Contemporary Amperex Technology Co. Ltd. (CATL), the world’s largest electric-vehicle battery manufacturer, is offering incentives to suppliers to lower emissions as part of its climate objectives.

The company aims to achieve carbon neutrality in its operations by the end of this year and extend this to its entire supply chain by 2035.

According to CATL’s latest ESG report, approximately 95% of its total emissions in 2024, totaling 118.3 million tons of carbon dioxide equivalent, originated from supply chain activities classified as Scope 3 emissions.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Battery makers face unique decarbonization challenges due to supply chain complexity

CATL’s focus on supplier emissions is strategically necessary given that 95% of their total carbon footprint comes from Scope 3 (supply chain) emissions, as revealed in their latest ESG report.

This supply chain emphasis reflects a broader industry challenge, as battery production involves energy-intensive processes and numerous raw materials suppliers across multiple tiers.

Electric vehicles typically offset their higher manufacturing emissions within 1-2 years of regular driving compared to gasoline vehicles, but the battery manufacturing process remains a significant contributor to their production footprint 1.

By categorizing the carbon footprint of over 130 suppliers producing components like copper foil, graphite, and aluminum casings, CATL is addressing the most significant portion of its emissions while maintaining its core manufacturing growth.

CATL’s strategy of providing technological assistance to suppliers rather than simply imposing requirements demonstrates how complex supply chain decarbonization requires collaborative approaches beyond just procurement policies.

2️⃣ Chinese battery makers evolving from cost competition to sustainability leadership

CATL’s sustainability initiatives represent a strategic evolution in China’s battery industry, which initially gained market dominance through government support, scale, and cost advantages.

The company’s carbon neutrality goals (operations by 2025, supply chain by 2035) signal a shift toward addressing international sustainability standards that could affect global competitiveness, particularly in markets with stringent environmental regulations.

China’s battery industry has previously benefited from substantial state support, with manufacturers like CATL and BYD controlling 64% of the domestic EV battery market through policies that favored local production 2.

CATL’s international expansion, including its German factory near major automakers like BMW and Volkswagen, positions the company to meet European sustainability requirements while maintaining its market leadership 3.

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