Automotive Leadership:  Volvo Cars Aspires To Become A Circular Business

Automotive Leadership: Volvo Cars Aspires To Become A Circular Business

In this article, Robert Austin discusses how Volvo Cars hopes to save more than $100 million in annual operating costs while reducing 2.5 million tons of carbon emissions by implementing Circular Business principles.

Robert Austin
Robert Austin

For a relatively small car manufacturer, Volvo has frequently taken the leading role in the areas of safety and environmental developments.  The company has already announced that it will be shifting its entire production of new vehicles over to EVs as soon as possible, but now, it is making an even larger commitment to both the environment and the advancement of vehicle production efficiency.  Volvo Cars aims to save over $100 million in annual operating costs and reduce 2.5 million tons of carbon emissions by adopting Circular Business principles.

"Volvo Cars has one of the most ambitious climate plans in the car industry, and if we are to reach our goals, we need to embrace the circular economy," said Anders Karrberg, head of global sustainability at Volvo Cars. "This requires us to rethink everything we do and how we do it.  We put a strong focus on integrating sustainability into the way we think and work as a company, and we are making it as important as safety has always been to us."

Circular Solutions, Business Strategy, And CO2 Reductions

To become a circular business by 2040, Volvo Cars is convinced that every part of its cars should be designed, developed, and manufactured to be used and re-used, either by the company or its suppliers.  Volvo Cars will create closed materials loops for emissions-heavy materials such as steel and aluminum and manufacture, repair, re-use, and refurbish parts.

By focusing on resource efficiency and retaining the value created in components for as long as possible during the lifecycle, the company wants to optimize the use of materials, components, and cars while eliminating waste in the process.  This will lead to financial savings and new revenue streams and significantly lower the company's environmental impact.

For many years now, Volvo Cars has remanufactured parts such as transmissions and engines to use materials better and reduce emissions.  In 2020 around 40,000 parts were remanufactured, saving nearly 3,000 tons of CO2 emissions.  By 2025 Volvo Cars aims to more than double its remanufacturing business.  To ensure that valuable material can be kept in circulation, the company recycled 95% of its production waste last year, including 176,000 tons of steel, which avoided the generation of nearly 640,000 tons of CO2.

In 2020, Volvo Cars became a member of the Ellen MacArthur Foundation, the world's leading Circular Economy Network.  Joe Murphy, Network Lead at the Foundation stated, "We welcome Volvo Cars' commitment to design, develop and manufacture their products to be used and re-used.  It is very encouraging to see the link being made between circular solutions, business strategy, and a reduction in carbon emissions.  The circular economy offers companies a framework for viable long-term growth that also benefits society and the environment."

The rapid change over to electric vehicles anticipated during this decade will eventually result in an abundant supply of used batteries. New business models such as finding a second life for vehicle batteries are critical from a circular business perspective.  By utilizing batteries in non-automotive energy storage applications, new revenue streams and cost savings can be realized while also extending the lifecycles of the batteries.

Second Life Applications For Batteries

Together with suppliers and partners, Volvo Cars is exploring the potential in second-life applications for high voltage batteries.  A current example is its collaboration with BatteryLoop, a company within the Swedish Stena Recycling Group that re-uses batteries from the automotive industry. Together with Volvo Cars, they use batteries from electrified Volvo cars for a solar-powered energy storage system. Starting just this April, the system will power charging stations for electric cars and bikes at Swedish health firm, Essity's business center just outside of Gothenburg.

Another project, this time with Comsys AB, a Swedish clean-tech company, and Fortum, a European energy company, Volvo Cars is engaged in a pilot project.  It aims to increase supply flexibility at one of Fortum's hydropower facilities in Sweden while contributing to a second life for electric vehicle batteries at the same time. Battery packs from plug-in hybrid cars will serve as a stationary energy storage unit, helping to increase the fast-balancing capabilities of the power system.

Through these and other projects, Volvo cars is exploring and learning about the second life opportunities for EV batteries after losing their ability for quick/powerful recharging required for vehicular use. They also help the company to gain more knowledge about the commercial value of this type of battery after their automotive life is over and the economics of used batteries as a revenue stream.

Volvo’s Leadership

Will Volvo Cars be able to be a fully Circular Business by 2040?  I don't know. But I do know that they will try hard to achieve it.  And I know that other companies worldwide watch Volvo Cars for leadership in safety and the environment.  Perhaps the same leadership that Volvo showed in promoting the importance of automotive safety and creating the first engines with closed-loop self-adjusting fuel injection with 3-way catalytic converters will spread the concept of Circular Business to companies around the world.  That is probably even more important than whether or not Volvo makes its 2040 objective.

Here's a video about Volvo Cars' Circular Business aspirations.

I had the good fortune to work for Volvo Cars in their North American headquarters for more than thirty years.  They have always had a brand name that was way larger and better known than many of their competitors despite their relatively small volumes.  It may be a function of their Swedish heritage. Still, since its inception, the company has always placed a premium on the value and quality of life and the protection and preservation of the environment.  This is simply the latest example.

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