IFRS Foundation

Auto Parts

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Entities in the Auto Parts industry supply motor vehicle parts and accessories to original equipment manufacturers (OEM). Auto parts entities typically specialise in manufacturing and assembling parts or accessories, such as engine exhaust systems, alternative drivetrains, hybrid systems, catalytic converters, aluminium wheels (rims), tyres, rear-view mirrors, and onboard electrical and electronic equipment. Although the larger automotive industry includes several tiers of suppliers that provide parts and raw materials used to assemble motor vehicles, the scope of these Auto Parts industry disclosures includes only Tier 1 suppliers that supply parts directly to OEMs. The scope of the industry excludes captive suppliers, such as engine and stamping facilities, owned and operated by OEMs. It also excludes Tier 2 suppliers, which provide inputs for the Auto Parts industry.

Relevant Issues (6 of 26)

Why are some issues greyed out? The SASB Standards vary by industry based on the different sustainability-related risks and opportunities within an industry. The issues in grey were not identified during the standard-setting process as the most likely to be useful to investors, so they are not included in the Standard. Over time, as the ISSB continues to receive market feedback, some issues may be added or removed from the Standard. Each company determines which sustainability-related risks and opportunities are relevant to its business. The Standard is designed for the typical company in an industry, but individual companies may choose to report on different sustainability-related risks and opportunities based on their unique business model.

Disclosure Topics

What is the relationship between General Issue Category and Disclosure Topics? The General Issue Category is an industry-agnostic version of the Disclosure Topics that appear in each SASB Standard. Disclosure topics represent the industry-specific impacts of General Issue Categories. The industry-specific Disclosure Topics ensure each SASB Standard is tailored to the industry, while the General Issue Categories enable comparability across industries. For example, Health & Nutrition is a disclosure topic in the Non-Alcoholic Beverages industry, representing an industry-specific measure of the general issue of Customer Welfare. The issue of Customer Welfare, however, manifests as the Counterfeit Drugs disclosure topic in the Biotechnology & Pharmaceuticals industry.
General Issue Category
(Industry agnostic)

Disclosure Topics (Industry specific) for: Auto Parts

Energy Management
  • Energy Management

    Most energy consumed in the automobile manufacturing process occurs in the supply chain. Auto parts manufacturers use electricity and fossil fuels in their production processes, resulting in direct and indirect emissions of greenhouse gases (GHGs). Purchased electricity is a majority of the energy used in the Auto Parts industry. Sustainability initiatives such as incentives for energy efficiency and renewable energy are making alternative sources of energy more cost competitive. Regulators and consumers also are encouraging the industry to reduce GHG emissions. While managing the cost and risks associated with overall energy efficiency, reliance on various types of energy and access to alternative energy sources may become increasingly important.
Waste & Hazardous Materials Management
  • Waste Management

    Manufacturing auto parts involves the use of significant amounts of materials (including steel, iron, aluminium, and plastics, among others). Types of waste generated by the industry include machine lubricants and coolants, aqueous and solvent cleaning systems, paint, and scrap metals and plastics. A significant portion of auto parts manufacturers’ revenue is spent on the cost of materials. Therefore, entities that are able to manage their manufacturing inputs through reducing and recycling waste are likely to be better protected from price volatility and the risk of supply disruptions. Moreover, auto parts manufacturers can achieve savings and improve operational efficiency by increasing the amount of waste that is recycled. At the same time, auto parts manufacturers that cause negative environmental impacts through their waste management practices are likely to face regulatory oversight. Violation of environmental regulations is likely to generate legal expenses as well as capital expenditures for pollution-control facilities and occupational safety and health projects.
Product Quality & Safety
  • Product Safety

    Driving is a risky activity, as distracted driving, speeding, drunk driving, and dangerous weather conditions, among other factors, can lead to accidents that expose drivers, passengers, and bystanders to possible injuries and deaths. Accidents can also be caused by defective parts in vehicles, and failure to detect defects before vehicles are sold can have significant financial repercussions for both automobile and auto parts manufacturers. Ensuring vehicle safety and responding in a timely manner when defects are identified can protect auto parts entities from regulatory action or customer lawsuits, which might otherwise result in significant costs. It can also help them retain their relationships with original equipment manufacturers (OEMs), which often select Tier 1 suppliers based on their safety performance and reliability. As cars incorporate more sophisticated electronics and other technologies, the risks related to recalls may increase. Through effective management of product safety, auto parts entities can enhance their reputation and drive higher sales over the long term.
Product Design & Lifecycle Management
  • Design for Fuel Efficiency

    Automobile manufacturers increasingly are demanding motor parts and components that reduce vehicle fuel consumption. Fuel-efficient components and parts are critical in reducing automobile tailpipe emissions through energy efficiency gains and weight reductions, among other factors. Auto parts entities that design and manufacture such parts may increase sales to auto manufacturers that increasingly are facing stricter environmental regulations and customer preferences for more environmentally friendly cars.
Materials Sourcing & Efficiency
  • Materials Sourcing

    Entities in the Auto Parts industry commonly rely on rare earth metals and other critical materials as key inputs for finished products. Many of these inputs have few or no available substitutes and are often sourced from deposits concentrated in few countries, many of which are subject to geopolitical uncertainty. Other sustainability impacts related to climate change, land use, resource scarcity, and conflict in regions where the industry’s supply chain operates are also increasingly shaping the industry’s ability to source materials. Additionally, increased competition for these materials due to growing global demand from other sectors can result in price increases and supply risks. These materials play a crucial role in clean energy technologies, such as electric and hybrid vehicles. As regulators aim to reduce greenhouse gas emissions and consumer demand grows for more fuel-efficient vehicles, the share of hybrids and zero-emission vehicles (ZEVs) produced by the Automobiles industry is likely to continue to increase in the future. Entities that are able to limit the use of critical materials, secure their sourcing, and develop alternatives will protect themselves from supply disruptions and volatile input prices, which may impact their margins, risk profile, and cost of capital.
  • Materials Efficiency

    Millions of vehicles worldwide reach the end of their useful lives every year. At the same time, the rate of vehicle ownership is expanding globally, leading to more end-of-life vehicles. To lower the lifecycle impact of vehicles, auto parts manufacturers can design their parts to be easily recyclable and reusable and can apply modularity principles to product design. They can also create take-back programs to ensure safe disposal and reuse of the products. Given input price volatility and resource constraints, auto parts entities that manage materials efficiency are likely to improve their long-term operational efficiency and strengthen their risk profile. In addition, entities can potentially reduce their manufacturing costs by using fewer materials and/or recycling materials, which will improve margins.
Competitive Behavior
  • Competitive Behaviour

    Competitive business practices are an important governance issue for entities in the Auto Parts industry. Although industry concentration is low, there is a wide range of auto parts, and competition for business within each category of parts may not be robust. Thus, leading producers of any specific auto part may wield substantial market power in that segment, creating antitrust concerns. Collusion and price fixing by auto parts manufacturers ultimately leads to costs being passed on to consumers through higher vehicle prices. If involvement in such activities is discovered, the imposed penalties and reputational damage may have an acute impact on an entity’s valuation and balance sheet.

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