Climate protection in the supply chain
Strategy and concepts
Climate-protection goal: CO2 neutrality on the balance sheet
With its “Ambition 2039”, the Mercedes-Benz Group aims to have a CO2-neutral on the balance sheet new vehicle fleet along the entire value chain in less than 20 years. The supplier network plays a decisive role in achieving the climate targets: for example, the production of an all-electric vehicle is about twice as CO2-intensive as for a conventional combustion engine model, mainly owing to the lithium-ion batteries.
The Mercedes-Benz Group has various levers at its disposal to avoid and reduce CO2 emissions – for example in the make-up of the electric vehicle portfolio or at the company’s own production locations. But it is also clear that there are some areas which the company can influence only in part. This includes for example the energy mix used in the use phase of the vehicles, or for production of procured components in the country of origin.
Sustainable transformation at the suppliers
The Mercedes-Benz Group aspires to prevent, minimise or as far as possible eliminate (potentially) negative environmental impacts along its supply chain. To achieve this, it observes the practice of sustainable supply chain management. Its “Responsible Sourcing Standards” provide the guidelines for this: they include minimum requirements for CO2 savings, requirements for the introduction of an environmental and energy management system and compliance with legal requirements. Suppliers must agree to the Responsible Sourcing Standards in order to participate in the award process for any new contracts with the company. In addition, Mercedes-Benz Cars and Mercedes-Benz Vans set further sustainability requirements for suppliers. These requirements define measures that will be applicable for future vehicles – for example specific CO2 targets for focus materials.
In order to reduce CO2 emissions in the supply chain, Mercedes-Benz Cars and Mercedes-Benz Vans are actively promoting the transformation of their suppliers. For this, they use three levers: through the “Ambition Letter”, which applies in the case of the award of any new contract, suppliers pledge to the segments that only CO2-neutral on the balance sheet products will be procured from 2039 on.
In addition, they have integrated target values for CO2 emissions into their criteria for award processes – the focus is on components that are produced in a CO2-intensive manner. These targets not only concern the direct supplier, but are also valid for the upstream production of raw materials and components.
As a third lever, both segments work together with selected partners. The aim is to reduce CO2 emissions in the supply chain – especially in the production of important components such as battery cells or body-in-white components – through innovative technologies.
Declaration of intent on CO2 neutrality on the balance sheet
The Mercedes-Benz Group implements various projects and measures in order to avoid and reduce CO2 emissions in its supply chains for services as well as for production and non-production materials. In future, the company wants to work only with partners who share its understanding of sustainability in terms of climate, environment and human rights.
For this reason, in 2020, Mercedes-Benz Cars and Mercedes-Benz Vans already sent out to suppliers of production materials the ambition letter, a declaration of intent on balance sheet carbon-neutral products and established approval as a prerequisite for awarding contracts. By signing this document, they commit themselves to supply Mercedes-Benz AG only with products that are CO2-neutral on the balance sheet by 2039 at the latest – and thus to the Mercedes-Benz Group’s “Ambition 2039”.
More climate-friendly production materials
Moreover, Mercedes-Benz Cars and Mercedes-Benz Vans are setting selected priorities for production materials on the road to achieving CO2 neutrality on the balance sheet. To this end, quantitative interim targets for CO2 emissions in the supply chains have been defined – these were derived from the results of the supplier discussions and determined with the support of external experts. Mercedes-Benz Cars and Mercedes-Benz Vans have placed the focus on materials and components that have high CO2 emissions in production. These include steel, aluminium, certain plastics and batteries. Finally, they have integrated the target values into their criteria for contract award processes – and consistently apply CO2 and recycled content requirements as key criteria when awarding contracts for the “Electric first” vehicle platform “Mercedes-Benz Modular Architecture” (MMA), as well as the "Mercedes-Benz Electric Architecture” platform (MB.EA).
Future technologies to reduce CO2 emissions
The Mercedes-Benz Group is working together with suppliers to develop measures for reducing the CO2 emissions of the procured production and non-production materials as well as those involved in delivering goods to the plants (inbound logistics). For Mercedes-Benz Cars and Mercedes-Benz Vans, the goal is to source only CO2-neutral on the balance sheet production materials from 2039 on – with the focus on batteries, steel and aluminium.
The battery is the component in the vehicle with the greatest CO2 contribution. To counteract this, Mercedes-Benz Cars and Mercedes-Benz Vans stipulate from their strategic battery cell partners that only battery cells produced on a CO2-neutral on the balance sheet basis should be procured. In this way the emissions of a cell can be reduced by around 30%. Since 2021, external experts and testing organisations have been verifying and confirming CO2-neutral on the balance sheet cell production at the suppliers.
In addition, both segments are engaged in ongoing negotiations with other players in the supply chain – including electrode producers, refineries and mines. In addition to respecting human rights, a central requirement is to rely more on renewable energy sources, in particular for electricity. They have also agreed with strategic partners to establish a sustainable supply of lithium.
Since 2018, the audit and consulting company RCS Global has been creating transparency about the complex supply chains for battery cells for Mercedes-Benz. In the reporting year, these audits were extended to include further battery raw materials. Along with the human rights due diligence, the audit now also covers specific environmental topics – including environmental due diligence, CO2 emissions and the use of electricity from renewable sources.
The company also works with strategic partners in other areas of the supply chain: in 2021, for example, Mercedes-Benz AG was the first car manufacturer to invest in the Swedish start-up H2 Green Steel (H2GS) as a means of introducing CO2-free steel into series production going forward. H2GS produces CO2-free steel by using hydrogen and electricity from exclusively renewable sources. In addition, Mercedes-Benz AG has been purchasing more environmentally friendly flat steel products from Salzgitter Flachstahl GmbH since 2021. In the same year, Mercedes-Benz AG also launched a partnership covering CO2-free steel with the Swedish steel manufacturer SSAB.
In the reporting year, Mercedes-Benz AG furthermore signed a letter of intent with an aluminium producer with the aim of working together to develop and introduce, by 2030, aluminium for automotive applications that is practically CO2-free. Innovative technologies for primary material production as well as the increased use of scrap will play an important part in this project.
New minimum requirement for suppliers
In the reporting year, the Mercedes-Benz Group introduced the “Responsible Sourcing Standards” (RSS). These are the company’s new central contractual document covering sustainability requirements for suppliers. The standards include its minimum requirements for a responsible supply chain – including environmental protection. They aim to conserve natural resources and prevent and repair environmental damage caused by economic activities when it occurs. If the environmental damage is unavoidable or irreparable, it must be compensated. In this way, the company is tightening its sustainability requirements, particularly in the areas of environmental due diligence, climate protection and resource conservation, as well as biodiversity, deforestation and water. In addition, the standards define minimum requirements with regard to human rights due diligence.
With the newly developed RSS, the Mercedes-Benz Group not only goes beyond its own previous sustainability requirements; it also sets stricter requirements for suppliers than those required by the German Supply Chain Sourcing Obligations Act (LkSG). In this way, the company seeks to sensitise its suppliers beyond the legal requirements and motivate them to greater efforts with respect to sustainability. In order to act in compliance with the LkSG, the Mercedes-Benz Group has applied the RSS to all contract award processes since 2023.
Environmental and energy management systems
Suppliers of production materials to Mercedes-Benz Cars and Mercedes-Benz Vans are expected to operate with an environmental management system that is certified according to ISO 14001 or EMAS. Depending on the specific risks, this also applies to suppliers of non-production
materials and services. If a supplier does not have a certified environmental management system, the supplier is given two years to set up such a system and have it certified. If this is not done, the supplier may be excluded from receiving new orders.
Moreover, suppliers of services and of non-production materials for CO2-intensive commodities will also be requested to sign the "Ambition Letter" that requires them to make their production CO2-neutral on the balance sheet or to provide their services in a CO2-neutral on the balance sheet fashion by no later than 2039. In addition, project-related CO2 reduction measures are agreed with non-production material suppliers and service providers in the contract award process, for example through the use of electricity from renewable energy sources as part of the commissioning process.
Transparency through data
Mercedes-Benz Cars and Mercedes-Benz Vans are also cooperating with organizations such as CDP (formerly Carbon Disclosure Project) so that it can depict the environmental impact of its supply chains even more transparently. The suppliers have been reporting on their environmental impact and climate change mitigation efforts within the framework of the CDP Supply Chain Programme since 2019. CDP provides the corresponding tools for recording, assessing and publishing environmental and climate data.
To ensure that the sustainability requirements are met, Mercedes-Benz AG is involved in the cooperation project “Catena-X”. This project networks companies across industries and allows for a secure exchange of data between all participants in the automotive value chain: from the mining of raw materials to recycling, the data chain is supplemented by each company with product-specific CO2 data so as to allow the sharing of a product-specific CO2 footprint that should include as high a proportion of primary data as possible. In the “Catena-X” project group “Sustainability and CO2", the Mercedes-Benz AG is working together with other partners to develop a standard that will make the CO2 data more comparable and reliable.
Award for suppliers
The Mercedes-Benz Group considers climate protection and resource conservation in the supply chain to be an element of its cooperative partnership with suppliers. Public recognition for good performance is also important to the company. For this reason, the company also gave awards to suppliers for outstanding sustainability performance in 2022 – for the third successive time and for the first time under the name of "Mercedes-Benz Supplier Circle”.
Effectiveness and results
Progress on climate change mitigation in the supply chain is reported at regular intervals in the Group Sustainability Board (GSB). The Mercedes-Benz Group continuously reviews the progress it is making towards its 2039 ambition for passenger cars: since 2020, the “Mercedes-Benz Cars Purchasing and Supplier Quality” procurement unit has been measuring, among other things, the number of suppliers who agree to the “Ambition 2039” statement of intent. By signing, the suppliers agree that, by 2039 at the latest, they will only supply products to the company that are carbon-neutral on the balance sheet. The results show that the supplier network of Mercedes-Benz Cars and Mercedes-Benz Vans has largely agreed to the climate targets of the Mercedes-Benz Group, which are formulated in “Ambition 2039”. Approximately 86%1 of all suppliers of production material for Mercedes-Benz Cars and Mercedes-Benz Vans registered in the system (as measured on the basis of annual planning procurement volume that, in turn, is based on target figures updated bi-weekly) have signed the ambition letter. CO2 neutrality on the balance sheet is incorporated into the terms of contract, and the ambition letter is a key criterion for the awarding of contracts. This means that a supplier who does not sign the “Ambition Letter” will not be considered in any new contract tendering process.
In addition, Mercedes-Benz Cars and Mercedes-Benz Vans have developed requirements in the form of interim CO2 targets for components whose production generates a large amount of CO2 emissions. These targets are included as criteria during the contract award process and affect a major share of the supply chain emissions of future vehicles. The CO2-intensive materials and components include steel, aluminium, certain plastics and also the battery.
In the reporting year, the suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans gave assurances that they would meet the company’s targets for the components across all model series. This means that they will continuously reduce CO2 emissions, especially for materials and components with high CO2 emissions, and increase the share of secondary materials.
The goal of the Mercedes-Benz Group is to bring more climate-friendly materials and products into its vehicles as quickly as possible. It is already setting the course for this today and relying among other things on CO2-free steel. Compared to conventional steel production, the use of almost 100% scrap saves more than 60% of CO2 emissions.
1 The key figure was audited in order to obtain limited assurance.