The Calvert Sustainability Research Department conducted a review of the auto industry in order to capture emerging environmental, social, and governance (ESG) issues and to sharpen Calvert's analysis relating to its Signature Strategy® sustainability criteria. Our research reveals that the auto industry is more focused than ever on driving sustainability throughout its operations and product strategy.
By the end of the recession, the American auto industry emerged with a fundamentally different and more positive approach to sustainability, more focused on making cleaner, more efficient vehicles and less resistant to more aggressive fuel economy and emissions standards. Over the course of the summer, the industry was engaged in negotiations with the Administration over proposed standards for model years 2017-2025, and while automakers were pushing for greater flexibility in meeting the efficiency and emissions targets, they have nonetheless shown greater willingness to work with regulators, rather than simply (and publicly) lobbying against them. In August, President Obama, joined by Ford’s chief executive and executives from other automakers, as well as representatives from the UAW, State of California, and environmental organizations, announced new fuel standards that would reach 54.5 mpg in 2025.
Fuel Economy Leaders: 2011 Model Year
Ford Fusion Hybrid FWD
Mercury Milan Hybrid FWD
Lincoln MKZ Hybrid FWD
Honda Civic Hybrid
Honda Insight (hybrid)
|4.||Honda CR-Z (automatic, hybrid)||35/39|
|5.||Lexus HS 250h (hybrid)||35/34|
Ford Escape Hybrid FWD
Mazda Tribute Hybrid 2WD
Mercury Mariner Hybrid 2WD
Smart Fortwo (Cabriolet)
Smart Fortwo (Coupe)
|8.||Nissan Altima Hybrid||33/33|
|9.||Lexus RX 450h 2WD (hybrid)||32/28|
|10.||Honda CR-Z (manual, hybrid)||31/37|
The scope of the review included evaluation covering all seven of Calvert’s ESG criteria: workplace practices; human rights; Indigenous Peoples’ Rights; governance and ethics; product quality and safety; community relations; and environment. However, in the auto industry, several key ESG issues—environment, product safety, and workplace/human rights—are most critical in assessing a company’s performance and impact. The review focused heavily on the industry’s performance on these key issues. Companies assessed as part of the review included U.S. manufacturers Ford and G.M.; the largest (by market cap) European auto company, Volkswagen; the largest (by market cap) Japanese manufacturer, Toyota; and a leading luxury/performance company, BMW.
There are a number of factors that strengthen the argument for greener vehicle strategies, such as fluctuating but rising petroleum prices and strengthening emissions and fuel economy standards as well as a greater global focus on climate change.
Product safety was highlighted as a key risk for the industry when Toyota recalled more than 8.5 million vehicles for unintended acceleration and ‘sticky pedal’ concerns. While other automakers (such as Ford in the later part of the last decade) have experienced safety failures on the same scale, Toyota's primary mistake was its reluctance to disclose safety failures in a timely fashion and to take concrete and credible steps to remediate the problem transparently and accountably for the benefit of customers, dealers, and the general public. In the past year, the industry, and necessarily Toyota in particular, has given much higher priority to product safety commitments and quality management systems, as well as overall improved disclosure around product safety issues in order to overcome sales losses, various costs, and brand damage. The apparent lesson to the industry from the Toyota debacle is that growth and higher-volume production cannot come at the expense of quality and safety—and that when safety lapses occur on such a significant scale, they must be addressed immediately and accountably.
Download the Calvert Investments Sustainability Review of the Automotive Industry (PDF) to learn more about the key ESG challenges in the areas of Environment, Human Rights and Product Safety. You will also find best practice examples from Toyota Motor Corporation, Ford Motor Company, and Volkswagen AG.
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