EU Policy Action for Automotive Circularity: Improving Asset Lifecycle Management Through Digital Traceability

Expanding on digital platforms and business models to improve product-asset lifecycle traceability throughout usage and reuse-recycle principles.

The Circular Cars Initiative (CCI) is led by the World Economic Forum and part of the World Business Council for Sustainable Development (WBCSD), in partnership with the European Institute for Innovation and Technology’s Climate-KIC, SYSTEMIQ, Accenture and McKinsey; it includes over 70 contributing organizations.

The Circular Cars Initiative (CCI) is led by the World Economic Forum and part of the World Business Council for Sustainable Development (WBCSD), in partnership with the European Institute for Innovation and Technology’s Climate-KIC, SYSTEMIQ, Accenture and McKinsey; it includes over 70 contributing organizations.

The Circular Cars Initiative (CCI) is presented by the World Economic Forum as “a private-public sector collaboration focused on leveraging new technologies and business models to align the automotive industry with a 1.5C climate scenario.” The CCI regroups industry manufacturers, policymakers and fleet operators, and operates across three primary workstreams: 

  1. Materials, led by McKinsey and Co.
  2. Business models, led by Accenture Strategy
  3. Policy, co-led by World Economic Forum and SYSTEMIQ

This month, the CCI issued an interesting report entitled “Paving the Way: EU Policy Action for Automotive Circularity” providing an overview of policy measures of automotive mobility sustainable and circular within the context of the European Green Deal. Beyond the greenwashing jargon and heavy context description, the report proposes to rethink the role of policymakers in breaking the status quo and driving progressive interventions towards low-carbon resource utilization. It highlights market- and policy-related barriers and the need for top-down incentives to improve the uptake of circular processes, products and services in the automotive industry. Furthermore, it refers to a circularity taxonomy with supportive recommendations to mitigate change barriers and a policy development roadmap for 2021-22. 

In this article, I review lifecycle-based perspectives from the 2021 CCI report, such as the need to “adopt a lifecycle-based approach for CO2 performance measurement that takes emissions from vehicle manufacturing and use into account” and “improve data availability for the lifecycle management of materials and shared mobility through digital multi-stakeholder platforms (ref. recommendations 1.1 and 1.2).” 

The CCI report promotes the need to balance the adoption of a lifecycle-based assessment approach to avoid shifting CO2 emission performance policies from the use phase to the build and end-of-life phases of vehicles, which could hinder sustainable innovation and uptake of EV products. This is not new; however, it refers to a more stringent set of requirements for OEMs to publish lifecycle assessment (LCA) in terms of the carbon footprint of vehicles that they produce, as well as their ability to gather and leverage real-time data across the entire value chain—from component development and assembly to vehicle commercialization and usage (mobility models, car utilization optimization schemes), component and product reuse (battery repurpose and vehicle life extension).

According to a 2020 CCI report, “a circular scenario in the automotive industry could reduce emissions of up to 75% per passenger kilometer by 2030 compared to baseline scenarios”. It is however important to consider the end-to-end vehicle lifecycle, as well as the lifecycle of each component individually. According to the 2021 CCI report, looking at the carbon footprint across the entire value chain must include the “extension of carbon performance assessments along the value chain from material extraction to recycling.” This includes materials, production and usage of vehicles, including the lifecycle of batteries for EV vehicles. While battery lifecycle emissions can be substantially lowered with the use of green electricity in the power mix, they currently produce “1.5 to 2.0 times higher material emissions compared to internal combustion engine vehicles,” due to the large amount of energy needed to produce the battery. 

On one hand, recommendation 1.1 focuses on the policy actions towards sustainability traceability requirements across the value chain, from product engineering to usage. Meanwhile, recommendation 1.2 focuses policy actions on data traceability, from material extraction to recycling, shared mobility operators and transport services. Among many other recommendations, these combined actions focus on:

  • Mobility targets: an incentivization of circular levers across the entire lifecycle, governed by public legislation and clear targets—promoting new business models (the report refers to mobility models, car-share services, transport services, etc.) but also the need for more open data standards and harmonization in this space.
  • Material carbon footprint target threshold: a full carbon footprint disclosure requirement and a gradual introduction of threshold targets for material lifecycle.
  • Vehicle emissions: continued legislation focused on end-of-pipe missions for all vehicles, the short- to medium-term (to allow for consistent transition and phasing out of traditional combustion engines)
  • Component-level carbon performance: a long-term emission performance standard reflecting a lifecycle perspective (complete vehicle and components, including energy-intensive battery production).
  • Holistic lifecycle footprint, up to downstream reuse and recycle: a more holistic product environmental footprint methodology, covering carbon savings from lifetime extension (especially battery second life and re-cycle policy)—in parallel to a utilization factor per passenger towards circular mobility; the idea presented here is ambitious in linking production data from OEM with usage and recycling data. 
  • Global low-carbon material and substitute standards: an effective material lifecycle traceability and alternate management model; for example, linking to wider adoption of international material data systems (IMDS) across automotive OEMs and supply chains, as reference standards for low-carbon material, towards national and international harmonization.
  • Global recycling standards, integrated with upstream production: full material traceability with recycling legislation and standards, such as the international dismantling information system (IDIS) and others, with integration to IMDS and other material extraction management platforms.

Further to defining the actual targets, the question of how to exactly implement such recommendations legally and technically is still to be determined. Assuming the above policy actions are implemented, how to ensure that targets are realistic and that OEMs have the means to track and improve how they continuously and consistently measure LCA indexes. 

Traceability is going to be a challenge, especially as targets will continue to evolve in the years and decades to come. Managing real-time LCA clearly sits at the intersection of the product lifecycle and asset performance management. In short, this sits across PLM, ERP and ALM enterprise platform integration, data traceability, accuracy and accessibility, as well as data monetarization. 

Finally, the report rightly explains the need to robustly govern sensitive data accessibility (what data sets are strictly necessary for the model to be effective without compromising customer rights). In addition, how will these actions translate in terms of process and information digitalization, and how to overcome barriers to entry: do enterprise and integration platform exists? How will small- and medium-sized players afford such transformation and adoption? What new business models are to be considered to foster such change? Is it realistic to suggest all-encompassing integrated data platforms across organizations, when enterprise digital platforms are not yet mature in effectively handling such information within their operations? Should policymakers rather dive into specific silos to assess what needs to be governed and how prior to boiling the ocean with overarching data management centralization policies? 

Furthermore, what will be governed by policy and legislation versus market requirements and competitive advantage drivers? Perhaps the 2021 CCI report is a plea for action (and funding) than an actual roadmap for implementation.

What are your thoughts?