Introduction

The Assessing low-Carbon Transition (ACT) Auto sector methodology is a product of the ACT initiative, which assesses an organisation’s readiness to transition to a low-carbon economy and aims to drive action by companies to move to a well below 2-degrees pathway in terms of their climate strategy, business model, investments, operations, and GHG emissions management. The ACT initiative, a joint project between ADEME and CDP, has created an overarching framework and sector-specific methodologies, of which the auto methodology is one.

The ACT auto methodology includes principles, scope, boundaries and performance indicators as well as performance, narrative and trend scoring explanations. The methodology was developed through research and multi-stakeholder dialogue. ACT builds on the Sectoral Decarbonization Approach (SDA), developed by the Science-Based Targets Initiative (SBTi), to compare a company’s alignment to the low-carbon pathway.

Together with ACT and CDP, the World Benchmarking Alliance (WBA) has translated this methodology into the Automotive ranking. A summary and explanation of how it was applied is contained here. This forms the first of a series of rankings within the Climate and Energy Benchmark of the WBA. This benchmark will measure and rank the climate action performance of high carbon emitting industries, including electric utilities and oil and gas, within the decarbonisation and energy system.

Scope

The WBA Automotive ranking is a sector-specific ranking within the WBA Climate and Energy Benchmark. The Climate and Energy Benchmark will clarify where and how companies can contribute to SDG 13 and the Paris Agreement, and incentivise them to align their strategies and operations with a well below 2-degree pathway. It is part of the decarbonisation and energy transformation identified by the WBA as one of the seven system transformations required to achieve the Sustainable Development Goals (SDGs). An assessment of the SDGs and corresponding targets demonstrated that the decarbonisation and energy transition will have an evident impact on SDG 1 (no poverty), SDG 3 (good health and wellbeing), SDG 7 (affordable and clean energy), SDG 9 (industry, innovation and infrastructure), SDG 12 (responsible consumption and production), SDG 13 (climate action) and SDG 17 (partnerships for the goals).

All WBA benchmarks build on existing frameworks, standards and norms. For this reason, the ACT methodology was adopted as a suitable existing methodology. Before the Climate and Energy Benchmark began, a mapping exercise identified that The Taskforce on Climate-related Financial Disclosures (TCFD) was strongly aligned with the benchmark (although their objectives and audiences differ slightly). The Climate and Energy Benchmark uses data that the TCFD promotes the publication of, while the benchmark can allow financial actors to better understand transition risk. Both initiatives focus on companies’ governance, strategy analysis and metrics and targets, and aspects of risk management practices (such as low-carbon transition plan and climate change scenario testing).

Industry scope of the ranking
Within the automotive sector, the WBA Automotive Benchmark includes companies with activities in automobile manufacturing. These activities include the design of “light duty” vehicles (cars) and their final assembly. They do not include the manufacturing of vehicle parts.

Company scope of the ranking
The automotive sector’s keystone companies – based on the concept and characteristics of keystone actors as defined by Österblom et al in 2015, as those that play a vital role in the industry and have a disproportionate effect on the structure and function of the system in which they operate – are included in the Automotive Benchmark. Of the potential global automotive manufacturers, 25 keystone companies were selected to be included in the rankings based on the following criteria:

  1. Companies that dominate global production or service revenues and volumes. Market capitalisation of each company was also considered.
  2. Companies that control globally relevant segments of production and/or service provision.
  3. Companies that connect (eco)systems globally through subsidiaries and supply chains.
  4. Companies that influence global governance processes and institutions.
  5. Companies that have a global footprint, particularly significant in developing countries.

Assessments

The ACT auto methodology assessment generates a rating comprising:

  • A performance score – represented as a number from 1 (lowest) to 20 (highest) – presents a broad and modulated view of company performance across core elements for low-carbon transition.
  • A narrative score – represented as a letter from A (highest) to E (lowest) – provides a holistic view of a company’s state of alignment with the goals of the Paris Agreement.
  • A trend score – represented as “+” for improving, “=” for remaining the same, or “-“ for worsening – signals the near-term movement of company alignment with the low-carbon economy.

For the performance assessment, company data is analysed across nine modules: targets, material investment, intangible investment, sold product performance, management, supplier engagement, client engagement, policy engagement, and business model. Each of these modules contains indicators, and each module and indicator has a weight (see figure below). The weights are guided by the principles of value of information, impact of variation, future orientation and data quality sensitivity.

Performance indicator weighting
A company’s module-level scores, and the overall performance score, are presented in each WBA company scorecard. The text in the “Leading practices” and “Risks and opportunities” section given additional commentary on a selection of performance assessment modules.

The narrative assessment is an overall analysis of all available data sources (including sources additional to those used for the performance assessment) to establish a company’s state of alignment with the goals of the Paris Agreement. The narrative assessment considers the performance assessment, as well as further analysis of the company’s reporting based on four criteria: business model and strategy; consistency and credibility; reputation; and risks. The overall narrative score is presented in each WBA company scorecard. The section “Progress towards the Paris Agreement” provides additional commentary on each detailed element of the narrative assessment: commitments, transition planning, present activities, legacy, and consistency.

For the trend assessment, the company is assigned a “+”, “=”, or “-”, depending on whether the analyst deems that the future company will be less, equally or more able to meet the requirements of the low-carbon transition in a re-assessment in the near-term. This is presented in each WBA company scorecard. The section “Trend” provides additional commentary on the trend assessment.

Approach to scoring and ranking

The analyst applying the ACT methodology assesses the data and gives a score per indicator which is used to calculate the performance element of the ACT score. The narrative assessment is then produced according to the narrative score principles by referring to the based on both the information considered for the performance assessment; plus other verifiable public data on the company such as annual and sustainability reports and news from reliable sources. Finally the trend score is produced synthesising the forward-looking aspects of the assessment to give a view of the future likely trend in company performance.

To create the overall Automotive ranking, a weighting was applied to each of the performance, narrative, and trend scores as follows:

  • The performance score has a 1:1 weighting, i.e., a score of 12 is 12;
  • The narrative score is weighted: A=25, B=20, C=15, D=10, E=5; and
  • The trend score is weighed: “+”=1, “=”=0, “-“= -1.

This overall weighted score resulted in the Automotive ranking.

Data collection process

The Automotive Benchmark for 2019 assesses the most reliable, latest available public and verifiable data. Where possible, data points are 5 years historic up to the present – so for some data points, as far back as 2012 – and with future orientated analysis. 2017 was the most recent year for which complete regulatory data was available.

Data was collected in the first instance from CDP’s disclosure platform where possible, as well as using publicly available sources from databases, company websites, including sustainability and corporate responsibility reports.

Companies were also invited to directly participate in the data validation process by submitting information during a two-week period, from 30 September 2019 to 11 October 2019.

All 25 companies were welcome to provide additional information; 9 of 25 provided additional data either through the data validation process or by other means within the time period. Learn more about the companies’ data availability and participation in the data validation process here.

Disclosing company scores

Scores for each company are available publicly, for all stakeholders:

  • For the performance assessment, at module and overall score level;
  • For the narrative assessment, at the overall score level;
  • For the trend score, at the overall score level.

Individual company results are presented in the company scorecards. Module-levels rankings are presented in the ‘Ranking’ section of the website.

Each company also received an ACT feedback report privately, which included more detail on the assessment and suggested areas for improvement.

Methodology development

The ACT auto methodology was developed according to a robust, credible, and replicable process. It was built based on extensive research and outcomes resulting from multi-stakeholder dialogues.

The ACT auto methodology was first developed by CDP and ADEME during 2016. It was then revised and updated during 2018 to reflect the updated SBT Transport Tool and updated underlying scenarios. ACT methodologies are based on the principles and guidelines of the publicly available ACT Framework.

Consultation process
The ACT auto methodology was developed in consultation with companies and experts in the auto manufacturing sector, and pilot companies reported against the methodology and received an ACT pilot assessment and rating privately. The methodology had input from a Technical Working Group (TWG), Advisory Group, and public consultation from February 2016 to January 2017. You can find out more via the ACT initiative website: https://actproject.net/

Development process
Feedback from the TWG, Advisory Group, and public consultation informed the direction of the methodology and consultation feedback was considered in both the final published version of the ACT auto sector methodology.

Publication

In December 2019, the ranking, key findings and company scorecards were published online, with the ranking officially launched at the UNFCCC COP25 in Madrid. The WBA company scorecard, as well as the ACT feedback report, had previously been made available to each company to inform them of their ACT rating and the median ACT rating in the ranking.

Explanatory Note

In both the WBA Key Findings and Company Scorecards, the term “low-carbon pathway” is used to refer to the “company benchmark” pathway. This is the pathway allocated to an individual company from the sector decarbonisation pathway, built on the Sectoral Decarbonisation Approach (SDA) of the Science-Based Targets Initiative (SBTi) using the 2017 IEA ETP 2DS scenario.  The term “the [automotive] industry’s low-carbon pathway” is used to refer to the sector decarbonisation pathway as a whole.

You can read more about the application of the sector and company benchmarks and other quantitative benchmarks in the ACT auto methodology: http://actproject.net.