A new report from Bloomberg Intelligence provides a detailed look at the Environmental, Social and Governance (ESG) journey of Mercedes-Benz AG, labelling its ESG route “ambitious”, with its legacy journey bumpy.

Mike Dean, BI Senior Industry Analyst for Auto at Bloomberg Intelligence writes: “Mercedes-Benz AG’s outlook has been enhanced by the spinoff of its Daimler heavy-trucks business, with an ambitious 50% electric-vehicle sales mix now targeted by 2025. Further, CO2 neutrality is sought along all the company’s value-chain stages by 2039. Though Mercedes’ emission-reduction targets are peer-leading and corporate governance trending positively, investigations into anti-competitive practices and rising product-quality concerns remain key business risks.”

Please see a breakdown of the E,S & G factors of the automotive company:

Environmental

1. Mercedes-Benz AG’s climate ambitions are gaining traction following the December 2021 spinoff of its Daimler trucks business. This is demonstrated by the automaker’s upgraded “Ambition 2039” sustainability plan, with an ambitious 50% electric-vehicle sales mix by 2025 vs. the prior 25% target unveiled in 2019
2. Mercedes’ successful rollout of seven new battery-electric vehicle (BEV) models in 2021-22 aims to improve its xEV — BEV and plug-in hybrid electric vehicle (PHEV) sales share and reduce its long-term Scope 3 emissions amid the global regulatory push to phase-out sales of internal combustion engine(ICE) vehicles
3. Mercedes’ 50% xEV sales-mix goal for 2025 is bold, expecting the bulk to be BEVs vs. a1H BEV sales share of just 4.6% (13.4% xEV). The path to achieving this aim relies on uncertain consumer demand, raw materials and charging-infrastructure availability
4. Mercedes plans to have a BEV alternative for all models by 2025 to meet its 100% BEV-sales goal by 2030 (markets permitting)
5. Bloomberg Intelligence sees BEVs making up 34% of Mercedes’ global 2025 sales, with a higher mix in Europe, where ICE sales will be banned starting 2035
6. Mercedes’ climate and decarbonization strategy is one of the most ambitious among European automakers. “Ambition 2039” targets CO2 neutrality along all the stages of the value chain by 2039.The company already met its goal for CO2-neutral production across all global plants by 2022 and boasts an 85% achievement level for its objective for a 50% reduction in Scope 1 and 2 emissions(from a 2018 base) by 2030.

Social

1. Mercedes-Benz AG’s social progress after the damaging Dieselgate scandal is beset by Daimler-era issues. Having embraced safety-enhancing advanced driver assistance systems (ADAS) technology and being more cautious on rolling out risky driverless car technology, rising Daimler-era-related vehicle recalls could spur a long-term hit to brand appeal
2. Despite significant advances in vehicle safety, global recalls have increased as vehicles have become more complex, with Mercedes Benz recording many more incidents in Europe and the US relative to European peers. Greater recalls are likely to damage brand value, reduce loyalty and dent car sales.

Governance

1. Mercedes-Benz AG’s new board chair, the exit of three long-term board members and a relatively refreshed top team improves its governance structure and means senior management now has little association with the damaging dieselgate scandal. Dieselgate settlements aside, Mercedes faces a Turkey investigation over alleged anticompetitive practices
2. Mercedes-Benz AG’s improved record on key board-composition issues such as its refreshment and gender diversity compare favourably with European automaker peers and could help navigate a disruptive period in the automotive industry
3. Mercedes has seven female board members (35%) vs. 28% at European automaker peers, the company has a large supervisory board (20 members), with about 50% employee representatives, which could affect collaboration and key decision-making.

By Mike Dean, BI Senior Industry Analyst for Auto at Bloomberg Intelligence