impact activities. It helps investors, consumers, policymakers, and other stakeholders evaluate large companies' non-financial performance. Thus, it encourages these companies to develop more responsible approaches to business. The CSRD poses significant requirements to larger-scale companies in the automotive and fleet industry. Therefore, automotive and fleet companies who have not yet established clear and meaningful sustainability metrics and KPIs need to act immediately.

Such proposals aim to significantly reduce carbon emissions within the wider road transport sector, where GHG emissions have increased by 21% since 1990. In doing so, the EU aims to achieve ambitious climate goals, such as zero emissions on European roads by 2035, along with the European climate goal which makes the goal of reducing EU emissions by at least 55% by 2030 a legal obligation. Mandating that the automotive and fleet industry shift towards zero-carbon vehicles will not only ensure better air quality; but will provide a range of benefits to businesses within the sector, such as greater energy efficiency and cost savings

Diesel and petrol veichle registrations are slowly declining.
Increasing regulations and changing consumer values is seeing petrol and diesel vehicles being phased out. Credit: ACEA

Five steps towards sustainability within the automotive and fleet industry 

Businesses within the automotive and fleet industry must place sustainability at the forefront of their strategy to ensure they can adapt to, and leverage, forthcoming regulations. Companies take the lead on such a vital topic, through developing and implementing a sustainability strategy which incorporates phasing out carbon-intensive vehicles, monitoring and reporting on their carbon emissions, and actively taking steps to enact decarbonisation across their wider supply chain will not only mitigate compliance risk, but also ensure they align with increasingly sustainable consumer values. As such, businesses should use the following steps as a guide.

  1. Understand the regulatory environment and the relevance of certain policies: In light of increasing regulations within the automotive and fleet industry across the EU, and worldwide, it is vital that organisations gain an understanding of the general and industry-specific policies which are relevant to the organisation both now, and in the future. Visit Plan A’s policy centre to learn more.
  2. Make sustainability a strategic priority: Sustainability must become a central focus of the organisation’s long-term value-proposition and strategy. Increasingly sustainable values, with sustainable product sales growing four times more than conventional product growth since 2014, means that sustainability will continue to be a strategic priority for pioneering businesses within the automotive and fleet industry. Furthermore, increasing regulations means that greenwashing inevitably no longer being an option for companies, thus mandating that companies who wish to remain competitive undergo sustainable transition immediately.
  3. Embed sustainability leadership within organisations: Ensuring that sustainability-focused leadership is embedded within the organisational structure of a company, such as a Chief Sustainability Officer who reports directly to the CEO - is essential to developing and implementing an organisation-wide sustainability strategy, whilst also aligning all departments to ensure ESG requirements are met. 
  4. Collect data and monitor emissions: Companies within the automotive and fleet industry must start collecting data immediately so that their Scope 1,2 and 3 emissions from their wider supply chain can be accurately monitored, and thus reduced. This is vital to sustainability transitioning, whilst also avoiding vast expenses associated with not following ESG requirements. Plan A offers a comprehensive platform for data collection, carbon accounting, monitoring, reporting and reduction.
  5. Leverage existing and future technologies: Utilising existing and future technologies to assist within the monitoring and reduction of carbon emissions; particularly within carbon-intensive sectors such as the automotive and fleet industry. Sustainability software is a great first step for any business looking to bolster their stance on sustainability software

As the global economy undergoes green transition, businesses within the automotive and fleet industry will ultimately be required to become sustainable if they wish to ascertain a competitive advantage. Therefore, it is highly recommended that automotive and fleet oriented businesses utilise  a comprehensive carbon accounting and decarbonisation platform to easily collect and streamline emissions data, measure and analyse carbon emissions across scopes 1,2 and 3, and report on sustainability and ESG performance.

Stay ahead of the curve and reap the long-term benefits of sustainability. Book a demo with Plan A today.

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