Sustainability takes back seat in auto industry sourcing decisions

Sustainability takes back seat in auto industry sourcing decisions - survey

By Victoria Waldersee

BERLIN (Reuters) - Automakers and suppliers are deprioritising sustainability initiatives in their sourcing policies and focusing on lowering exposure to geopolitical risk after years of supply chain turmoil, a survey of over 1,000 executives showed on Monday.

The number of companies deploying sustainability initiatives like mapping their carbon footprint, optimising routes to cut emissions, and listing production information on origins and manufacturing declined by 9-11 percentage points between 2022 and 2023, the survey by consulting group Capgemini showed.

The average amount suppliers are investing in sustainability initiatives has fallen to $30.5 million in 2023 from $36.6 million in 2022, it said. One-third of all companies surveyed said they did not have a comprehensive sustainability strategy.

The most common factors respondents based supply chain decisions on were quality, geopolitical risk, cost, and resilience - followed by sustainability.

"The need to maintain continuity of operations will take priority over, for example, initiatives to measure carbon footprints, cut emissions through route optimization, or increase traceability," Capgemini said in its report.

The survey featured 1,004 executives from global automotive companies from BYD to Ford to Lamborghini with over $1 billion revenue, and suppliers with at least $500 million.

The results chime with statements from executives across the auto industry in recent months on the ongoing fallout in their supply chains from the coronavirus pandemic and geopolitical tensions, semiconductor shortages, and rising costs.

Respondents said around 50% of semiconductor supply was still not considered fully secure, with full-stack computing platforms and microcontrollers the hardest to obtain.

The proportion of supply which companies obtained from offshore locations fell by over a fifth in the past two years, and Capgemini expects it to fall by another fifth in the next two years, it said.