Case study 12.2: BMW makes the case for environmental sustainability

In developing its environmental strategy, the BMW Group has long embraced the philosophy of ecological modernisation. In 2003, Dr Helmut Panke, the then Chairman of the Board of Management, said ‘the experience of the BMW Group shows that economic efficiency and sustainability can be compatible with one another1.’ Also in 2003, Board member, Dr-Ing Burkhard Göschel, commented that ‘innovations create success and safeguard the future viability of companies. They are also essential for sustainable development1’. Ten years later, the company’s 2013 Sustainable Value Report stated that ‘sustainability is seen as making a positive contribution to the business success of the company. ... sustainability measures have led o cost savings or generated revenue – thus validating the business case for sustainability’.

At the end of 2013, the BMW Group operated 28 automobile production and assembly facilities in 13 countries worldwide and produced almost two million vehicles. The company aims to imbue an integrated strategy across all its operations, wherever they are in the world, transferring and implementing best practice developed in one location to all plants and demanding high sustainability standards from all suppliers throughout its supply chain.

The company has a policy of flexible capacity management in an integrated production network. For example, changes to a particular model can be made almost simultaneously throughout the world and production can be balanced across the Group by changing the output of individual production lines to different models, thereby enabling the Group to react swiftly, flexibly and efficiently to market requirements. This has become extremely important in view of the seemingly constantly shortening production cycles, greater technical complexity of the product and continuing internationalisation.

All existing and future BMW production facilities and central planning units are required to operate an environmental management system (EMS). In 2013, all plants had ISO14001 certification - the Manaus motorcycle plant in Brazil was the exception but this plant is expected to acquire the necessary certification in 2015. Moreover, all German and Austrian sites have undergone external audits and meet EMAS standards (see below).

An increasingly common practice among vehicle and other manufacturing MNEs is to consider the quality and management systems in the selection of suppliers. In order to ensure sustainability throughout the supply chain, BMW has been doing this for some time. Suppliers must meet the same environmental standards as BMW facilities and, as part of their contractual arrangements with BMW, they must implement an EMS. This applies not only to first-tier suppliers but also to sub-suppliers. If a supplier is considered to be at high risk of breaking BMW sustainability principles or is suspected of non-compliance, that supplier can be required to undergo an independent audit into its sustainability performance. A finding of non-compliance will initially lead to the joint development of a plan to remedy the problem. Non-co-operation or severe breaches of sustainability requirements can ultimately lead to a termination of the contract between BMW and its supplier.

Sustainability is wholly integrated into product development and all activities within the BMW Group which produced its first overarching environmental plan in 1993. The current strategy is geared to meeting the objectives set out in Table 12.1.

Table 12.1: BMW’s key environmental sustainability outcomes and targets
Activity / Performance / Target
Reduction of resource consumption and emissions / Reductions per vehicle –
2006-13 (%) / By 2020
Energy consumption
Water consumption
Process wastewater
Non-recyclable waste
Solvent emissions
CO2 emissions / -31.0
-33.1
-42.7
-69.7
-36.7
-35.2 / Reduce consumption of resource per vehicle by 45% compared to 2006

The following, far from exhaustive, examples demonstrate how BMW is working to achieve these targets.

  • Electromobility: BMW has developed its ‘i’ brand as a separate brand: in 2013, it introduced its first fully electric premium vehicle, the BMWi3, into the European market and was launched into the markets of the Americas and Asia in 2014. The BMWi3 is designed to generate at least 50 per cent fewer greenhouse gas emissions over its full life cycle than conventional internal combustion engines and is suitable for urban driving. The ‘i’ range is to be developed further and the hybrid sports car, BMWi8, began production in 2014. The company is also expanding its range of electric motorcycles.
  • Efficient dynamics and driver management: the company’s Efficient Dynamics strategy has resulted in a number of technological advances that help increase fuel efficiency and reduce emissions. More specifically, these innovations include intelligent energy management, lightweight construction, optimal aerodynamics, forward-looking drive control, air flap control, etc. The results of the Efficient Dynamics Strategy have been incorporated into all new vehicles since 2007. The company sees potential for further significant reductions in fuel consumption by combining Efficient Dynamics with ConnectedDrive, a package of intelligent technologies that, through interacting with the driver, help him/her make more environmentally positive decisions during the course of a journey and adjust driving styles accordingly. Active Coating, brought to the market in 2012, is but one example of such technologies: by releasing pressure on the accelerator, the driver automatically disconnects the engine from the gearbox and the vehicle slows down via air resistance and the rolling resistance of the tyres alone. Operated in conjunction with the Proactive Driving Assistant which uses data about road conditions and accumulated knowledge about an individual’s driving style to give the driver tips on how to drive in the most fuel efficient way, can be particularly effective.
  • Logistics: the rapid growth of its business in North America and China and the need to transport raw materials and components to its production facilities and to transport finished vehicles to the customer means that BMW itself has a large demand for transport. Wherever possible, BMW utilises the more carbon efficient rail system over road transport. Where road transport is unavoidable, BMW requires carriers to use the most energy efficient vehicles available.
  • Energy consumption at production facilities: all BMW sites are required to use the most sustainable energy resource available to it. By 2013, 48 per cent of electricity consumed by BMW (up from 28 per cent in 2011) was from renewable electricity. This was achieved by production facilities generating their own power or by using local sources. For example, combined heat and power is utilised at eight locations – not only does this utilise the electricity generated but also the waste heat from the process. In 2013, four wind turbines were commissioned at the Leipzig production plant to feed into the production of the BMWi3. Also since 2013, about 30 per cent of the heat required by the Steyr engine plant has been supplied by a neighbouring biomass thermal power plant fuelled by timber waste from the region. Two bonuses flow from this strategy: first, auto generation and drawing energy from locally produces renewable sources increases the Group’s energy security and the risk of production losses arising from any disruptions in the broader energy supply network. Secondly, the utilisation of more sustainable energy and improvements in energy efficiency is, according to BMKW’s 2013 Sustainable Value Report2, ‘a significant business opportunity’. This arises from the expected evolution of the EU’s Emission Trading System (see below) which is expected to reduce the emissions allocation allowance year on year. Therefore, every unit of energy saved or emission avoided pays off in terms of fewer allowances that need to be purchased.

Case questions

  1. ‘For us, sustainable operations constitute a long-term business case: sustainability means making a lasting positive contribution to the company’s economic success.’2 – page 12 Using the information from Table 12.1, from the rest of the case and any further information you can uncover about BMW, consider why BMW makes this claim.
  2. What challenges might BMW encounter in extending its sustainability strategy to its first-tier suppliers and sub-suppliers?
  3. This case study only touches upon a few of the many sustainability initiatives undertaken by the BMW Group. What other possibilities can you identify (through brainstorming and/or further researching the company and/or industry)?
  4. The case study explicitly refers to two European initiatives - EMAS and ETS - which have a direct impact on BMW. Research other areas where EU environmental policy impacts on BMW’s operations.

1 BMW Group Sustainable Value Report, 2003-4

2 BMW Group Sustainable Value Report, 2013