Automobile manufacturers face a rising challenge. To comply with environmental, social and governance (ESG) regulations, they must be able to identify, classify and manage all materials and substances present in their products — from the least critical to the most dangerous.
However, this information can be difficult to obtain. That’s because automotive supply chains are highly complex; so are automakers’ own development processes. And while the auto industry is fortunate to have an automated system for collecting the required information for compliance, difficulties still exist.
Demands for compliance reporting are increasing, too. Automakers now face new and amended regulations that include end-of-life vehicles (ELV); reuse, recycling and recovery (RRR); and restrictions of hazardous materials, such as the European Union’s RoHS and REACH directives.
Further complicating matters, ESG legislation varies by region. For example, the EU’s ESG regulations differ from those of Japan. So do the EU’s newly proposed rules on ELV, currently available as a draft. Yet most automakers operate internationally, meaning they may need to run separate compliance programs for each of their operational regions. To coordinate regional efforts, automakers may also need central, overarching compliance organizations. The work quickly becomes complicated to run, staff and manage.
Auto manufacturers are also under pressure to join the “circular economy,” in part because circularity is becoming a new demand from consumers, and requirement from regulators and others. Under the circular model, automakers would not discard materials, but instead repair, reuse and recycle them. So they need to monitor and manage their supply chains and production processes to conform with legislation and comply with Europe’s Green Deal initiative that is aimed at making the EU climate-neutral by 2050.
However, achieving circularity and recyclability is far from easy as the automotive supply chain has massive size and global reach, also interacting with other industry chains, making monitoring and management difficult.
More regulations, arriving faster
Another factor makes the ESG task even more difficult: the quickening pace of regulatory update cycles. This requires automakers to review their compliance programs and make necessary adjustments more frequently than in the past, raising both their compliance workloads and their associated costs.
Most of these efforts will be mandatory, as the cost of noncompliance can be high. An automaker that fails to comply with even one ESG regulation risks legal liability, sales downturns in the affected region and severe reputational damage. Given these risks, most automakers will instead make the investments necessary for compliance.
To meet these challenges, automakers will need to implement several big changes. These can include designing products for sustainability, connecting their ecosystems to facilitate circular economy transactions, managing all ESG regulatory compliance processes and automating related calculations that were previously done manually.
- Identify all materials and substances present in their vehicles
- Inherit and certify the materials mix of parts from their suppliers, then associate these in the product bill of materials (BoM)
- Check critical and dangerous substances against threshold tolerances, then communicate these findings with the appropriate regulatory authorities
- Associate each substance or material in a vehicle with its specific end-of-life treatment cycle
- Verify final product compliance against the specific regulations of the target market
- Balance the need for ESG compliance with overall parameters such as cost and ease of recycling
The threefold path to sustainability
To meet these efforts, automakers can adopt and integrate industrywide solutions. Fortunately, they now enjoy three powerful options: IMDS, CDX and MaCS. Let’s look at each in some detail:
International Material Data System (IMDS): A single materials platform for the auto industry, this solution is now the de facto standard. With it, data on materials used for auto manufacturing worldwide is collected, maintained, analyzed and archived. Using the IMDS, automakers can meet their obligations under national and international standards, laws and regulations. IMDS can also be integrated with the larger ecosystem, using technical interfaces to communicate with other applications such as SAP. In the future, IMDS may even communicate with industry standards such as the Catena-X open data ecosystem.
Started in 2000, IMDS has since been expanded and improved with new functionalities. Originally, it was adopted by traditional automakers only. But today IMDS is an industry solution used by nearly 50 OEMs worldwide for exchanging data across their corporate boundaries. Their ranks now feature electric-vehicle makers including Tesla and Rivian. Across the larger automotive industry, IMDS is used by more than 200,000 people at over 120,000 auto suppliers in 140 countries.
Compliance Data eXchange (CDX): This cloud-based Software-as-a-Service (SaaS) solution is operated and supported by DXC Technology’s in-house developer team, working with recommendations from the manufacturing industry. Developed from IMDS, CDX is intended for non-automotive manufacturers but it serves the auto industry as an additional solution for materials data compliance. It supports product data management and supply-chain communication to assess product safety, compliance and sustainability. And it’s designed to free users from many burdensome IT considerations and constraints. In other manufacturing sectors, CDX offers a robust solution for automating manual methods of data collection.
Material Collector System (MaCS): This solution, fully integrated with IMDS and CDX, has been designed by DXC to run on a SaaS platform. It empowers manufacturers to comply with the current ESG regulations (e.g. preparing the SCiP dossier, automatically running all the product compliance checks) and to maximize the recyclable and reusable portion of components and materials when designing products, to minimize their environmental footprints.
MaCS lets automakers associate the composition of each supplier’s part as described in the associated Materials Data Sheet, with the structure of the final product that is typically described in the OEM’s BoM. Therefore, automakers can use MaCS to test different versions of their BoMs to find the version that will have the lightest impact on the environment.
Coming soon: digital product passports
Another important aspect of designing for sustainability is the digital product passport (DPP). Proposed by the European Commission in 2022, the DPP platform, once approved, will gather information about each recyclable component’s life cycle, digitally store the data in the cloud and then provide easy data access to stakeholders.
The goals of DPP include:
- Increase the traceability and availability of product data across the entire life cycle, including ELV, supporting a circular economy
- Foster more sustainable production with a BoM that minimizes the environmental footprint — including once a vehicle is dismantled
- Encourage and empower consumers to make informed, eco-friendly choices
- Verify that laws are followed, including processes for after end-of-life, when each material (such as plastic and metal) must be treated appropriately
While full approval and implementation of the DPP platform is still years ahead, the time for automakers to prepare is now. In fact, several DPP research programs and EU Horizon projects have already started to support designing the DPP process framework, its distributed data model and communications among different industry chains – for example, automotive and mass electronics manufacturers can share information regarding all electronic components used in the auto supply chain.
How DXC can help
Designing for automotive sustainability is a big, complex job. Fortunately, you don’t have to do it alone. DXC Technology can help.
DXC has more than 20 years of experience in both compliance and product-data management. We understand the upstream and downstream supply chains needed for circularity today, and for digital product passports in the future. DXC is also committed to achieving greater sustainability in our own operations and services, and to helping our customers do the same.
Working with DXC, you can choose from several sustainability solutions. These can help you ensure circular economy product compliance, manage ESG data and reporting, reduce your IT estate’s carbon emissions and develop targeted insights.
In addition, DXC’s reporting and analytics can help you collect and consolidate data across your supply chain. This can support your compliance requirements (with, for instance, the EU’s SCIP for substances of concern), lower your overall costs, provide a single source of truth, and improve transparency for your suppliers.
What you want to manage, you have to measure. That’s why DXC supports three important tools for compliance: IMDS and CDX to collect external data, and MaCS to associate supply-chain data with company-internal BoM data. MaCS also lets you simulate different combinations of components to achieve the best recyclability indexes, enhancing your early planning and forecasting work.
Working with DXC, your organization can comply with new regulations, advance your product sustainability, and help make the planet a little cleaner.