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Climate Change Strategy
Doing our share to meet the collective challenge of climate change is a key responsibility and a strategic priority for Ford.
Our Strategy at a Glance
Over the past decade and more, we have developed a comprehensive approach that puts us in a good place to manage the issues of a changing climate and the opportunities of a changing world. We are focusing on three key areas:
Reducing vehicle emissions
Efficient, state-of-the-art manufacturing
Supporting our suppliers to drive positive change
Our strategy is also shaped by external factors, including government policies, physical risks such as extreme weather and other effects of climate change, market trends, and investor concern over climate change. For detail on these and other risk factors, see the Ford annual report 2017 (Form 10-K), page 12 (pdf, 13.8MB).
You can read more about our progress on climate change from Bill Ford and Jim Hackett.
The Science Behind Our Strategy
Our climate change strategy is based on our commitment to do our share in limiting the global temperature increase to less than 2°C in line with the Paris Climate Accord. Many scientists, businesses and government agencies have concluded that a 2°C limit may help to forestall or substantially delay the most serious consequences of climate change. This is extremely challenging and requires a major effort globally to stabilize carbon dioxide (CO2) concentrations in the atmosphere.
How We Developed Our Approach
Based on climate science and modeling by recognized authorities, including the International Energy Agency, we developed a model of global and light-duty vehicle (LDV) CO2 emissions from different regions.
Using the model, we calculated the 2°C stabilization emission reduction levels for LDVs over time, resulting in “CO2 glide paths” for the LDV sector, taking into account regional differences in vehicle size and fuel consumption, and biofuel availability.
We then calculated Ford-specific glide paths (CO2 reduction goals) for our new vehicle lineups across our major operating regions. We also applied the methodology to determine CO2 reduction targets for our facilities.
To ensure alignment with the latest scientific knowledge, we review our glide path model every year and carry out major updates every five years.
Our CO2 model is not intended to provide “the answer,” but a portfolio of possible vehicle and fuel solutions, as well as insights into cost-effective mobility choices, in a carbon-constrained world.
In the absence of certainty about future regulations, the glide paths are an approximate guide rather than a precise limitation for our long-term fuel economy and CO2 emissions vehicle planning.
Delivering Long-Term Reductions Across Our Lineup
We review our product development plans annually to ensure our vehicles are aligned with the 2°C stabilization glide path. While our plans are based upon delivering long-term reductions in CO2 emissions from new vehicles that are similar to those for the industry-average LDV glide paths, we anticipate that the reductions will vary from year to year. This is due to market forces that we do not fully control, such as energy price fluctuation, changes in the mix of vehicles demanded by consumers and other factors that influence our product plans.
Refining Our Model
Recognizing the long timeframe of climate science, we update our glide path model’s assumptions and input data every five years. In 2017, we completed a major revision, moving to a 2°C temperature stabilization pathway, which is similar to our previous 450 ppm CO2 concentration-based pathway. We also evaluated a 1.5°C sensitivity scenario. Our 2017 glide path is specific to LDVs, instead of an all-sector pathway. Between major updates, we conduct other sensitivity analyses to understand the effect on the glide paths of global changes, such as economic conditions, biofuel availability or regulations. In 2018, we adjusted the model to account only for the physical CO2 emissions from our vehicles and decoupled it from regional regulatory requirements. We are continuing to review the effects of recent LDV regulatory incentives such as electric vehicle multipliers (supercredits) that encourage new technologies but do not physically reduce CO2 and our future vehicle fleet plans including increased electrification.
As climate science, alternative fuels and technologies advance, we will be considering ways to refine and adjust our science-based CO2 targets in future updates – for example, how best to factor in emissions other than CO2 – and how best to recognize the fact that to address climate change, cost-effective actions across different economic sectors are needed.
Two Degree Scenario Analysis Framework
Investors are leading initiatives to establish common strategy and planning assessment tools to evaluate climate change risks and opportunities. Frameworks established for the oil and gas industry evaluate how scenarios, including policies, technology and market and climate trends, could impact their future business strategies and capital planning. Ford is engaging with Ceres, a nonprofit organization encouraging companies to take stronger action on climate change, to develop and validate the framework for the automotive industry and complete the framework for Ford.