BMW:BMW Group Purchasing steps up sustainability activities and paves the way for future e-mobility growth
Munich. The BMW Group is increasingly gearing up its
purchasing for future growth in e-mobility and setting new standards
for sustainability. The expansion of e-mobility makes value creation
in the supplier network more important than ever, both with respect to
CO2 emissions and sourcing of so-called critical raw materials, like
those needed for producing battery cells.
“We believe sustainability is an integral part of all purchasing
activities. So, as we accommodate the planned growth in electrified
vehicles in the supplier network, we are at the same time integrating
our sustainability requirements into all contract awards. In this way,
we are taking sustainable development to the next level. Particularly
as a premium manufacturer, we aspire to lead the way in sustainability
and take responsibility,” said Dr Andreas Wendt, member of the Board
of Management of BMW AG responsible for Purchasing and Supplier Network.
The BMW Group aims to have more than seven million electrified
vehicles on the roads by 2030 – two thirds of them fully-electric. At
this scale, BMW Group Purchasing is ensuring not only that the supply
chain can handle higher volumes, but also implement requirements for
sustainable development. In this way, BMW Group Purchasing is making a
vital contribution to the company’s transformation towards e-mobility.
High flexibility accommodates growing demand for e-mobility
Growing demand for electrified vehicles will also increase the need
for the components and parts that go into producing these vehicles.
With regard to battery cells, in particular, BMW Group Purchasing is
implementing various measures to accommodate this growth. The BMW
Group sources the current fifth-generation battery cells from four
suppliers – making it less dependent on individual suppliers.
“Volume flexibility is a basic premise and decisive criterion in the
selection of our battery cell suppliers. For our fifth-generation
battery cells, we have agreed 20% flexibility in the quantities to be
purchased: in both directions – up and down,” added Wendt.
Since the battery cell accounts for much of the cost of the drive
train in electrified vehicles, this is a key lever for long-term cost
reduction. The main focus is on cell raw materials and battery cell
production. The BMW Group is therefore consolidating its extensive
know-how in these areas at its own Battery Cell Competence Centre.
Focus on sustainability makes an impact on the BMW iX
The BMW Group is steadily expanding its sustainability activities in
parallel with the strong growth in e-mobility. Purchasing focuses on
three main areas: 1. compliance with environmental and social
standards and respect for human rights; 2. protecting natural
resources; and 3. reducing CO2 emissions in the supply chain.
These measures are already delivering results in the BMW iX (combined
power consumption: < 21 kWh/100km in the WLTP test cycle*; CO2 emissions combined: 0 g/km): Relying on renewable green power to produce battery cells and increased use of secondary material reduces CO2 emissions in the BMW iX supply chain by 17%, compared to the same vehicle produced without these measures.
At the same time, the BMW Group is also limiting its use of critical
raw materials and has reduced the amount of cobalt in the cathode
material for the current fifth-generation battery cells to less than
10% and increased the amount of secondary nickel to up to 50%. The
e-drive no longer requires the use of rare earths.
Compliance with environmental and social standards controlled
through transparent processes before, during and after the contract
The BMW Group is a trailblazer for corporate due diligence in the
supplier network. As early as 2008, the company began addressing this
issue and subsequently insisted on comprehensive environmental and
social standards when commissioning deliverables for the BMW i3. Since
2014, all BMW Group direct suppliers have been contractually obliged
to respect human rights, comply with expanded environmental and social
standards and to introduce management systems to promote occupational
safety and protect the environment. These requirements must also be
contractually passed on to subcontractors.
“We don’t just hand off responsibility to the supplier network; we
take responsibility jointly with our direct suppliers. We benefit from
our years of experience and are creating processes to achieve better
transparency and traceability,” explained Wendt.
BMW Group Purchasing does not rely on contractual obligations alone
for this, but is also implementing a large number of additional
measures as part of a transparent process. A risk filter is used to
evaluate potential supplier locations worldwide even before the call
for bids. The next step is to require possible suppliers to outline
their sustainability activities in a detailed questionnaire. External
partners also work with internal appraisers to review selected locations.
Compliance with the defined sustainability requirements is a
prerequisite for awarding a contract. Throughout the contract period,
external partners work with internal appraisers to verify compliance
with sustainability requirements through questionnaires and audits.
If discrepancies arise during any of these steps, the BMW Group
agrees on corresponding measures with the suppliers. In this way, BMW
Group Purchasing is monitoring thousands of locations every year.
The company has also established a procedure that can be used to
report non-compliance with social and environmental standards anonymously.
Special focus on critical raw materials
Eliminating infringements of human rights and environmental standards
presents a particular challenge in the case of critical raw materials
– for example, for lithium and cobalt, both of which are key
components for production of battery cells. For both raw materials,
BMW Group Purchasing has therefore implemented additional measures to
ensure cobalt extraction and processing takes place in compliance with
sustainability standards and to avoid problems with working
conditions, e.g. child labour. The company is therefore sourcing
cobalt and lithium directly from the mines and making it available to
battery cell suppliers.
“As well as guaranteeing predictable pricing, this enables us to
anchor our sustainability standards in contracts and ensure cobalt and
lithium are mined and processed in an environmentally and socially
sustainable manner. We saw this for ourselves when we inspected mines
in Australia and Morocco,” explained Wendt.
Another major challenge is ensuring respect for human rights and
compliance with environmental, health and safety standards for
extraction of raw materials when the process is not industrialised,
but takes place under the most basic artisanal conditions. For this
reason, as part of its corporate due diligence, the BMW Group is
actively taking responsibility and participating in local projects,
based on the principle of “empowerment before withdrawal”. In 2018,
the BMW Group joined forces with other partners to create the
cross-sector “Cobalt for Development” initiative in Congo. The aim of
the project, which is implemented by the German Agency for
International Cooperation (GIZ) is to develop and professionalise
artisanal mining in the region, so that it meets the BMW Group’s high
sustainability requirements and could again become an option for
sourcing cobalt in the long term.
Additional sustainability measures for other critical raw
The BMW Group has implemented additional measures to tighten
compliance with environmental and social standards for the additional
critical raw materials. Here, BMW Group Purchasing goes beyond
contractually agreed sustainability standards and is getting more
involved in the supply chain through corresponding agreements made
directly at particularly critical points in the supply chain.
Mines and smelters are a focal point: Here, direct contact can be
increased through collaborations. It is also important that mines and
smelters are certified according to strict, internationally recognised
standards. To this end, BMW Group Purchasing is actively involved in
international standardisation initiatives focused on raw material
extraction, such as the IRMA standard, which is the most accepted,
most ambitious and most comprehensive of all mining standards.
However, expansion of other local projects like “Cobalt for
Development” is also conceivable, as well as extending direct
purchasing of critical raw materials.
Responsible management of natural resources
In addition to compliance with environmental and social standards and
respect for human rights, responsible management of nature’s finite
resources also plays a central role.
To safeguard reserves of critical raw materials, the BMW Group has
set itself the goal of significantly increasing the percentage of
recycled raw materials it uses, so-called secondary material, by 2030
and using raw materials multiple times in a circular economy. The
growth in e-mobility makes the idea of the circular economy
increasingly important, because of the many critical raw materials
needed for battery cells. Secondary material reduces CO2 emissions
substantially compared to primary materials: by about factor four to
six for aluminium.
Reduction of CO2 emissions in supply chain delivering results
The BMW Group aims to reduce supply chain CO2 emissions per vehicle
by 20% from 2019 levels by 2030. Without corrective measures, CO2
emissions per vehicle in the BMW Group supply chain would increase by
more than a third by 2030 – mainly due to highly energy-intensive
production of battery cells and increased use of aluminium. The
company intends to reverse this trend. One of the ways it is doing so
is by making carbon footprint a decision criterion in its contract
award processes. In particular, the use of green electricity for the
production of the battery cells in the BMW iX has led to a significant
reduction in CO2 emissions in the supply chain.