Nature Positive Role of the Automotive Sector

The principle of “double materiality”, a concept at the heart of the EU’s CSRD, defines a company’s impact on the environment and its dependencies on it as highly interdependent (see Figure 6). In other words, the economic activities of businesses have impacts on both the environment and society (known as impact materiality), while concurrently, businesses also encounter risks (and opportunities) arising from their dependencies on the environment and society (known as financial materiality).2.1 Double materiality Double materiality FIGURE 6 Double materiality Traditional materiality Business impacts on nature/ impact materialityDependencies/ financial materiality Examples of financial materiality Pressure on water availability and decline in quality affect company profitability Soil erosion and degradation lead to decreases in agricultural yields for agricultural food companies Dirty beaches and coastal areas cause drop in tourism traffic and revenues – – –Examples of impact materiality Company activities affect water supply and quality Unsustainable agricultural practices lead to decrease in soil quality Irresponsible travel and tourism cause pollution and over-exploitation of natural resources – – –Business dependencies on nature/financial materiality Source: World Economic Forum. Definition of double materiality sourced from: Deloitte. (2023). Double Materiality: 5 challenging key aspects to consider. The automotive sector and its value chain are highly dependent on a number of environmental assets and ecosystem services, including:83 –Freshwater supply and rainfall regulation: The sector depends on freshwater as an important resource, including for input industry processes (such as chemical cracking) and automotive manufacturing processes (such as for pretreatment and cleaning of the body shell in paint shops, cooling in the manufacturing process and leak testing). –Climate regulation, soil and sediment retention, and flood protection: Global climate regulation protects upstream industry operations – in particular, those sensitive to increased temperatures. For both upstream operations and midstream automotive manufacturing, mass stabilization and erosion control provide protection from landslides and other natural hazards. Finally, green infrastructure84 and water flow regulation provide flood protection across the value chain. For example, in 2023, a flood event in Slovenia caused €30-50 million in damage to KLS Ljubno, an automotive parts manufacturer,85 resulting in supply delays to OEMs such as Volkswagen Group and Skoda. This significantly affected production, for instance resulting in a loss of 150,000 vehicles Nature Positive: Role of the Automotive Sector 19