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The Big (Electric) Poker: BMW goes all out

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Summary

With its first Integrated Group Report, BMW accepts that its business model and sustainability cannot be separated and that the group needs to be managed according to both financial and non-financial parameters. Its publication marks the completion of an important phase of internal ambition-setting and culture-change. One important goal: by 2030 50% of all its vehicles in use will be battery electric.

What is it about

On 17. March 2021 BMW Group has published a single Integrated BMW Group Report, for the first time combining its Annual Report and its Sustainable Value Report for the reporting year 2020.

Why is it important

The German auto industry is in the midst of a far-reaching upheaval which has also been dubbed “biggest crisis since the invention of the automobile”. The combined tectonic shifts of electrification, autonomous driving and shared mobility as a service are threatening all incumbents to their mark. BMW’s leaders, however, continue to see much room for growth in the automotive sector. This does not come as a surprise, knowing that the internal combustion engine continuous to be much more profitable than its electric alternatives. Consequently, there is pressure from investors who want to understand how BMW and the other leading auto makers intend to manage, or dare one say, survive, the enormous economic, social and technological pressures of this global transformation.

Up until now, it has been a rare occasion to see a global industry leader provide investors and all other relevant stakeholders with one single coherent narrative. More often than not, investor information remained stuck in conventional “business as usual” forecasts while the same companies published glossy sustainability reports painting an almost utopian future of digital and green mobility.

For the first time, BMW signals with one Integrated Group Report that one form of success (i.e. financial) cannot be achieved without the other (i.e. performance for society and the environment). And, it underpins that companies need to take their long-term investors along on this demanding journey of complete re-building of an industry and provide a continuous, honest and convincing narrative.

The Globalance View

The big German automobile companies are currently outbidding each other with announcements of electrification and a total restructuring of the industry. This makes radical transparency and accountability all the more important.

BMW is taking an important step with its first integrated report. It underlines how profound and demanding the transformation of a complex, global-integrated industry is. The report highlights a number of significant achievements: ambitious CO2-reduction targets for 2030 have been set and cascaded through the organization linking them to financial key performance indicators; a goal of 50% battery electric cars (BEV) by 2030 is ambitious, and in production the secondary first-rule applies with immediate effect (i.e. the use of recycled materials are the default).

Knowing that engineering-led European multinationals never make public commitments without detailed internal plans how to achieve them, BMW’s step is all the more noteworthy: linking non-financial to financial performance indicators presumably required a re-calibration of accounting systems making goals measurable and results auditable. It does not take much to assume that this first external integrated report marks the completion of an important phase of internal ambition-setting and culture-change. There is no going back now.

The real challenge: how is a net-zero climate emissions world going to define "premium mobility", and can BMW also transform this concept?

Disclosure: Globalance does not currently include BMW in its mandates or funds.

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