Relevant Issues (4 of 26)
- GHG Emissions
- Air Quality
- Energy Management
- Water & Wastewater Management
- Waste & Hazardous Materials Management
- Ecological Impacts
- Human Rights & Community Relations
- Customer Privacy
- Data Security
- Access & Affordability
- Product Quality & Safety The category addresses issues involving unintended characteristics of products sold or services provided that may create health or safety risks to end-users. It addresses a company’s ability to offer manufactured products and/or services that meet customer expectations with respect to their health and safety characteristics. It includes, but is not limited to, issues involving liability, management of recalls and market withdrawals, product testing, and chemicals/content/ingredient management in products.
- Customer Welfare
- Selling Practices & Product Labeling
- Labor Practices The category addresses the company’s ability to uphold commonly accepted labor standards in the workplace, including compliance with labor laws and internationally accepted norms and standards. This includes, but is not limited to, ensuring basic human rights related to child labor, forced or bonded labor, exploitative labor, fair wages and overtime pay, and other basic workers' rights. It also includes minimum wage policies and provision of benefits, which may influence how a workforce is attracted, retained, and motivated. The category further addresses a company’s relationship with organized labor and freedom of association.
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion
Business Model & Innovation
- Product Design & Lifecycle Management The category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
- Business Model Resilience
- Supply Chain Management
- Materials Sourcing & Efficiency The category addresses issues related to the resilience of materials supply chains to impacts of climate change and other external environmental and social factors. It captures the impacts of such external factors on operational activity of suppliers, which can further affect availability and pricing of key resources. It addresses a company’s ability to manage these risks through product design, manufacturing, and end-of-life management, such as by using of recycled and renewable materials, reducing the use of key materials (dematerialization), maximizing resource efficiency in manufacturing, and making R&D investments in substitute materials. Additionally, companies can manage these issues by screening, selection, monitoring, and engagement with suppliers to ensure their resilience to external risks. It does not address issues associated with environmental and social externalities created by operational activity of individual suppliers, which is covered in a separate category.
- Physical Impacts of Climate Change
Leadership & Governance
- Business Ethics
- Competitive Behavior
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
- Systemic Risk Management
Disclosure Topics (Industry specific) for:
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Product Quality & Safety
Driving is a risky activity, as factors such as distracted driving, speeding, drunk driving, and dangerous weather conditions can lead to accidents that expose drivers, passengers, and bystanders to possible injuries and deaths. Accidents can also be caused by defective vehicles, and failure to detect defects before vehicles are sold can have significant financial repercussions for auto manufacturers. Defective vehicles sold in many countries that do not meet safety requirements must be recalled and repaired or replaced at the manufacturer’s cost. Recalls can result in reputational damage, which can reduce revenues and growth potential while increasing a company’s risk profile and thus its cost of capital. Ensuring vehicle safety and responding in a timely manner when defects are identified can protect companies from regulatory action or customer lawsuits, which may result in significant costs that can erode industry margins. Through effective management of the issue, companies can enhance their brand value and drive higher sales over the long term.
Many workers in the Automobiles industry are covered under collective bargaining agreements that cover fair wages, safe working conditions, and freedom of association, which are among basic worker rights. Meanwhile, due to the global nature of the industry, auto companies may also operate in countries where worker rights are not adequately protected. Effective management of, and communication regarding, issues such as worker pay and working conditions can prevent conflicts with workers that could lead to extended periods of strikes, which can slow or shut down manufacturing, reduce revenues, and raise operational risk. Auto manufacturers that manage workers in a way that protects worker rights may face higher labor costs in the short term, but may be better positioned to ensure the long-term financial sustainability of their operations by enhancing worker productivity.
Product Design & Lifecycle Management
Fuel Economy & Use-phase Emissions
The combustion of petroleum-based fuels by motor vehicles accounts for a significant share of greenhouse gas (GHG) emissions that contribute to global climate change. It also generates local air pollutants such as nitrogen oxides (NOx), volatile organic compounds (VOCs), and particulate matter (PM), which can threaten human health and the environment. In this context, vehicle emissions are increasingly of concern to consumers and regulators around the world. While use-phase emissions are downstream from auto manufacturers, regulations often focus on auto manufacturers to help reduce these emissions, such as through fuel economy standards. More stringent emissions standards and changing consumer demands are driving the expansion of markets for electric vehicles and hybrids, as well as for conventional vehicles with high fuel efficiency. Moreover, manufacturers are innovating by designing vehicles made with lighter-weight materials to improve fuel efficiency. Companies that can meet current fuel-efficiency and emissions standards and continue to innovate to meet or exceed future regulatory standards in different markets are likely to strengthen their competitive position and expand their market share, while mitigating the risk of reduced demand for conventional vehicles.
Materials Sourcing & Efficiency
Companies in the Automobiles industry commonly rely on rare earth metals and other critical materials as key inputs. Many of these inputs have few or no available substitutes and are often sourced from deposits concentrated in a few countries, many of which are subject to geopolitical uncertainty. Other sustainability impacts related to climate change, land use, resource scarcity, and conflict in regions where the industry’s supply chain operates are also increasingly shaping the industry’s ability to source materials. Additionally, increased competition for these materials due to growing global demand from other sectors can result in price increases and supply risks. These materials play a crucial role in clean energy technologies, such as electric and hybrid vehicles. As regulators aim to reduce greenhouse gas emissions and consumer demand grows for more fuel-efficient vehicles, the share of hybrids and zero emission vehicles (ZEVs) produced by the Automobiles industry is likely to continue to increase in the future. Companies that are able to limit the use of critical materials, secure their sourcing, and develop alternatives will protect themselves from supply disruptions and volatile input prices, which may impact their margins, risk profile and cost of capital.
Materials Efficiency & Recycling
Auto manufacturing involves the use of significant amounts of materials (including steel, iron, aluminum, and plastics) and can generate substantial amounts of waste (including scrap metal, paint sludge, and shipping materials). As the rate of vehicle ownership expands globally and millions of vehicles reach the end of their useful lives every year, the lifecycle environmental impacts of automobiles are increasing. Automobile companies can use design innovation as well as process and technological improvements to mitigate these impacts and achieve material financial benefits. Companies that innovate to improve materials efficiency in their production processes, including reducing waste and reusing or recycling waste and scrapped vehicles, can contribute to lowering the lifecycle environmental impacts of vehicles and the strain on natural resources from the production of new materials. Through such innovation, companies can achieve cost savings by lowering input costs and protect themselves from potential regulatory fines or penalties. They can also protect themselves from fluctuations in the prices and availability of key inputs into their production process that may arise from resource scarcity.
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