Sustainability has never been more important to the automotive industry. The transportation sector, including both passenger and cargo vehicles, accounts for approximately 23 percent of global CO2 emissions annually. The industry has been laser-focused on tailpipe emissions, as they represent 85 percent of an internal combustion engine (ICE) vehicle’s lifetime contribution to total CO2. However, with the adoption of electric vehicles accelerating, it’s time for OEMs to look beyond the tailpipe and address other sources of CO2 emissions by taking a life-cycle view.There are three key themes for OEMs when considering the next big improvement in CO2 reduction.1. The road map to sustainability is different for everyone—know where you are going and how you plan to get there. OEMs and suppliers to the auto industry need to be intentional about where they approach CO2 emissions reductions and where it fits into their internal decision-making priorities. In our work with major automakers and suppliers, we have noticed a few archetypes:Emerging companies starting on their environmental journeys let policies and regulatory changes drive changes to emissions goals and decision-making. In companies where margins or net working capital are tight, it might make sense to prioritize cost-based investments that do not compromise profits. These companies also benefit from learning from other archetypes’ experiences and can invest in technology advancements and strategies that have been proven effective.Evolving companies consider emissions tradeoffs throughout their organization in decision making. These companies have developed a balanced cost–environment lens but still tend to err on the side of costs. For example, they may consider the impact on all scopes of emissions as part of the equation in evaluating make/buy, supplier shifts, or design changes in their manufacturing processes. However, they typically look for opportunities with positive emissions and cost impact.Visionary companies take sustainability to the next level and embed it in all parts of their organization. These companies shift from a balanced cost–environment approach to an environment-first approach, sometimes even at a small price. They recognize that investment in environmentally friendly decisions drives long-term value as a company and for shareholders. Employees at every level of the organization understand the role they play in reaching emissions goals. In our experience, when sustainability is at the core of their operations, these companies realize value through brand credibility, cost savings, and increased revenue.2. There is an old saying—“what gets measured, gets managed” While it is no secret that scope 3 emissions represent up to 80 percent of an OEM’s total emissions, this does not mean OEMs cannot influence their reduction. In most value chains, one company’s scope 3 emissions are another company’s scope 1 emissions. OEMs can send clear signals to their supply base that emissions vs. cost tradeoffs will be considered in purchasing decisions to further incentivize their suppliers. OEMs and tier 1 suppliers should make standard reporting of CO2 emissions by suppliers a contracting requirement and drive their suppliers to reduce their annual and per unit emissions.However, in considering scope 1 emissions in-house, OEMs need to take a foundational approach when it comes to measuring and managing their footprint and facilities' impact on the fixed-CO2 balance of a new car. Companies can mature their approach to go beyond the current standard high-level reporting of CO2 at the corporate or site level. Every person in the organization should understand how their day-to-day decision-making impacts CO2 emissions and strive to meet reduction goals. Whether it be the thermostat setting in the board room or the efficiency of a furnace on the production floor, it is important to create visibility and accountability when it comes to sustainable production.3. Slow and steady won’t win this race Finally, automakers are not going to get the desired results by merely being less bad, or fine-tuning current operations. OEMs need to think outside the box and use nontraditional levers to take reducing their environmental impact to the next level. Some strategies include:Amortize fixed carbon emission investmentsExtending the expected life of an EV reduces lifetime emissions by extending the return on the fixed emissions from the manufacturing of a new vehicle. The CO 2 breakeven point for an electric car is around 70k miles, which equates to roughly five years.Investments in renewable-energy-powered charging stations will reduce the lifetime emissions of a vehicle. If an EV could be powered entirely by wind energy, the breakeven point for emission would be reduced by roughly 40k miles, bringing the breakeven point to two years.Develop circular economies that recycle and reuse emission-heavy materialsEstablishing true circularity in the tire industry creates a self-sustaining locally sourced model that reduces reliance on fossil fuels for material and transportation.Battery recycling can find a new life for the earth metals reducing emissions generated from their mining and refining processes.Pursue new features with environmental upsidesRidesharing services would reduce the fixed carbon investment needed to serve some customer segments.Smart parking features reduce variable energy waste from congestion and idling.The auto industry is making leaps and bounds in their pursuit to reduce tailpipe emissions. That is a great thing. But more remains to be done if the industry is to contribute to and sustain the climate goals of the Paris Agreement. We don’t have the luxury of waiting for EV adoption to peak before mobilizing on other emission reductions. It’s time to start looking beyond the tailpipe and start visualizing a truly net-zero car.