In a bid to improve supply security – by reducing dependency on imports – and develop local industries, countries are also increasingly shifting towards resource nationalism.54 For example, the EU aims to relocate 40% of the refining and processing of raw minerals within the EU and increase battery manufacturing as part of the Critical Raw Materials Act,55 and Net-Zero Industry Act.56 This may not necessarily result in environmental benefits, however, depending on the type of ore that is imported. Indeed, World Wide Fund for Nature (WWF) analysis shows that, depending on the origin and type of raw materials, relocating lithium and nickel refining processes can either increase or decrease GHG emissions by a factor of five.57 Alongside EVs, the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6) report states there are also additional pathways to decarbonizing the automotive industry, including flexible-fuel hybrid EVs (FFV- HEVs), sustainable biofuels (in the short to medium term),58,59,60 low emissions hydrogen and derivatives (including synthetic fuels).61 Like other sectors, the automotive sector is intrinsically interlinked with nature. The sector depends on environmental assets and ecosystem services (such as freshwater supply and rainfall regulation, global climate regulation, soil and sediment retention, flood protection and metal, mineral, energy and biomass provisioning)62 to function and grow across the value chain. Examples of relevant nature services include supply of water for cooling during manufacturing processes and rubber biomass for tyres. The sector also contributes to drivers of nature loss, notably pollution – including from end-of-life (EOL) vehicles – water use, land-use change and ecosystem disturbance, and GHG emissions across the value chain. Indeed: –8% of mining-related deforestation is attributable to the motor vehicle sector (the second largest contributor after the construction sector).63 –Life cycle analysis indicates that the production of cars requires over 400,000 litres of water across the value chain,64,65 equivalent to over 10 years of household water supply for the average person in Europe.66 –Overall, road transport was responsible for 45% of global oil demand67 and 16% of global GHG emissions in 2022, with cars and vans accounting for 10% of emissions.68 The Science-based Targets Network (SBTN) have classified several key materials required as inputs to the sector (including steel, aluminium, battery materials, rubber and leather) as “high-impact commodities” for nature.69 To address its impacts and dependencies on nature, the automotive sector will face significant challenges due to the complexity of companies’ global supply chains. On average, an automotive manufacturer may have 18,000 suppliers across the full value chain,70 with around 20,000 parts in a typical passenger car.71 Manufacturing cycles are long and complex, with the process typically taking four to six years from initial concept to market. It is, therefore, critical that companies plan ahead to account for long lead times. This report aims to support businesses in the sector to incorporate nature into their forward-looking business strategies. Definition of the automotive sector BOX 1 The scope of this report is defined by the Sustainability Accounting Standards Board (SASB) Sustainable Industry Classification System (SICS),72 and includes “Transportation – Auto Parts” and “Transportation – Automobiles”. This encompasses automotive parts production by tiers 1, 2 and 3, all the way to tier n suppliers, including battery production and technology development, and midstream vehicle manufacturing by original equipment manufacturers (OEMs) of light-duty passenger vehicles and trucks, 2/3-wheelers and compact tractors. In addition, this report will consider the full value chain for automobiles, including industries that provide inputs to automotive parts manufacturers or original equipment manufacturers (OEMs), downstream product distribution and aftersales, vehicle use and end-of-life (EOL) management. Raw material extraction within the mining and metals sector is considered a key driver of the automotive sector’s nature footprint and is covered in more detail in the Forum’s Nature Positive: Role of the Mining and Metals Sector report. This report focuses directly on the automotive sector. It is, however, important to consider these recommendations within the broader context of the mobility system transition, alongside other factors such as the role of various vehicle modalities (for example, public transport) and infrastructure transformation. The [automotive] sector depends on environmental assets and ecosystem services to function and grow across the value chain. Nature Positive: Role of the Automotive Sector 15

Nature Positive Role of the Automotive Sector