The BMW Group is upping its purchasing activities in anticipation of 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 in addressing CO2 emissions and sourcing critical raw materials, such as 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 (EVs) in the supplier network, we are simultaneously 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 management board of BMW AG responsible for purchasing and supplier network.
The BMW Group aims to roll out over 7 million EVs on the roads by 2030—two-thirds fully electric. At this scale, BMW Group Purchasing is ensuring that the supply chain can handle higher volumes and implement requirements for sustainable development. In this way, BMW Group Purchasing contributes to the company’s transformation towards e-mobility.
Sourcing batteries for sustainability
Growing demand for EVs will also increase the need for the components and parts that produce these vehicles. About 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 and decisive criterion in selecting our battery cell suppliers. For our fifth-generation battery cells, we have agreed to 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 drivetrain in EVs, this is a crucial lever for long-term cost reduction. The main focus is on cell raw materials and battery cell production. The BMW Group consolidates its extensive know-how in these areas at its own Battery Cell Competence Centre.
Protecting natural resources; respecting human rights
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. 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 exact vehicle produced without these measures. At the same time, the BMW Group is also limiting its use of critical raw materials. It 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 piles of earth.
Corporate due diligence since 2008
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 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 but implements many 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 these steps, the BMW Group agrees on corresponding measures with the suppliers. In this way, BMW Group Purchasing monitors 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.
Sourcing cobalt and lithium directly from mines
However, eliminating infringements of human rights and environmental standards presents a particular challenge in the case of critical raw materials lithium and cobalt, both of which are vital components for the production of battery cells. For both raw materials, BMW Group Purchasing has implemented additional measures to ensure cobalt extraction and processing comply with sustainability standards and to avoid problems with working conditions, e.g. child labor. The company is, therefore, sourcing cobalt and lithium directly from the mines and making them 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 extracting raw materials when the process is not industrialized 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 the 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 the German Agency implements for International Cooperation (GIZ), is to develop and professionalize 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.
compliance key toward sustainability
The BMW Group has implemented additional measures to tighten compliance with environmental and social standards for supplemental 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 critical points in the supply chain.
Mines and smelters are a focal point: Here, direct contact can be increased through collaborations. It is also essential that mines and smelters are certified according to strict, internationally recognized standards. To this end, BMW Group Purchasing is actively involved in international standardization 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, expanding other local projects like “Cobalt for Development” is also conceivable, extending direct purchasing of critical raw materials.
Managing finite 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 natural materials multiple times in a circular economy. The growth in e-mobility makes the circular economy increasingly crucial because of the many critical raw materials needed for battery cells. Secondary material reduces CO2 emissions substantially compared to primary materials: by about a factor of four to six for aluminum.
Reducing CO2 emissions by 20% in 2030
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 the highly energy-intensive production of battery cells and increased use of aluminum. 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, using green electricity to produce the battery cells in the BMW iX has led to a significant reduction in CO2 emissions in the supply chain. (Story and photo courtesy of BMW Global)