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Recycling and cost savings through circular business practices are seen by automotive manufacturers as a revenue opportunity with companies looking into their handling of resources to reduce consumption and emissions.
Swedish carmaker Volvo showed Move attendees preliminary data relating to its resource consumption, estimating that it consumed a total of 5.5 million tonnes of resources in 2020. This comprised direct consumption (50%), supply chain (40%) and overheads (10%).
“The overall waste and emissions [we generated] came from the supply chain, not from our own operations, which account for a small part of the total,” Owain Griffiths, Volvo’s head of circular economy, said.
The company intends to generate 1 billion Swedish krona ($99 million) in new revenue or savings through circularity and recycling.
By 2025, Volvo hopes to recycle 25% of all plastics, 40% of aluminium and 25% of steel used in its manufacturing. By 2040, the company hopes to achieve climate neutrality and become a circular business.
“We are decoupling growth from resource consumption, in order to tackle the two independently,” Griffiths said.
Consuming markets including Europe will remain dependent on resource-rich countries for the next few years, before sufficient capacity is set up closer to home or recycling volumes make up a meaningful share of supply, according to William Adams, head of battery materials research at Fastmarkets.
Commenting on the outlook for battery materials sourcing in Europe, Adams told the audience during a panel discussion: “We’re going to be dependent on where the material is in the ground, at least in the near-term.”
One of the fallouts from the Covid-19 pandemic was a slowing-down of investment into new mining projects, which is expected to contribute to the bottlenecks in availability this year and in the next few years.
“We also need shorter supply chains [and for] recycling to increase,” Adams added.
He cited secondary materials, obtained from the recycling of spent batteries, as crucial for non-mining areas such as Europe if they are to reduce dependence on resource-rich countries, and to cut the overall emissions footprint from the battery supply chain.
“It will be still 10-15 years before we have any decent volumes of supply coming from recycling,” he said. “But there is already waste from battery cell production, and we can start amassing that now.”
Evolution in the mobility industry and in the ways that cities and citizens will see transport – in a sustainable, low-carbon context – will affect traditional revenue streams at car manufacturers, forcing companies to look beyond sales for new revenue streams.
Volvo’s Griffiths said that the company expects consumption to move away from vehicle ownership toward more flexible models including rental.
“Usage of vehicles is changing,” he said. “[There will be] less ownership, more rental [as part of a sustainable] economic model.”
This is forcing Volvo to look outside of the traditional business model of selling vehicles to increase revenue, he added, including rental programs.
The company has launched Care by Volvo, a flexible car subscription program for users that Griffiths said will be an “important” revenue driver in the coming years.
“We’ll change the use of mobility services so that people don’t need to buy a vehicle,” he said.
Electric vehicle consumers said at the conference that more must be done on the traceability of battery raw materials, despite the maturation of that field over the past few years.
“What is highlighted to everybody is that the transparency of the supply chain is not as good as we’d like it to be,” according to Sue Slaughter, purchasing director, global material cost and supply chain sustainability, at carmaker Ford.
Legislation in the West, such as Germany’s soon-to-be-implemented Supply Chain Due Diligence Act, is expected to drive more transparency in the supply chains for metals such as cobalt.
The act, due to come into force on January 1, 2023, requires companies with offices in Germany to conduct due diligence on their supply chains to protect human rights and the environment.
The act will be enforced through fines of as much as €800,000 ($843,200) or as much as 2% of average annual global turnover, and exclusion from winning public contracts in Germany for as long as three years.
“Obviously, legislation is coming – certainly, the German due-diligence is coming at the beginning of next year,” Slaughter said. “It’s a requirement for us to do that, which in some ways is a very positive thing, because it helps us when we’re talking to our suppliers to say [that supply chain due-diligence is] a legal requirement.”
Jessica Battle, senior expert on global ocean policy and governance, and lead on the No Deep Seabed Mining Initiative at the World Wildlife Fund, said that there are too many unknowns in the deep-sea mining of raw materials when it comes to judging its effect on the environment.
“The problem is, these minerals are an ecosystem that is extremely sensitive and highly unknown, and scientists are saying that what we know is enough to be cautious, and not dive into the deep sea at this point,” she said.
Companies such as Ford and Volvo have committed to ensuring that raw material supply does not come from deep-sea mining, company representatives said in panel discussions at the event.
“We will not source when there is any chance of seabed mining,” Anders Berger, sustainability director at Volvo Group, said on one panel. Volvo focuses on manufacturing trucks and construction equipment.
Slaughter said that Ford is ensuring that its suppliers comply with standards from the Initiative for Responsible Mining Assurance (IRMA). This initiative does not allow its systems to be used by companies involved in deep-sea mining.
Instead of looking for new sources of raw materials in such an unknown environment, Battle said, stakeholders should instead focus on how to turn to a circular economy.
In the same panel, Slaughter said it is still difficult to pass along the increased costs for sustainable or traceable materials.
Premiums for metal such as low-carbon aluminium continue to push higher on strong demand in Europe. Fastmarkets assessed the aluminium low-carbon differential, P1020A, Europe, at $5-15 per tonne on June 1, compared with $0-15 per tonne a month earlier.
“There are always going to be a few people who are so conscious about sustainability that they will be prepared to pay,” Slaughter said. “[But] when you talk about mass population, price is still – unfortunately – the driving force.”