We are faced with intertwined, multifaceted global challenges. These include immediate impacts such as record-breaking heatwaves, unprecedented floods in atypical regions, and other extreme weather events significantly driven by climate change, as well as those rapidly evolving silent beasts exemplified by biodiversity loss and ecosystem collapse. Our window to reverse global nature loss is rapidly closing.

We have been collaborating with the World Economic Forum in the past two years to assess how environmental challenges materialize and impact sector activities and business actions. Together, we have developed the Nature Positive Transitions: Sector Report Series, which outlines the different pathways to halt and reverse nature loss by 2030 – the mission at the heart of the Global Biodiversity Framework. Our “Nature Positive: Role of the Automotive Sector – China Deep-dive” report is the first regional deep-dive report within this series and adds country-specific perspectives to the findings in the global automotive report.

China’s automotive sector should lead the world in nature-positive transition

China remains imperative to the world economy and global supply chain. Its automotive sector is one of the leaders in the transition towards autonomous, electric, connected, and shared mobility in this new era driven by the macro forces of technological advancements, policy support, and a heightened focus on sustainability. China has emerged as the largest automotive manufacturing hub globally – the electric vehicle (EV) market is experiencing rapid growth, with EV penetration in the country projected to reach 90% by 2030.

Globally, and within China specifically, society and the economy are deeply interlinked with the natural world. The impacts and dependencies of the Chinese automotive sector on nature span the entire value chain – heavy reliance on key materials with a high dependency on imports makes efficiency and recycling crucial due to high consumption levels. Midstream and downstream activities, including materials processing, production of parts and use of vehicles, all contribute to the overall impact on nature.

In total, 65% of China’s total GDP is at risk due to nature loss. However, there is hope – China has committed to pursuing ecological civilization and green development. The automotive industry’s actions towards a nature-positive transition could enhance the sector’s sustainability and overall competitiveness while also facilitating resilience and new growth opportunities. 

We delve into four major environmental and nature-related challenges of the industry: 

• A heightened impact on environmental assets and ecosystem services, particularly due to the intensified demand for critical minerals like lithium and nickel
• Limited focus on land use assessment and protection, as the industry’s reliance on raw materials pushes operations upstream, potentially leading to increased land use pressure due to intensified extraction activities
• The often carbon-intensive production process for EVs – decarbonization requires cross-industry collaboration and significant investment, including reducing the power grid’s carbon intensity
• Increased water usage leads to a need for improved water stewardship and innovation in water-saving and recycling technologies during extraction and industrial processes 

Given how dependent China’s economy is on nature, urgent actions from policymakers and the private sector are needed to halt and reverse nature loss. By 2030, nature-positive transitions in China can unlock $1.9 trillion worth of annual business opportunities, accounting for close to 20% of the total global opportunities, with the automotive industry alone capturing $161 billion. 

Five priority actions for Chinese automakers to unlock a nature-positive transition

The abundance of opportunities in nature-positive efforts call for business actions and policy support to be realized. The automotive industry in particular is positioned to lead this change through these recommended priority actions.

Avoid and reduce impacts on nature from operations

China’s automotive industry can improve its capacity of conducting comprehensive assessments on nature and establishing robust systems to optimize energy, waste, and water resource management. Automakers should focus on operational decarbonization by adopting energy efficiency measures, such as smart grid technologies to substantially reduce electricity consumption, waste heat recovery or heat pump technology to reduce heat waste, and reducing or recycling freshwater to decrease water consumption.

Avoid and reduce impacts on nature from production materials

Minimizing the impact of raw material extraction and processing on nature can extend the influence of automakers throughout the supply chain, promoting systematic shifts in the automotive industry and the upstream material sectors. Major automotive players can incorporate nature-related assessment factors into procurement and supplier evaluation systems. Automakers can enhance resource efficiency by expanding circularity to lessen solid material waste, such as obsolete car parts and tires, across the value chain.

Transform product offerings for alternative revenue streams

Leading players in China are proactively exploring new business models to find alternative avenues to growth and boost service-related revenue. As China’s automotive industry moves into a stable phase of development, a variety of new business models, such as Mobility as a Service, Battery as a Service, and flexible car subscription services, are facilitating decreases in natural resource use by generating value from service.

Conserve and restore nature with Indigenous Peoples and local communities

Automakers should cooperate with local governments, protected area management committees, non-profit organizations, and other key local stakeholders to proactively protect, restore and invest in landscapes and watersheds in the vicinity of their operations and beyond. Automakers can also proactively explore potential ecological compensation mechanisms in partnership with financial institutions, such as green or blue bonds, voluntary biodiversity certificates or credit markets and nature restoration funds.

Drive cross-sector collaboration on standards, infrastructure, and policy

Automakers should engage with the Chinese government to develop supportive policies, such as enabling data sharing or more effective end-of-life management of vehicles, promoting full-chain data standards and transparency in the industry, incentivizing road testing of new technologies to advance new business models and potentially help reduce resource use, and supporting the establishment of an improved carbon or green certificate trading system and platform.

While some of these actions are already being employed or gradually rolled out by Chinese businesses, this report calls for accelerated efforts in China’s automotive sector. Taking these five priority actions across operations and the wider value chain will help companies in the sector reduce biodiversity loss, mitigate risks to operations, and unlock significant commercial opportunities.