BMW – sustainability – ethics paper #3

If you ever wanted to truly dig into the background of BMW and sustainability – here you go.. with tons of references to read more as part of a term paper! Written several years ago, got a 94% on this one…

BMW

Section 1. External forces or influences: Identify three external factors that you think have influenced the company’s shift to more environmentally and/or socially responsible business management practices. Describe the ways in which these external factors influenced management actions and/or decisions or helped to transform the company. Provide evidence to support your observations. (30 marks)

Europe’s CO2 requirements for 2020 and 2021

In the EU in 2021, the average emissions target is set at 95g/km CO2, and for every 1g/km of CO2 that they exceed, they will be fined €95 multiplied by its volume of new-car registrations in the preceding year (King N. , 2020). It is currently predicted that BMW will face to close €1 Billion in fines in 2021 and 2022, at first glance this may appear a substantial amount, however Volkswagen is predicted to possibly pay close to €6 billion (King N. , 2020).

Currently auto manufacturers are eligible for super credits for production of certain types of vehicles, such as mild hybrids and full electric cars, however the benefit of super credits will be phased out in two years (Sigal, 2020) .

To help achieve this amount, BMW has confirmed that there will be a change of CEO, and it is believed to be related to BMW’s current position with electric vehicles. The new CEO, Oliver Zipse, has shown an ability to ensure that vehicles were launched on schedule (Traugott, 2019).

It is estimated that BMW likely will be one or two years late in compliance, if there is no accelerated progress towards the targets (Todts, 2018 ); however their new competence center launched in 2020 may provide that acceleration.

Consumers

However, the biggest challenge that BMW, as well as other manufacturers, face in meeting this goal is the adaptation of consumers to desire low emissions vehicles. This slow adaptation may be due to the consumers misunderstandings on the range, price and charging availablity for electric vehicles (Dow, 2019). However it appears that at the luxury level, that consumers have flocked towards the new Tesla Model 3, choosing it over BMW’s own fleet of electric vehicles (Tom Randall, 2019).

In Canada, the market share of electronic vehicles is increasing, seeing 11,998 sales, roughly 3.8% of total light vehicles sold in Canada. While that may seem a small amount, it is an increase of 3% from Q4 2019 (Sarabia, 2020). Norway appears to be an outlier in that in 2018, 10.7% of the light duty vehicles on the road were electric Vehicles, which now have a 55.9% market share. (Electric_car_use_by_country, n.d.)with Sweden, Netherlands and Iceland coming in at over 10%.

Consumers today stand fast in their belief of a company is green or not, even if they hold a false understanding of facts, then prior generations. Incidences such as the recent diesel emissions scandal can cause enormous reputation damage to a corporate image. Even a drop in sales of 1% might have an estimated impact of up to the €250 Million Gross profit (BMW Group, 2019).

Consumer behavior is in some ways switching to mobility services instead of owning vehicles, this can specifically be seen in high density urban areas. BMW looks at this as an opportunity to maximize, rather then a risk to sales, which is why they involved themselves in DriveNow, ReachNow and FreeNow (BMW Group, 2019).

Competition

BMW has been seen to be losing ground to Tesla, and it appears BMW has the most to lose. Tesla sold more Model 3s in the US in 2019 than BMW sold sedans from its 2, 3, 4, 5, 7 and 8 Series combined (Karkafiris, 2019). Tesla delivered 127,836 Model 3s between January and November (Shahan, 2019), while BMW delivered 116,073 units of its popular sedans (Morris, 2020).

Bloomberg surveyed 5,000 Tesla owners, and identified that BMW had the highest vulnerability, including factors such luxury cars that were traded for a Tesla Model 3 (Tom Randall, 2019). Tesla’s sedan has taken over the luxury class, outselling the previous category-defining BMW 3 and Mercedes Benz C-Class.

Ironically, Daimler and BMW, through their joint-venture Free Now, ordered 60 Tesla vehicles to expand the electric vehicle offering in Germany. Daimler originally purchased Free No win 2014, however last year they entered a joint venture with rival BMW and they invested over $1 billion into the company. As neither BM or Mercedes-Benz had a vehicle in the Electric vehicle market that would be a good fit for a taxi company (Lambert, 2020).

There is a possibility that with BMW’s prototype the all-electric i4, may be able tot ravel 373 miles charge, and reach a max speed of 120 kmh (Courtney, 2020). This may offer a true competition to Tesla, and in Q1 2020 BMW had increased their EV Plug-in Sales by 13.9% with a year-over-year of 30,692 (Kane, 2020).

Additional risk could emerge if competitors gain a competitive advantage by finding better technology solutions. Further risk could emerge from the complexity of such new technologies and its handling which could lead to increased costs (BMW Group, 2019).

Section 2.

Internal forces or influences: Identify two internal factors that have influenced the company’s shift to more environmentally and/or socially responsible business management practices. Describe the ways in which these internal factors influenced management actions and/or decisions or helped to transform the company. Provide evidence to support your observations. (20 marks)

Social commitment

BMW has set key performance indicators for their social commitment including (BMW Group, n.d.)with goals to increase:

· The number of children and young people by their BMW group educational program from 400,000 in 2019 to 1 million in 2025

· Number of people benefiting from the intercultural innovation award from 3.6 million in 2019 to 6 million in 2025.

This is done through promoting diversity, inspiring the next generation of engineers, contributing to social mobility and inclusion, teaching road safety and employee engagement.

An example of their commitment is the Care 4 Water program, which is the global BMW group program to provide clean water to people in need (Care4Water, n.d.). In 2017, they helped provide 1,930 water filter devices and advise on water management impacting 193,000 people in 25 communities based in Thailand (BMW Group Thailand brings clean water to communities in need, 2017). In the previous year they had donated 1,300 filters and in the coming years distribute at least another 5,000.

In 2011 BMW partnered with Magic Bus, a non-profit organization that supports over 250,000 underprivileged children in twenty states across India. The core aim is based on “helping People Help Themselves’ (Rajkamal, 2014). In the last six years, they have transformed almost a million youth, helping them move out of poverty in India, resulting in helping place at least 10,00 in jobs in an organized sector, and work with over 798 schools (brainfeed, 2019).

Leadership

BMW recently changed their CEO to Oliver Zipse, as there were concerns about Harald Kruegar’s indecisiveness on taking important steps to meet business objectives. He had proven himself, when head of production, with the ability to bring to fruition the record product rollout designed to deliver the profits necessary to pay for the electric and self-driving revolution (Sachgau, 2019).

It is possible that Zipse’s unique education history in computer science in mathematics aboard may help provide him a edge in the changing market, better understanding the changes that are looming (Sachgau, 2019).

Zipse is helping the BMW group ensure to make sustainability and resource efficiency central to their strategic direction. BMW has now set clear target for Co2 reduction up to 2030, and for the first time, these include the entire life cycle from supply chain, production and the end of use phases (Green Car Congress, 2020).

To encourage the correct directions from leaders, BMW has implemented several rewards. These are primarily financial incentives provided if goals of the following climate-related issues are met (BMW Group, 2019):

· Efficiency target in Energy Management

· Emissions reduction target

· Sustainability and Carbon

BMW routinely monitors and assesses climate-related risks at a minimum of every 6 months and are prepared to keep this in place for a horizon well beyond the next years. This is done under the direction of the Sustainability Board, which consist of the full board of management, they make the decisions for the mitigation and adoption of the strategies.

Section 3.

Global impacts of sustainable development initiatives: Describe one real or potential global impact of the sustainable development initiatives of this company. Indicate the magnitude or significance of this impact in terms of its influence on global business and/or society. (10 marks)

Reduction in the consumption of resources

BMW Group’s “Number ONE Next” Strategy aims to making the principle of sustainability a primary anchoring goal, hoping that by the end of 2022, they will have leveraged efficiencies totaling more than 12 billion euros (BMW Group, 2019).

Looking at their average results for the time period between 2006-2017, BMW group reduced its resource consumption and emissions per vehicle produced by 53.2%. This included the following reductions (BMW Group, n.d.):

· Energy consumption – 36.5%

· CO2 emissions 61%

· Waste for disposal 76.6%

· Water consumption 31.9%

· Process wastewater 51.2%

· Solvent emissions 59%

They ensured to include all aspects of the production of the vehicles, such as how to reduce the emissions from welding the vehicles, goals to prevent soil stress, and ways to reduce the impact of their staff in their commute to work (BMW Group, n.d.).

They have worked towards sustainability in their dealerships, including Korea’s first sustainability designed BMW dealership, with solar power that generates 14,000 KWh energy. As well as obtaining 79% of their purchased energy comes from renewal energies, with the long term goal of 100-percent green power, BMW will systematically invest in optimizing its energy efficiency and applying data analytics to make production more efficient. They have also implemented other types of renewable energy such as wind turbines, geothermal cooling (BMW group, n.d.).

BMW recently signed a contract with a Moroccan mining company for sustainable cobalt worth around €100M for fifth-gen batteries, about 1/5th of its cobalt needs. Compliance with environmental standards and respect for human rights is the top priority. The highest sustainability standards apply to cobalt extraction at the Managem Group. This is paired with their contractual agreements with their cell manufactures that they will only use green power to produce the battery cells. This will save them about 10 million tonnes of COCO22 over the next decade (Green Car Congress, 2020).

Currently the BMW group is the only company in the automotive sector continuously listed in the Dow Jones Sustainability Indices since 1999. As well, in 2016, BMW was named the worlds’ most sustainable automotive company by Down (BMW Group, 2016). As such striving for continued sustainability on all levels is a high priority to preserve resources in the full scope of their operations (BMW Group, 2019). There current goals have been set and will extend through to 2030.

BMW recognizes that they require to maintain their good reputation regarding sustainability and continue to invest in sustainable mobility and clean production. To further assist with meeting sustainability standards, BMW has also created a training program for suppliers. They identified key suppliers with high CO2 emissions and designed specific training for those suppliers (A, 2017).

Section 4.

Harnessing technology for sustainable development: Describe (with examples) how this company is using the Internet and other technologies to assist its efforts to move toward sustainable business and development. (10 marks)

Electrified vehicles improved

BMW was a pioneer in the field of electric vehicles, having started production of the i3 battery-electric vehicle in 2013 (King, 2020). They have continued to develop battery upgrades that have resulted in reducing the use of cobalt and manganese in their batteries, and that their electric motors are without any rare-earth metals (Berman, 2020).

BMW has made electrification of vehicles as a primary goal in their corporate strategy, where all bands and models can be electrified as opposed to the traditional petrol based (The BMW Group, 2017). The “Complete Vehicle Architecture” unit within the R&D department coordinates the development and implementation of fuel-saving technologies in the individual vehicle projects.

They have concentrated all of the their technological expertise on battery cells at a new competence center, with the aim to advance the cell technology, investing a total of 200 million euros in the location until 2020 (BMW Group, 2019). The goal of this plant is twofold, develop batteries that will have a higher energy density, as well as ways to make the production process more sustainable and efficient (Nica, 2020). They are hoping to have a capacity to generate more then 500,000 electrified vehicles annually by 2022, employing upwards of close to 2,000 employees long term (Inside EEVS, 2020).

Improving urban quality of life with networked and automated driving

Half of the world’s population uses just 2 per cent of the earth’s surface (From urban spaces to urban ecosystems, 2016), containing close to 4.2 billion people, consume 70 percent of the world’s energy needs (Moran, 2018). This is a model that cannot be sustained indefinitely as the earth can not continue to support the mass consumption of energy.

BMW is implementing several steps to help reduce this impact, as they understand you can not ask people to stop using vehicles. They have developed an ACES Strategy, this stances for Automated Driving, connectivity, electrification, and services (BETTER QUALITY OF LIFE AND IMPROVED MOBILITY, n.d.). This includes vehicles that are emission free, car sharing programs, intelligent parking systems, autonomous driving, ways for cars to communicate with other things and people around it and urban mobility and local public transport development (BMW, 2020).

Internet of Things

On some fronts BMW is becoming Internet of Things(IoT) Driven, BMW was one of the first few players within the automobile industry to adapt the majority concepts of IoT. They aligned with IBM to develop in car Artificial Intelligence. They further partnered with Microsoft to create a personal travel assistance that curates a better driving experience using Azure Platform (Rao, 2017).

In their partnership with Microsoft, they connected over 3,000 machines, robots and autonomous transport systems. With plans to contribute relevant initial use cases to the Open Manufacturing Platform Community. They had previously been cloud based, this was the next logical step (Microsoft News center, 2019).

BMW originally approached IoT as a “adapt or die” approach, starting with rethinking the manufacturing process. They have implemented IoT sensors and each of the facilities, allowing real-time data, which lead to an increase in productivity and reduction in use of a resources (DX Journal Staff, 2018), however it also comes with dangers. In 2018 it was identified that BMW’s with a direct connection to the internet was in danger of being hacked, and 14 different vulnerabilities were identified (Koddos, 2018).

In 2018 BMW Group also acquired Parkmobile, LLC to become the world’s leading provider of digital solutions. It has been found that up to 30% of city traffic is caused by people looking for parking spaces, thus reducing emissions and congestion in urban areas (BMW Group, 2018).

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