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Management Challenge of Sustainability in the Automotive Industry

2389 words (10 pages) Business Assignment

6th Nov 2020 Business Assignment Reference this

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Introduction

Established in 1916, BMW are an established business which operates in the automotive industry. As a multinational organisation, headquartered in Munich, Germany, BMW produce, sell and manufacture premium cars and motorbikes. Delivering 2,490,664 cars and 165,566 motorbikes throughout 2018(Bmwgroup.com, 2019), one of the biggest concerns for BMW is the impact of which their responsible management impacts the major challenge of climate change. As a forward-thinking organisation, their aim is “to make sustainability an integral part of the entire value chain and its underlying processes to create an added value for the company, the environment and society” (Bmwgroup.com, 2019). Through their supply chain procedures and management, BMW have the ability to make significant changes to their impact on the environment, and their overall sustainable practice. The contribution of sourcing, producing, using and disposing of cars, motorbikes and all other vehicles, has a significant impact on the health of the environment.

This report plans to discuss the reason why sustainability is such a crucial element to BMW’s responsible management, analysing the impact this has on BMW and partners and its contribution to BMW’s sustainability. It will also provide recommendations for how BMW should respond to this challenge through their supply chain management, giving sound explanation and reason.

Sustainability within the Automotive Industry

The automotive industry is considered a pillar industry in most countries because of its significant economic contributions (Tian and Chen, 2014). The growth in demand for vehicles, has subsequently increased the total production of cars, motorbikes and other transport alternatives. And therefore, increases the number of ‘end-of-life vehicles’ (ELVs). The global number of ELVs is predicted to reach over 100 million. As you can see by Figure 1, there has been an overall increase in the number of cars licensed in the UK. At the end of June 2019, there were 38.7 million registered vehicles in Great Britain, a result of a 1.3% increase compared to the same time in the previous year (Assets.publishing.service.gov.uk, 2019). Almost 75 million cars have been produced, globally to date (Worldometers.info, 2019), “Despite the limitations imposed by fuel resources and environmental protection, as well as the emergence of energy saving and new energy technologies in the automotive industry, conventional cars continue to dominate the market in general.” (Tian and Chen, 2014).

Climate change is one of the biggest challenges faced by society in the 21st century, as a result of human activity. Increased levels of CO2 have contributed to the rise of ‘green house gases’, increasing global temperatures and impacting climate. What’s been noted is that road transport makes up for almost 16% of man-made CO2 emissions (Ocia.net, 2019). With more people demanding more and better mobility, the number of vehicles on the road is only going to rise. This is going to increase the pressure on companies who are operating within the automotive industry, to aid and encourage lower and better emissions when designing and selling vehicles.

Why is this a challenge?

With current total car sales on a steady rise, companies like BMW will be having a significant contribution to the impact of CO2 going forward. With just over 3 million electric cars on the road globally (IEA, 2019), BMW have the chance to increase this, by promoting and encouraging electric vehicles – not only cars, but motorcycles too.

Throughout the lifecycle of a vehicle, both cars and motorbikes, a number of processes take place in order for it to evolve from an idea, to a physical product - where several negative factors contribute to the impact on the environment.

Figure 2: (Ocia.net, 2019)

Production

Since the 1980s, high-volume car makers have proactively reduced their environmental impact of their production processes. On average, it takes around 4 years to develop a new model of car, where the manufacturer will aim for it to remain in the production process for 7 years. This means that for a vehicle to start being developed now, designers would need to predict what customers will demand in 2030. Looking at the design process, it is possible for companies like BMW to ensure that their cars are going to last longer, yet still withhold their modern image. For example, “the BMW i3 (figure 3) of the future can drive itself, it will have a longer range, and it will have better in-car technology, but the rest will not change dramatically” (Kessels, 2019). There is a risk here for BMW to invest a large amount of time and money into a vehicle, requiring a lot of energy, which may not live up to what they aimed for, and thus being very unsustainable.

“The average car consists of around 30,000 parts” (Kessels, 2019), which can be sourced globally, coming from various different countries and locations. In order to make use of these resources, they require mining and being turned into raw materials. From this, they’re turned into parts which create the components that form parts of the vehicle. Each of these processes require a lot of energy, in order to transport them from one country to another. But generally, it’s said that for “a car build in 2017, around 500kg of CO2 is emitted into the production process” (Kessels, 2019).  However, “Auto engineers have developed sophisticated emissions-control technology that is putting cleaner automobiles on the road everywhere” (Ocia.net, 2019).

Figure 3: (Top Gear, 2019)

Vehicle Use

It’s often assumed that the term ‘consumer’ is meant to be a private individual purchasing a car within the market, whereas they’re seen to be the minority. The reason for this, is that private buyers tend to buy second-hand or used cars. The new car market is actually dominated by corporate and public sector organisations, which have large influence on determining the characteristics of new cars. It is emphasised that it is vital to understand these types of consumer.

End-of-life Vehicles

One factor which is considered the least, and if not ever, is the environmental impact that is cause from the treatment of vehicles once they have passed their useful functioning period. Thus, encouraged significantly European regulations for end-of-life vehicles (ELVs). The establishment of the EPR policy was first proposed by Lindhquist in 2000, submitted the report to the Swedish Environmental Agency to urge producers to be responsible for the lifecycle of their products (Tian and Chen, 2014). Within the UK, producers (i.e. the manufacturer or the importer) are responsible to comply with the ELV Regulations 2005, where specific vehicles which are seen to be waste are dismantled accordingly. The reason for this is that it reduces the impact that it could have on landfill sites and dumps, where vehicles are crushed, and not dealt with correctly.

Recommendations

As discussed, transport is among one of the main contributors to green-house gasses and air pollutants in the UK (Price, 2019). In order to address this major challenge, there are a number of actions that BMW have the ability to take, in order to tackle the difficulties, through the way in which they manage their supply chain. 

One of the biggest contributors towards climate change is the fact that these cars are releasing a third of all CO2 emissions in the UK (Price, 2019). By supporting the production and development of alternative fuels, BMW would be working towards the Government’s aim of Road to Zero strategy. This strategy focuses on and makes clear that “at least half of all cars should be ultra-low-emission by 2030”. What this means for BMW, is creating vehicles which run on a fuel other than petroleum fuels – this includes any kind of technological power which does not require petrol. The Global Alternative Fuel Vehicles market was valued at USD 318.1 billion in 2018 and is expected to grow and reach 843.4 billion by 2026 (Fernandes, 2019). It is clear to see, after reading the referenced article, that BMW is not mentioned as a key player within this market. As a high-volume automotive company, BMW need to ensure that they are developing vehicles which fall within this competitive landscape. With the market to increase by 12.98%, BMW would benefit substantially by making moves to enter this highly valued market.

Another recommendation for BMW, and the main recommendation, is to invest in increasing the lifespan of their cars. One of the main reasons for this is that the price of vehicles is continuously increasing. Consumers are not interested in buying new cars as frequently, and with the reputation of the car going down every year, BMW should aim to ensure their cars live longer. Not only is it very costly for BMW to continuously making high volumes of vehicles, but it would be a waste of their resources and energy. With a 1 million fall in car sales, (which you’ll see in figure 2), over 2017 and 2018, BMW need to ensure their fixed costs are low if sales aren’t being made. The demand for cars is falling – especially with the fall in interest from the younger generation, as sustainable advocates are making use of alternative travel options. BMW need to be aware that as cars become more expensive, they are also damaging the environment, polluting the air and generally ruin towns and cities. It is sensible to see, and understand, that automotive companies are unable to continue on this current path. One way in which BMW could increase the lifespan of their vehicles, is by focusing on a circular economy, where they keep the vehicle in use for as long as possible – extracting the maximum value from the vehicle.

Conclusion

It is clear to say that the automotive industry impacts the environment negatively, most specifically when looking at the production and maintenance of the vehicles which BMW sell. One of the largest contributing factors to climate change is the CO2 emissions, produced from vehicles. When designing and producing cars and motorbikes, BMW need to focus on ensuring that their materials are being sourced sustainably, as well as ethically – aiming to use reused and recycled materials to help and aid towards a more sustainable production process. BMW should also focus on making sure that these vehicles are 100% electric, as this is a major market which will positively have an impact on the environment – reducing the carbon emissions and resulting in a cleaner environment. I believe that the most successful recommendation for BMW to take into consideration, is the aim of increasing their vehicle’s life span. It would reduce not only the cost of production, but it would result in a fall in new vehicles bought, thus reducing the whole energy use required to make a car. Taking all of this into consideration, BMW should expect to portray a more environmentally friendly, sustainable brand image as well as reducing costs in production.

Bibliography

  • Assets.publishing.service.gov.uk. (2019). [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/830795/vehicle-licensing-statistics-april-to-june-2019.pdf [Accessed 19 Dec. 2019].
  • Bmwgroup.com. (2019). Company. [online] Available at: https://www.bmwgroup.com/en/company.html [Accessed 19 Dec. 2019].
  • Bmwgroup.com. (2019). Sustainability at the BMW Group. [online] Available at: https://www.bmwgroup.com/en/responsibility/sustainability-at-the-bmw-group.html [Accessed 19 Dec. 2019].
  • Fernandes, E. (2019). Alternative Fuel Vehicles (AFV) Market 2019 Opportunities, Key Players, Size, Share, Trends and Forecast to 2026 - Techi Labs. [online] Techi Labs. Available at: http://techilabs.com/alternative-fuel-vehicles-afv-market-2019-opportunities-key-players-size-share-trends-and-forecast-to-2026/226147/ [Accessed 19 Dec. 2019].
  • IEA. (2019). Global EV Outlook 2018 – Analysis - IEA. [online] Available at: https://www.iea.org/reports/global-ev-outlook-2018 [Accessed 19 Dec. 2019].
  • Kessels, C. (2019). Overcoming Automotive Consumerism, How Design Can Encourage Sustainability. [online] Medium. Available at: https://medium.com/swlh/overcoming-automotive-consumerism-how-design-can-encourage-sustainability-f61eb501bd57 [Accessed 19 Dec. 2019].
  • Oica.net. (2019). [online] Available at: http://oica.net/wp-content/uploads/climate-change-and-co2-brochure.pdf [Accessed 19 Dec. 2019].
  • Oica.net. (2019). Alternative Fuels | OICA. [online] Available at: http://www.oica.net/category/auto-and-fuels/alternative-fuels/ [Accessed 19 Dec. 2019].
  • Oica.net. (2019). Sales Statistics | OICA. [online] Available at: http://www.oica.net/category/sales-statistics/ [Accessed 19 Dec. 2019].
  • Price, C. (2019). The UK must ramp up efforts to roll out greener transport solutions. [online] The Telegraph. Available at: https://www.telegraph.co.uk/business/smart-mobility-summit/uk-transport-more-environmentally-friendly/ [Accessed 19 Dec. 2019].
  • Tian, J. and Chen, M. (2014). Sustainable design for automotive products: Dismantling and recycling of end-of-life vehicles. Waste Management, 34(2), pp.458-467.
  • Top Gear. (2019). BMW i3. [online] Available at: https://www.topgear.com/car-reviews/bmw/i3 [Accessed 19 Dec. 2019].
  • Worldometers.info. (2019). Cars produced in the world - Worldometers. [online] Available at: https://www.worldometers.info/cars/ [Accessed 19 Dec. 2019].

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