Study of Sustainable Value in Automobile Manufacturing Finds Mixed Performance for Most OEMs, BMW and Toyota as the Clear Leaders
|Sustainable Value Margin—the ratio of Sustainable Value to sales—for each of the evaluated manufacturers. BMW and Toyota are consistent leaders in sustainable value. Click to enlarge.|
A survey of the sustainability performance of 17 of the world’s leading automakers has found a mixed pattern when it comes to the sustainability performance of most of the car manufacturers. The BMW Group and Toyota are consistent industry leaders, creating extremely positive Sustainable Value over the entire review period—i.e., they use all the economic, environmental and social resources considered in a value-creating way.
The report, which covers the period between 1999 and 2007, applies the Sustainable Value approach developed by Prof. Frank Figge of Queen’s University Belfast and Dr. Tobias Hahn of Euromed Management School Marseille. The research project was undertaken by researchers working at Euromed Management School Marseille, Queen’s University Belfast and IZT—Institute for Futures Studies and Technology Assessment in Berlin.
The Sustainable Value approach is a value-based method for assessing corporate sustainability performance that extends the traditional valuation methods used in financial analysis to include not just the use of economic capital, but also environmental and social resources. A carmaker creates positive (or negative) Sustainable Value if it earns a higher (or lower) return than its peers with its available economic, environmental and social resources.
|The ranking of the 17 manufacturers based on the Sustainable Value Margin. Click to enlarge.|
The new report, Sustainable Value in Automobile Manufacturing, examines a set of nine environmental, economic, and social resources: capital use, water use, and waste generated as well as emissions of carbon dioxide, nitrogen oxides, sulfur oxides, and volatile organic compounds; further, the number of employees and the number of work accidents are taken into account.
The analysis is based on the financial, environmental and social data reported and published by the companies themselves and as a result 17 out of the 20 largest carmakers worldwide were included in the ranking: BMW Group, Daihatsu, DaimlerChrysler/Daimler AG, FIAT Auto, Ford, General Motors (GM), Honda, Hyundai, Isuzu, Mitsubishi, Nissan, PSA (Peugeot, Citroën), Renault, Suzuki, Tata, Toyota, and Volkswagen Group.
(The authors note that other leading manufacturers including Porsche, KIA or Chinese manufacturers are still not producing sufficient sustainability performance data.)
The ratio of sustainable value to sales (sustainable value margin) is calculated in the report so that different companies can be directly compared irrespective of their size.
Findings of the report include:
Toyota and the BMW Group are industry leaders. Both companies consistently create positive Sustainable Value over the entire review period, and use their economic, environmental and social resources in a value-creating way. In other words, the authors note, these companies use these resources more efficiently than their industry peers.
Hyundai, Honda and—to a certain extent—Nissan and Suzuki, generally create positive Sustainable Value as well.
The only other major volume manufacturer managing to keep up with the two sustainability leaders is DaimlerChrysler, but only intermittently. In 2007, Daimler AG (replacing DaimlerChrysler in the analysis as of 2007) manages to close the gap to BMW Group and Toyota considerably.
Volkswagen only managed to create significantly positive Sustainable Value in 2001, 2002 and 2007.
GM has consistently produced only a negative Sustainable Value, and reveals a downside trend over the entire review period.
Ford has also languished in negative territory from 2001 onwards, and only temporarily showed signs of recovery in 2004 and 2005 (although still not managing to create positive Sustainable Value).
In the group of medium-sized manufacturers, only the BMW Group and Asian producers were able to consistently generate positive Sustainable Value.
Among European carmakers in this group, PSA and Renault are mainly positioned in the bottom half of mid-field, with Renault showing a negative trend towards the end of the review period.
Fiat Auto, and to a certain extent Mitsubishi, posted consistently negative Sustainable Value.
In the group of smaller producers, Isuzu showed a noticeable improvement. Daihatsu, on the other hand, generally fell just within the negative zone.
The study also highlights the potential improvement that a car giant like General Motors has in how it could improve its long-term sustainability performance. GM achieved a sustainable value of -€9.87 billion, in comparison with BMW, which having used all the resources considered necessary to create value doubled its sustainable value to €2.8 billion from 1999 to 2007.
Economic crisis, energy crisis, climate crisis and recent global developments have affected the automobile industry like few other sectors. Never before has it been as important for car manufacturers to employ their economic, environmental and social resources wisely—and efficiently.
However, while issues such as fleet consumption and CO2 emissions have been firmly put on the public agenda, the equally considerable environmental impact of the production phase of car manufacturing has as yet been largely ignored.
...The bottom line is that this study reveals big differences in sustainability performance in automobile manufacturing. This shows that the production process itself bears considerable room for improvement in terms of sustainability performance.
—Professor Frank Figge, co-author
Prior to this present survey, the Sustainable Value approach had been tested and refined in two extensive comparative studies funded by the European Commission and the German Federal Ministry of Education and Research.
The original version of this study triggered public interest and sparked discussion within the industry. BMW Group expressed an interest into how its efficiency gains documented in these regional assessments would translate into an evaluation of its sustainability performance relative to major automobile manufacturers worldwide.
Therefore, it provided substantial financial support for the present survey along with funding from the research institutions involved. The independent researchers would like to make it clear that the study’s findings are wholly independent of any input from funders outside of the data supplied and assessed for every car manufacturer included in the study.