Mercedes-Benz supply chain to become CO2 neutral by 2039
In an announcement made by Mercedes-Benz the company has set new measures to transform its entire supply chain to Carbon (CO2) neutrality. The new measures come as part of its Ambition 2039 strategy, with the supplier network being key to achieving its goals.
While the transformation to electric mobility is increasing the energy demand in the supply chain, and the production of all-electric vehicles is - mainly because of the lithium-ion batteries - Mercedes-Benz states that despite this plug-in hybrids and electric vehicles offer a clear advantage when it comes to CO2 emissions compared to conventional drives already today. “Electric vehicles can make up for a large part of the initially higher CO2 emissions from the upstream value chain due to their emission-free driving.” However, as part of its Ambition 2039, Mercedes-Benz is working with its global supplier network to reduce CO2 emissions in the production phase, and has established goals to offer a CO2 neutral new car fleet in under 20 years.
"With the electric EQS luxury sedan, which is already in the starting blocks for next year, we have already achieved important milestones in close cooperation with our partners - for example by purchasing CO2 neutrally produced battery cells. We are consequently pursuing this path: When awarding contracts for our subsequent electric vehicle platform - Mercedes-Benz Modular Architecture (MMA) for compact and medium-sized cars- we are already applying CO2 as a key criterion for the first time consistently,” commented Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG.
"Almost half of our approximately 2000 suppliers have signed an 'Ambition Letter of Intent' and are committed to supplying us with only CO2 neutral parts in the future. These companies account for more than half of the annual purchasing value of Mercedes-Benz AG,” added Gunnar Güthenke, Head of Procurement and Supplier Quality, Mercedes-Benz Cars.
As part of its contractual terms, climate neutrality is incorporated into Mercedes-Benz’ supplier contracts, with an 'Ambition Letter of Intent' being a core criteria for awarding contracts. From 2039 - at the latest - the company has stated that only production materials which are CO2 neutral in all value creation stages will be allowed in its factories.
"Together with our partners, we are implementing the Mercedes-Benz Ambition 2039. Almost half of our approximately 2000 suppliers have signed an 'Ambition Letter of Intent' and are committed to supplying us with only CO2 neutral parts in the future. These companies account for more than half of the annual purchasing volume of Mercedes-Benz AG. This is an important proof point on the way to achieving our climate goals: our supplier network has also recognised the signs of the times, and is following the transformation. We place an additional focus on particularly CO2-intensive components and materials such as battery cells. We are also in the process of setting up a tracking system that will enable us to see how CO2 emissions are reduced over time,” commented Gunnar Güthenke, Head of Procurement and Supplier Quality, Mercedes-Benz Cars.
Components and materials
Additionally the company will focus on materials and components that are particularly CO2 intensive in manufacturing and processing until 2039, such as battery cells, steel, and aluminium which account for roughly 80% of the CO2 emissions in the supply chain of a fully electric vehicle.
“Mercedes-Benz has already agreed on clear objectives with two strategic partners for battery cells: CATL (Contemporary Amperex Technology Co., Limited) and Farasis Energy have committed to supply battery cells that are produced using electricity from renewable sources such as hydropower, wind, and solar energy. This reduces the CO2 footprint of an entire battery by more than 30%. The rest of the supply chain will be included as a next step,” stated M.
Being a role model
From 2022, Mercedes-Benz’ own plants will produce on a CO2 neutral basis worldwide. Acting as a role model for the supplier network.
“In line with the procedure in Mercedes-Benz’s own plants, suppliers are required to avoid and reduce emissions as a fundamental principle. Only then can compensation via high-value projects be considered. The areas of approach for climate-neutral production are diverse, and range from reducing consumption to purchasing energy from renewable energy sources,” added .
5 minutes with: Ivalua’s Sundar Kamak
Who are you?
My name is Sundar Kamak, I’m Head of Manufacturing Solutions at Ivalua. I’ve been with the company for around two years now, and I’m responsible for our industry solutions and our pre-sales team. Before joining Ivalua I spent almost 20 years in the source-to-pay procurement space, working for a number of providers. But I got my career started in manufacturing and supply chain, specifically in automotive and aerospace.
And what is currently taking up the majority of your professional time?
The last year I've been focused in helping organisations put together a digital transformation strategy, especially manufacturing companies, so they can continue to address some of the challenges they face due to the COVID pandemic.
The traditional approach of engineers designing their latest product then procurement going off to source no longer works
What are the biggest challenges facing your corner of supply chain?
We have a lot of clients coming from different backgrounds - aerospace, high-tech, automotive - and they’re feeling the pressure and the crunch. There’s a lack of product, lack of material availability, lack of resources, labour shortages. So, I work with the leadership in these organisations, try to understand what problems they're looking to solve and come back with Ivalua solutions that can help them address some of these challenges.
Where do the biggest opportunities lie?
If we look at manufacturing, it all comes back to procurement and supply chain being involved sooner in the process. The traditional approach of engineers designing their latest product then procurement going off to source no longer works. It’s important to treat suppliers like partners, which means you build trust, so they can participate very early on in the product design and product development process. It’s not done consistently in the manufacturing sector, but it will be key.