Delivering net zero supply chains: Decarbonization from textiles and automobiles

Reducing the carbon footprint in each of these two industries requires very different strategies. In recent years, decarbonization levers across the automotive and textiles supply chains have not only become clearer, but also more feasible. Most are spread across the full product life cycle, from manufacturing raw materials to delivering the-end-product to consumers, and even extending to the disposal of products.

Efforts of the textile industry

In the textile industry, there is great leverage in addressing small and medium-sized companies. They contribute almost half of the economic value and the emissions in this industry. The challenge comes in convincing them to change. A textile mill in Bangladesh is one of many, supplying dozens of apparel makers, and often competing on price. There is little incentive to reduce emissions as a single company, especially if it is expected to make that decision on its own. A few of its customers may appreciate the gesture, but probably not enough to switch suppliers. The supply chain must be shifted at a broader level.

That shift would yield great rewards in climate terms. Prior BCG analysis estimates that the textile industry currently emits 3.3 Bn metric tons of greenhouse gases per year. Surprisingly little of this comes from transportation or retail; fabric is relatively light to ship and other parts of the process are more energy-intensive. The fabric manufacturing process contributes 22% of the emissions from a garment. Making the garment accounts for another 30-40%; it involves several high-energy processes such as bleaching, dyeing, finishing and assembly. Use represents another 25-35% share, mainly generated by washing and drying clothes. There is also a carbon footprint attached to the original raw materials. Swapping polyester for recycled polyester, for example, can substantially reduce the energy equired in production, reducing CO2 emissions.

A range of activities could be used to reduce carbon emissions in a textile supply chain. Since the industry is fragmented, many of these measures should take place as shared activities: decarbonization of the util- ity grid that supplies electric power to textile companies, training for company leaders about the virtuous cycles inherent with efficiency, and an emphasis on data collec- tion & transparency. More sustainable sourcing options can be found for textile fibers, including recycled fibers. With individual companies, the frequency and temperature of textile or apparel washing can be adjusted. Efficiencies can be improved, and some processes, such as dyeing or trans- portation, can be made more sustainable. With concerted effort, the practices of the industry can shift to greater use of electric vehicles, greater factory efficiency, and more emphasis on recycling and reuse.

Less opportunity for automobile industry

In automobiles, by contrast, there is less opportunity for  change in manufacturing, even with suppliers. Most sup- pliers serve just a handful of manufacturers, and they tailor their products accordingly. They have already opti- mized for energy-efficiency, especially after 30 years of lean production. BCG estimates that together manufactur- ing and auto retail comprise only 5% of all emissions.

There is still some savings available through operations – about 25% of the total emissions from the industry – but it will not be found on the assembly line. Most of it comes from unsustainable materials, such as metals and plastics, sourced further up the value chain. When these mate- rials are incinerated instead of recycled, CO2 enters the atmosphere. Even better would be to eliminate unneces- sary materials or parts altogether, such as the use of cer- tain rare earth metals in battery components.

The much greater opportunity for reducing emissions is in  motor vehicle use – shifting to electric vehicles or reducing emissions impact. A break- down of an automotive supply chain, this proportion is included in the figures for the largest companies (specifi- cally the OEMs). They provide 85% of the economic value and account for up to 80% of the investment needed to reduce emissions. Most of that will go towards reducing the carbon footprint of the individual automobile.

More than 70% of automotive emissions occur after manu- facturing and retailing – when they are driven. The source is not just CO2 from internal combustion engine (ICE) vehicles, but also the batteries and other components that are not recycled at the end of the vehicle’s life.

An array of measures that can reduce the carbon footprint in automotive supply chains. The devel- opment and commercialization of electric vehicles (EVs) should be the highest priority. Whether powered by fuel cell or battery, the conversion of the installed base of cars will do the most to reduce emissions, assuming the con- tinued drive towards renewable electricity generation in markets.

Even in electric vehicles, there are emissions – partly from the manufacturing of batteries, and the rest from the type of fuel used to generate electric power where the vehicle is charged. In Europe, for example, Norway is best in class, with BCG estimating that 98% of energy for BEVs are gen- erated from clean sources, Germany is behind at 45%, and the Netherlands are far behind at 18%. Full grid decar- bonization should be put in place to bring most coun- tries closer to Norway’s example. BCG estimates it could reduce carbon emissions by an estimated 27 grams per kilometer driven, out of a total 131 grams per kilometer, representing a c. 20% reduction.

Automakers should also source “green materials” more diligently, reengineering elements of their metals and ores supply chains. They may do this by setting CO2 targets for suppliers, or using recycled steel and aluminum. There are always further improvements available in lean production and energy efficiency. Further innovation in batteries and synthetic fuels could also make a difference. For example, giving a second life to an auto battery by recycling it into an energy storage system, instead of discarding it, could reduce emissions by 22 grams per kilometer driven with that battery.

Finally, governments and investors should finance and incentivise both the production of BEVs (such as EU fund- ing of the BEV battery industry) and the spread of infra- structure such as charging stations for electric vehicles. With this, many countries should reach a tipping point where electric vehicles are inexpensive, convenient, and fashionable enough for people to switch en masse.