Transparency at work the magic that changed the car industry


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This articles describes how magic metrics (product performance metrics on environmental impacts) can enable effective regulation and fiscal incentives

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Transparency at work the magic that changed the car industry

  1. 1. Cut The Fluff Series 1Transparencyin action: Thepower of themagic metricBy Ramon ArratiaNovember
  2. 2. Transparency in action: The power of the magic metricTransparency in action:The power of the magic metricIt’s not often that the motor industry can be be the embodied energy of all the materials,vaunted as a sustainability success story. Yet, the production, consumer use and end of life.involuntarily – thanks to European Union (EU) It’s the same for a building; you need to takeregulatory leadership – it is becoming a great case into account embodied impacts as well as thestudy of how other sectors can make progress use, refurbishment and demolition phases. Buttowards their environmental objectives. This is concentrating on the highest impact in the lifeall down to the use of a ‘magic metric’ – a single cycle is a very good start.piece of data that has the power to galvanise For a car, this is the consumer-use phase.legislation at all levels to create a level playing Building a car uses up lots of energy, as well asfield that promotes strong competition and raw materials and toxic chemicals. But by far theinnovation to redesign products to reduce their greatest proportion of a car’s total environmentalenvironmental footprint. footprint comes after it has left the factory – when it is being driven.A magic metric has the power to According to the European Environmentgalvanise legislation at all levels Agency, around 77 per cent of the environmental impact of a car comes into create a level playing field. this ‘use’ phase.What has happened to the European car Environmental impacts duringindustry today is a fine example of the depth of the lifecycle of a car1transformation that focusing on a magic metriclike this can bring about. In this case, that magicmetric is grams of carbon dioxide per kilometre 1% 8%(gCO2 /km) – a measure of the greenhouse gas 1%emissions generated when a car is driven (oftenreferred to as tailpipe emissions). 13%What began with regulations mandating labelling,and later, reductions in gCO2 /km, has gone wellbeyond compliance, changing behaviour acrossthe board. There is now fierce competitionbetween manufacturers over which car has theleast environmental impact. This has stimulatedextensive innovation in the car industry and itssupply chain; enabled more transparent andcomparable consumer communications about theenvironmental impacts of vehicles; and, in turn, 77%encouraged consumers to take a much greaterinterest in the ‘green’ credentials of a car they n Production n Tank to wheelmight buy. n Parts n End of life n Well to tankChoosing the right metricAs an advocate of full life cycle thinking, I would 1 European Environmental Agency:of course support metrics that take into account full life cycle of a product. For a car this would figures/life-cycle-analysis-of-passenger-carsThe Cut The Fluff Series 1 Ramon Arratia November 2011 02
  3. 3. Transparency in action: The power of the magic metricWhile car manufacturers used to report progress This is sustainability commoditized - as it shouldon reducing impacts from their manufacturing be. Even the green claims that are still used inoperations, they rarely saw themselves as being the market - such as Renault’s ‘eco2’ label andaccountable for the full environmental impact of Peugeot’s ‘Blue Lion’ eco standard - are based ontheir product. Indeed, for a long time the European the magic industry had no incentive todesign vehicles that would use lessfuel and thereby emit less CO2 into Today even my mother knows thatthe atmosphere. Why would they if 160gCO2 /km is too much and thatthey were not paying the bill, and aslong as most customers continued 100gCO2 /km is pretty choose cars based on how cool The beauty of such a metric is that it goes beyondthey look or how cool they make them look? In the point of sale to all promotional materials. Thanksvoluntary, ‘let the market solve the problem’ era, to the labelling directive, today all car advertisingCO2 emissions from road transport in Europe rose must include the gCO2 /km metric. This has createdby 29 per cent between 1990 and 2007. The EU consistency and transparency while enabling thehad to take action because cars are responsible consumer to get used to the metric and base theirfor around 12 per cent of total EU carbon dioxideemissions. buying decisions on it. Today even my mother knows that 160gCO2 /km is too much and thatIt was a two-pronged approach from the EU that 100gCO2 /km is pretty good. This consumer literacyhelped to transform the attitudes of the industry and awareness has helped shift the focus of theand consumers – thanks to the magic gCO2 /km car industry to the ‘in use’ stage of the product.metric. The Car Labelling Directive, then, has laid theFirst, the EU introduced the Car Labelling Directive foundation for a change in consumer habits. Butin 1999. This mandated that a label on fuel as the 1990-2007 figures for CO2 emissions fromeconomy and gCO2 /km must be attached to a car road transport have shown, it has not in itselfor displayed clearly near each new model at the ushered in a big reduction in tailpipe emissions.point of sale. What has made the real difference, in conjunction with the Car Labelling Directive, has beenCut the fluff and just tell me the more daring and successful second prong of the EU approach. Top-down thisthe gCO2/km for this car. time - focusing on the manufacturers, not the consumers. In 2009 an EU-wideThis bottom-up approach aimed to create new regulation came into force that required eachcompetition in the car industry around tailpipe car manufacturer to decrease average tailpipeemissions by enabling consumers to make an emissions across its portfolio to 130gCO2 /km byinformed decision about the environmental impact 2015 and 95gCO2 /km by 2020.of the product they were planning to buy. Mostpeople may still choose a car based on cost, These targets are not just wishful thinking: theredesign or brand, but at least they are now able to are financial implications if you don’t comply.understand the environmental implications of their From 2010, if the average CO2 emissions of adecisions. manufacturer’s fleet exceed its limit in any one year, the company has to pay an excess emissionsMost importantly, the labelling directive eliminated premium for each car registered. This premiummany opportunities for greenwash. Few amounts to €5 for the first g/km it exceeds themanufacturers these days spend time trying to target, €15 for the second g/km, €25 for the thirdmarket the little ‘green’ things they are doing in g/km, and €95 for each subsequent g/km. Fromtheir factories or with their recyclable seats. The 2019, the exceeding the limit will become evenmagic metric is allowing customers to say: ‘cut more expensive, with the cost of even the firstthe fluff and just tell me the gCO2 /km for this car’. g/km rising to €95.The Cut The Fluff Series 1 Ramon Arratia November 2011 03
  4. 4. Transparency in action: The power of the magic metricWith such significant financial implications, emissions from newly sold cars to 140g/kmperhaps unsurprisingly, the impact of this by 2008. That would have been a 25 per centapproach has been almost immediate. In 2009 reduction. But with no stick or carrot availablethe decrease in average EU emissions was five per to galvanise manufacturers into action, theycent against the previous year, with a further four predictably fell well short of that commitment,per cent cut in 2010. achieving just a 2.2 per cent reduction between 1998 and 2006.In 2008 the average gCO2 /km for car emissions inthe UK alone was 158, but by the end of 2009 this So the EU set up a mandatory target with awas down to 149.5. Within just one year of the timetable long enough to allow companiesregulation coming into force, the UK car industry to invest, innovate and make the necessaryhad achieved a reduction in tailpipe emissions of widespread changes required to meet it. It alsoAverage CO2 emissions of new passenger cars in Europe (g/km) CO2 monitoring Formal adoption of CO2200 system established performance standards regulation Automative industry self commitment adopted Economic crisis Review of European180 185 183 Commission strategy decision to 181 introduce regulatory measures 178 174 172 170160 167 166 163 162 161 159 154140 146 142 2015 target120 5% Annual change in CO2 emissions (in percent)100 2020 target 0%80 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011more than five per cent, compared to just 2.2 per wielded a few sticks in the form of financialcent in the eight years up to 2006. penalties. Having coupled these sticks with very visible metrics, the target quickly began to deliverThat the EU felt the need for regulation was largely results. Carbon dioxide emissions from new carsbecause it had run out of patience with the lack of have begun to decrease substantially.progress from voluntary industry agreements. In1998, the European Automobile Manufacturers’ There seems little doubt that manufacturers willAssociation had agreed to reduce average tailpipe now meet the EU wide target of 95gCO2 /km byThe Cut The Fluff Series 1 Ramon Arratia November 2011 04
  5. 5. Transparency in action: The power of the magic metric2020. That’s the beauty of the market: tell it what the cars have been made to emit less CO2 . Butyou want to achieve and it will usually find a way they also do it because they save money, or getto do it. But without a clear focus, progress will be free parking, or some other advantage. This putslimited. This is where the magic metric comes in. into practice the idea that people should pay less for more environmentally friendly products. And it’sThe enabling power at local level all thanks to the magic metric.The power of having a magic metric is that itenables smart regulation beyond Brussels. Three key elements must be in place to effectHere are some examples of how it has enabled change in this way: a clearly measurable metricregulatory mechanisms at national, city and that relates to the main life cycle impact of aorganization levels: product; a transparent way of communicating this metric to consumers, and a regulatory framework• Car purchase tax: In France the Bonus/Malus (at EU, national or local level) that pushes scheme makes sure customers choosing to consumers to make the right choice. The results buy a heavily polluting car pay extra tax on the from this regulatory approach to the car industry price of that car, while those who buy a more are beginning to speak for themselves. fuel-efficient car will receive a reduction in the price. The tax penalty ranges from €200–2,600 per car, and the incentive reductions range from The magic metric in action €200–5,000+. BMW: In the 15 years to 2010, BMW achieved a 30 per cent reduction in CO2 emissions from new• Company car tax: In the UK tax is higher, on vehicles in Europe – the biggest reduction came a sliding scale, for company cars that produce after 2006. Today, the average emissions level higher emissions. A petrol car that generates for its vehicles in Europe is 148g/km and BMW less than 75gCO2 /km attracts a tax rate of five has set a target to reduce CO2 emissions from its per cent; one that produces 235g will be taxed global fleet of new vehicles by at least 25 per cent at 35 per cent. Average CO2 emissions from by 2020 (compared with 2008). company cars were around 15g/km lower in 2004 than would have been the case if the PSA: The maker of Peugeot and Citroen has cut regulation had not come into force. its average corporate CO2 emissions in Europe to 131.8 g/km in 2010, from 135.8 g/km in 2009• Congestion and parking charges: In London, and 140.1 g/km in 2008. PSA has a target to cars that emit 100gCO2 /km or less and meet sell one million vehicles emitting less than 120 g/ the Euro 5 standard for air quality are exempted from the city’s congestion charge. In many towns km of CO2 in Europe each year from 2012. It also in the UK, such as York, Salford, and Milton aims to halve tailpipe emissions from the vehicles Keynes, one can qualify for discounted parking if it sells in China by 2020. you have a low carbon vehicle. Renault: With a target to reduce average tailpipe• Procurement policies: Essex County Council emissions to less than 100g/km by 2016, Renault in the UK has a fleet of 850 vehicles, 74 per is already on its way to achieving 120g/km by cent of them cars. It has set an emissions cap 2013 – that’s a 17% reduction from 146g/km of 160g CO2 /km for any new delivery and the in 2007. average today is 135g CO2 /km. Arval, part of the The graphs on the next page shows the BNP Paribas Group, has an average fleet CO2 performance of BMW and Renault. That car of 128g/km after it refreshed its company car manufacturers use the regulatory target in their choice list to include more of the lowest emitting graphs as a benchmark shows how critical EU vehicles on the market. action on the magic metric has been. The lackWith all these regulations and tax advantages, it’s of progress before the regulations also suggestsno surprise that consumers are choosing cars with how ineffective voluntary corporate responsibilityless CO2 . They do it without knowing it, because has been.The Cut The Fluff Series 1 Ramon Arratia November 2011 05
  6. 6. Transparency in action: The power of the magic metricDevelopment of CO2 emissions of BMW Group vehicles in Europe(Index: 1995 = 100; Basis: fleet consumption of newly registered vehicles in Europe (EU-15) measured on the basis ofthe New European Driving Cycle in accordance with the ACEA self-commitment)105100 100 101 102.4 101 98.6 95 96.7 96.7 94.8 88.6 90 92.9 92.9 90 85 80 80 73.3 75 71.4 70 70 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010 *measured only on EU-27 basis with effect from 2009Renault average vehicle emissions performance and targets150140 146 CO2 regulatory level130 137120110 12010090 < 100g in 2016 < 95g in 202080 2007 2010 2013 2016 2019Beyond the magic metricBut the car industry could – and should – go registered as producing 0gCO2 /km; we need tofurther. Despite offering a valuable tool for change take into account the environmental impactsand focusing on the biggest environmental impact, associated with the carbon generated to producethe magic metric in this case does not take into the electricity on which they run. This differsaccount all the impacts throughout the product from country to country according to the carbonlifecycle. For full product transparency, this is intensity of the national grid, so the real gCO2 /kmessential. of full use phase for electric cars will vary quite substantially. Discussions are underway to find aThe gCO2 /km metric only deals with tail-pipe unified European metric on this.emissions from a car. It doesn’t take into accountthe emissions connected with producing the fuel Despite these flaws, the magic gCO2 /km metricfor the car in the first place, which according to we have been examining is very much focused onThe Society of Motor Manufacturers and Traders the right issue and has achieved demonstrableaccounts for 15 per cent of car-related emissions. improvements in the car industry.Full product transparency is even more important Various refinements could strengthen the effectgiven the increase in the number of electric of the magic metric, but the example of the carvehicles. We can’t just have electric cars being industry is demonstrating the magic metric’sThe Cut The Fluff Series 1 Ramon Arratia November 2011 06
  7. 7. Transparency in action: The power of the magic metrictransformative power. So why hasn’t this approach better understand how common metrics mobilizebeen adopted for other industries too? The answer regulators, consumers, civil society and innovatorsis that it will be. It’s already in the pipeline in some – or it will lose out. Even worse, it may go out ofway or another for buildings, energy-using products business altogether. Just ask yourself if any carand power suppliers. So be prepared. manufacturer would have had the vision 10 years ago to really go for an 80gCO2 /km car withoutIf your business wants to achieve a competitive regulation, and a magic metric, to guide them.advantage based on sustainability, then it had Seven lessons for regulators from Europe’s magic metric for cars 1. Develop a common metric based on the full life cycle impact of a product – or at least on its biggest impact 2. Adopt a top-down visionary approach at European level for the performance required in a few years time (or federal level if in the US) 3. Regulate to ensure the metric is displayed on all promotional materials 4. Make sure the metric is visible to consumers at point of sale 5. Use national taxes and regulations to reinforce changes brought about by the metric 6. Enable local and city legislation and taxes to reward products with the lowest footprint 7. Encourage companies and public purchasers to make decisions that promote products with smaller footprints. How the magic metric could work for the building industry 1. There will be a focus on either total life cycle carbon or the use of two separate metrics: kgCO2 embodied carbon (for new buildings and refurbishments) and kgCO2 /m2 plus kgCO2 per occupant per year for new and existing buildings. 2. There will be top-down EU performance standards for new buildings (very high) and existing buildings (reasonable) 3. All member states, regions and cities will be encouraged to report (and compete on) their averages each year (name and shame) 4. The use of EN 15804 Environmental Product Declarations across Europe will be made mandatory, with all building materials companies having to publish their product data through EPDs but also to make these available in promotional material so that architects and designers can make informed decisions 5. At national level, high carbon buildings will be taxed and low carbon buildings will attract fiscal advantages such as lower stamp duty on low carbon houses 6. At the local level, council taxes will be linked to absolute CO2 metrics 7. Display of the metrics in public and private buildings will be mandatory.The Cut The Fluff Series 1 Ramon Arratia November 2011 07
  8. 8. Transparency in action: The power of the magic metric About InterfaceFLOR InterfaceFLOR is the modular flooring division of US-based Interface Inc. The company is a worldwide leader in the design and production of high-quality, stylish, innovative modular floor coverings. Interface was one of the first companies to publicly commit to sustainability, when it made a ‘Mission Zero’ pledge in the mid-nineties to eliminate its impact on the environment by 2020. Mission Zero influences every business, manufacturing and design decision made and inspires the company to continually go beyond current business models, practices and solutions in order to achieve its goal. Interface is now more than half way to reaching its Mission Zero goal and has been widely recognised for its achievements to date. About the author Ramon Arratia is the Sustainability Director InterfaceFLOR EMEAI. His focus is on continuing to develop the company’s sustainability strategy towards Mission Zero as well as reviewing products, services and business processes to ensure that they are as sustainable as possible. Ramon plays a leading role in InterfaceFLOR’s ‘Let’s be clear’ campaign, an anti-greenwash drive calling for full transparency in how companies declare the environmental impact of their products. He has also been instrumental in InterfaceFLOR commitment to have all products covered by Environment Product Declarations (EPDs) by 2012. Ramon is also leading InterfaceFLOR’s ‘war on waste’ campaign, an initiative which calls for action to change European Waste Legislation within the flooring and construction industry.The Cut The Fluff Series 1 Ramon Arratia November 2011 08