Truck manufacturers invest more CO2 intensively than oil, steel or cars – research

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Investors are in for a shock as Scope 3 disclosure requirements come into effect next year, with truck makers' emissions 50% higher than what they report to investors. The only sector T&E could find with an average carbon intensity higher than that of truck manufacturers is mining

European truck manufacturers' emissions are 50% higher than what they report to investors, a new Transport & Environment (T&E) report study shows. The study of Europe's top truck manufacturers – Scania, MAN, Renault, Volvo, Mercedes-Benz, DAF and Iveco – shows that investments in truck makers are more carbon intensive than oil, steel and cars [1]. Now that the mandatory scope 3 reporting for investors comes into effect this year [2]T&E is calling on all truck manufacturers to switch to zero-emission models as soon as possible to avoid becoming 'carbon bombs' in their portfolios.

European truck manufacturers have already started publishing sustainability reports, but to date there is no legal requirement to report on indirect emissions – known as scope 3. The average truck uses 450,000 liters of fuel over its lifetime, which is good for 99.8 % of a truck manufacturer's total carbon impact.

T&E's analysis shows that Mercedes-Benz and DAF fail to report their full scope 3 emissions and as a result report only 0.1% to 0.2% of their total emissions. IVECO reports only about a third of its scope 3 emissions, while Renault and Volvo also underestimate their emissions. The reports from MAN and Scania are accurate [3].

Xavier Sol, director of sustainable finance at T&E, said: “Truckmakers have had an easy time in the financial markets until now, as their true climate impact has been hidden from investors. This is changing. As the true extent of truck manufacturers' Scope 3 emissions becomes clear, the industry could be in for a serious shock. To avoid being seen as carbon bombs in their portfolios, truck manufacturers must move to zero emissions as quickly as possible.”

Truck manufacturers are already a more carbon-intensive investment than other heavily polluting industries, such as oil and steel, in terms of reported carbon emissions per euro of turnover[4]. The only sector T&E could find with an average carbon intensity higher than that of truck manufacturers is mining. The truck manufacturers with the most extensive scope 3 reporting – MAN and Scania – pay a fine if they disclose a higher carbon intensity. From next year, all truck manufacturers in Europe must disclose their scope 3 emissions to investors.

Less than 3% of heavy vehicle sales today are electric, compared to 15% for cars. If truck manufacturers in the EU sold only zero-emission vehicles, as Tesla and BYD already do, their carbon footprint could drop by 95%. A new EU regulation adopted earlier this month requires truck manufacturers to increasingly sell zero-emission vehicles. T&E analysis shows that this will reduce their emissions by 29% by 2030.

On April 10, the EU finalized a new law to reduce CO2 emissions from heavy-duty vehicles (HDVs). The law obliges truck and bus manufacturers to sell an increasing share of zero-emission vehicles from 2025.

Xavier Sol said: “Truckmakers are one of the most carbon-intensive investments on the market today. But new EU CO2 standards for trucks will cut truck manufacturers' emissions by almost a third. The faster truck manufacturers transition to electric, the more attractive they will become to investors.”

The research also points to the inability of ESG ratings to provide a true assessment of the climate impact of truck manufacturers, with most rating agencies giving truck manufacturers' sustainability scores comparable to those of some renewable energy producers.[5]. For example, Mercedes-Benz performs better in Bloomberg's environmental rankings than Siemens Gamesa, a wind turbine arm of Siemens. This is largely because less than 3% of Bloomberg's environmental score is based on scope 3.

There is also very little correlation between scores from different providers. Daimler is the best performing truck manufacturer according to Sustainalytics, another rating agency, but still receives one of the lowest scores from the other two providers (Bloomberg and S&P). This limits the usefulness of ESG ratings, says T&E. In road transport, the EU taxonomy better reflects a truck manufacturer's actual environmental performance as it directly takes into account the ratio of green investments to revenues associated with zero-emission trucks.

Notes for editors:

[1] An important metric for investors assessing a company's environmental performance is its carbon intensity, expressed as tonnes of CO2 emissions per million euros in turnover.

[2] The European Sustainability Reporting Standards (ESRS) require large companies to conduct and publish their sustainability reports. Truck manufacturers will report their CO2 emissions in scope 1, 2 and 3 from financial year 2024 (reporting by the end of 2025 based on 2024 data). The EU regulatory technical standards supplementing the Sustainable Finance Disclosure Regulation (SFDR) also require financial institutions to fully disclose their scope 1, 2 and 3 emissions by June 2024 (reporting by June 30, 2024 based on of 2023 data).

[3] T&E makes a conservative estimate by only taking into account one of the 15 categories of scope 3 emissions (use of products sold). This represents between 94% and 97% of the truck manufacturers' total. T&E also uses EEA CO2 emission factors, which are based on what companies disclose and are normally lower than the actual factors. In reality, truck manufacturers' emissions are therefore likely higher than estimated by T&E in this analysis. Furthermore, the estimate for MAN is lower because we do not include the 21,600 vans they sold in 2022 in our calculations. We therefore believe that the reports from MAN and Scania are accurate and not over-reported.

[4] The carbon intensity is calculated based on the CO2 emissions and revenues as reported by the companies themselves.

[5] SunPower Corp, Vestas Wind Systems, Siemens Gamesa Renewable Energy (renewable energy equipment manufacturers) and Brookfield Renewable Partners (renewable energy supplier) are among the Company Knights' ranking, with 100% sustainable turnover and investments. However, they all score lower than Volvo in the Bloomberg 'E' score. Likewise, they all score worse than Daimler in Sustainalytical score.

Thanks to Transport & Environment.