TRANSPORTATION SECTOR

BASIS FOR CONCLUSIONS 

 

Auto Parts

Sustainable Industry Classification System® (SICS®) TR-AP

Prepared by the
Sustainability Accounting Standards Board

October 2018

sasb.org

© 2018 The SASB Foundation. All rights reserved. 
About SASB
The SASB Foundation was founded in 2011 as a not-for-profit, independent standards-setting organization. The
SASB Foundation’s mission is to establish and maintain industry-specific standards that assist companies in
disclosing financially material, decision-useful sustainability information to investors.

The SASB Foundation operates in a governance structure similar to the structure adopted by other
internationally recognized bodies that set standards for disclosure to investors, including the Financial
Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). This structure
includes a board of directors (“the Foundation Board”) and a standards-setting board (“the Standards Board” or
“the SASB”). The Standards Board develops, issues, and maintains the SASB standards. The Foundation Board
oversees the strategy, finances and operations of the entire organization, and appoints the members of the
Standards Board.

The Foundation Board is not involved in setting standards, but is responsible for overseeing the Standards
Board’s compliance with the organization’s due process requirements. As set out in the SASB Rules of
Procedure, the SASB’s standards-setting activities are transparent and follow careful due process, including
extensive consultation with companies, investors, and relevant experts.

SUSTAINABILITY ACCOUNTING STANDARDS BOARD

1045 Sansome Street, Suite 450

San Francisco, CA 94111
415.830.9220
[email protected]

sasb.org

 
The information, text, and graphics in this publication (the “Content”) are owned by The SASB Foundation. All rights reserved. The Content may 
be used only for non‐commercial, informational, or scholarly use, provided that all copyright and other proprietary notices related to the 
Content are kept intact, and that no modifications are made to the Content. The Content may not be otherwise disseminated, distributed, 
republished, reproduced, or modified without the prior written permission of The SASB Foundation. To request permission, please contact us at 
[email protected].

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY

Table of Contents
Introduction ............................................................................................................................................................. 4 

The Standards Board ........................................................................................................................................... 4 

Development of the Sustainability Accounting Standards .................................................................................... 4 

Approval of the Industry Standard....................................................................................................................... 5 

Future Updates to the Standards ......................................................................................................................... 6 

Revision TR-AP:01– Industry: Auto Parts; Topic Name: Materials Efficiency & Waste Management ................ 7 

Revision TR-AP:02 – Industry: Auto Parts; Topic Name: Materials Efficiency & Waste Management ............... 8 

Revision TR-AP:03 – Industry: Auto Parts; Topic Name: Product Lifecycle Management ................................ 10 

Revision TR-AP:04 – Industry: Auto Parts; Topic Name: Product Lifecycle Management ................................ 15 

Revision TR-AP:05 – Industry: Auto Parts; Topic Name: Materials Sourcing ..................................................... 18 

Revision TR-AP:06 – Industry: Auto Parts; Topic Name: Materials Sourcing ..................................................... 22 

Revision TR-AP:07 – Industry: Auto Parts; Topic Name: Product Lifecycle Management ................................ 23 

Revision TR-AP:08 – Industry: Auto Parts; Topic Name: Product Lifecycle Management ................................ 25 

Appendix A. Standards Board – Sector Committee Assignments ..................................................................... 27 

Appendix B. Redline Metric Tables ...................................................................................................................... 28 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY

Introduction
The publication of the Sustainability Accounting Standard (“Standard”) for the Auto Parts Industry marks an important
milestone for the industry and for global capital markets more generally. It is the first Standard designed to assist
companies in the Auto Parts industry in disclosing financially material, decision-useful sustainability information to
investors.

The Auto Parts Industry Standard was first released in a provisional form in June 2015 after an extensive standard-
setting process. Following the release of the Provisional Standard, the SASB staff, under the guidance of the SASB
standard-setting board (“the Standards Board” or “the SASB”), engaged in further due process to revise the
Standard. In October 2018, the Standards Board approved revisions to the Standard. The Standards Board
subsequently voted to approve the Auto Parts Industry Standard, thereby including it in as one of the 77 industries for
which the SASB has developed and published an industry standard.

The Basis for Conclusions describes the rationale for revisions made to the provisional industry standard. Additionally,
the document outlines the standard-setting process the Standards Board used to codify the standard. All standard-
setting documentation, including prior drafts of the standard, summary reports, and comment letters, which informed
the development of the standard, are publicly available at the Standard Setting Archive of the SASB website.

The Standards Board

The Standards Board is charged with developing, issuing, and maintaining SASB standards. The Standards Board
operates in accordance with its primary governance documents, including the SASB’s Conceptual Framework and
Rules of Procedure. The Conceptual Framework sets out the basic concepts, principles, definitions, and objectives that
guide the Standards Board in its approach to setting standards. The Rules of Procedure establishes the due process
followed by the Standards Board and staff in their standard-setting activities. The standard-setting process is designed
to ensure each industry standard reflects the core objectives established in the Conceptual Framework to facilitate
companies’ cost-effective reporting of financially material and decision-useful sustainability information to investors.

In its standard-setting role, the Standards Board operates in a transparent manner, including holding public board
meetings. The Standards Board currently uses a sector-based committee structure, with three Standards Board
members assigned primary responsibility for each given sector. In addition to sector committee reviews, the full
Standards Board evaluates revisions to the standards. Information on Standards Board meetings, including minutes,
agendas, and a schedule of upcoming meetings is available on the SASB website. A list of Standards Board members
and their respective sector committee assignments is included in Appendix A.

Development of the Sustainability Accounting Standards

SASB staff initiated its standard-setting activities in 2012 under the oversight of the Standards Council.1 From August
2012 to March 2016, the SASB staff developed provisional standards for each of the industries identified in the
Sustainable Industry Classification System® (SICS®).2 The provisional standards were developed through an iterative

                                                            
1
The Standards Council served in a process oversight role, distinct from the standard-setting role the Standards Board serves in. Upon
completion of the provisional phase in 2016, the Standards Council was disbanded.
2
At the time of the development of the provisional standards, SICS® contained 79 industries. SICS® was subsequently revised to 77
industries as a result of the combining of industries that contained similar sustainability-related risk and opportunity characteristics.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 4

and transparent process centered on independent research, market input, and oversight from the Standards Council.
Each provisional industry standard was developed based on staff research, industry working group (“IWG”) feedback,
public comments, and individual consultations with companies, investors, and other relevant experts. Throughout the
development of the provisional standards, more than 2,800 individuals participated in IWGs, 172 public comment
letters were received, and hundreds of individual consultations were conducted with market participants by the SASB
staff.

In 2016, following the issuance of the provisional standards across all industries, the SASB staff initiated a dedicated
market consultation period to gain further insight into market views on the provisional standards. Subsequently, the
Standards Board was seated and initiated a due process phase that culminated in the codification of 77 industry
standards in October 2018. This standard-setting phase that began with the provisional standards and concluded with
the codified standards is described more fully below. All standard-setting documentation discussed below are publicly
available at the Standard Setting Archive of the SASB website.

 Consultation: In the six-month period from Q4 2016 – Q1 2017, the SASB staff conducted
consultations to gather additional input from companies, investors, and relevant experts on the
provisional standards. Throughout this phase, the SASB staff received input on the complete set of
industry standards from individual consultations conducted with 141 companies, 19 industry
associations, and 271 investor consultations via 38 institutional investors. The Consultation Summary
comprises the findings from the consultations.

 Technical Agenda: In July 2017, after a period of review to evaluate market input from consultations
on the provisional standards, the Standards Board worked with the SASB staff to publish the Technical
Agenda. The Technical Agenda formally lists the areas of focus to address in preparing the standards
for codification, emphasizing those issues for which strong evidence surfaced and/or those which
received significant market feedback during the consultation period.

 Public Comment Period: In October 2017, the Standards Board published exposure drafts of the
standards, which incorporated proposed changes guided by the Technical Agenda to the provisional
standards. This opened a 90-day period, subsequently extended to a 120-day period, from October
2017 to January 2018, for public comment and review of proposed changes to provisional standards.
Market participants provided 120 comment letters during the comment period. All letters received and
a Summary of Public Comments are available at the Standard Setting Archive.

The Standards Board and the SASB staff evaluated the public comments received in conjunction with previous market
input and research to determine the revisions to be made to the provisional standard.

Approval of the Industry Standard

On October 13, 2018, the Standards Board voted unanimously to revise the Provisional Standard for the Auto Parts
industry. In light of these revisions, on October 16, 2018, the Standards Board voted unanimously in favor of
removing this Standard’s provisional status. In doing so, the Standards Board considered all phases of the standard-
setting process, including those detailed in the above documents, to assess their underlying rationale, their adherence
to due process, and their faithfulness to the essential concepts of sustainability accounting, as described in the
Conceptual Framework.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 5

The following section of this document describes the rationale for the revisions. Appendix B contains a redline table
that summarizes these revisions. Revisions relative to the provisional standard that have not altered the scope or
content of disclosure topics or metrics, such as those that are intended to improve the consistency, clarity, and
accuracy of the standard, are not specifically addressed in the Basis for Conclusions.

Future Updates to the Standards

As social, economic, regulatory, and other developments alter an industry’s competitive landscape, the SASB
standards may need to evolve to reflect new market dynamics. The Standards Board will follow a regular standards
review cycle to address emerging and evolving issues that may result in updates to the SASB standards.

The Standards Board intends to direct the SASB staff to compile and publish a Research Agenda, which outlines items
that have been identified as requiring further analysis. Evidence-based research and market input, including feedback
from outreach and consultation, will inform reviews of issues on the Research Agenda. Items from the Research
Agenda may later be added to the Standards Board’s Technical Agenda for additional due process and formal
deliberation. All updates are subject to the standard-setting process described in the Rules of Procedure.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 6

Revision TR-AP:01– Industry: Auto Parts; Topic Name:
Materials Efficiency & Waste Management
Summary of Change – Revise Topic Name
The SASB renamed the provisional topic from Materials Efficiency & Waste Management to Waste Management.

Supporting Rationale
As manufacturing auto parts involves the use of significant amounts of materials, this provisional disclosure topic
focuses on waste management. The one metric associated with this topic, provisional metric TR0102-02, measures the
amount of waste from manufacturing, percentage hazardous, and percentage recycled.3 The revised topic name helps
stakeholders understand the intent of the topic.

Benefits
Improves the SASB Standard: The revision improves the clarity of the topic scope.

   

                                                            
3
See Revision TR-AP:02 for a change to the technical protocol of this metric.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 7

Revision TR-AP:02 – Industry: Auto Parts; Topic Name:
Materials Efficiency & Waste Management4
Summary of Change – Revise Technical Protocol
The SASB revised the technical protocol for provisional metric TR0102-02, “Total amount of waste from
manufacturing, percentage hazardous, percentage recycled,” to define hazardous waste and hazardous waste
recycled per the relevant regulations at the point of waste generation. Previously, the standard required classification
of all hazardous waste, regardless of where it is generated, according to the protocols of the U.S. Environmental
Protection Agency’s (EPA) Resource Conservation and Recovery Act (RCRA). Additionally, the SASB added a disclosure
requirement to report the hazardous waste regulations that are used to classify the company’s waste.

Adherence to Criteria for Accounting Metrics

The Auto Parts Industry Provisional Standard includes a topic, Materials Efficiency & Waste Management,5 with one
associated metric that focuses on a company’s generation and recycling of hazardous wastes. The technical protocol
associated with provisional metric TR0102-02 references the RCRA (40 CFR 261.3) to define the categories that
companies shall use to classify their hazardous materials. While this definition is relevant for companies with U.S.
operations, companies with operations outside the U.S. typically use local regulations to classify wastes according to
each jurisdiction in which they operate, as required by law. Requiring companies to classify waste in non-U.S.
jurisdictions using the EPA standard does not align with common industry practices.

To improve the applicability and cost-effectiveness of the metric, the SASB revised the technical protocol to allow
companies to categorize waste according to local laws, with which companies must already comply. Companies with
operations in the U.S. may continue to report using the RCRA as well as applicable state or local laws. The technical
protocol was also revised to require companies to disclose the primary waste regulations they use to categorize and
manage their waste. By establishing criteria that are free from regional bias, while still providing for consistent
measurement among companies, the revision improves the objectivity and measurability of the metric.

In summary, the revisions to provisional metric TR0102-02 improve its consistency with the industry’s approach to the
measurement and management of hazardous waste, thereby improving the applicability of the metric and the cost-
effectiveness of the standard overall.

Supporting Analysis
In most regions, including the U.S., Europe, and Asia, government regulations address the categorization and
management of hazardous wastes produced as a result of operations. Consequently, companies typically classify,
monitor, and manage hazardous waste across their operations according to the prevailing regulation at the point of
waste generation. The technical protocol revision aligns the standards with existing company practices, eliminating the
requirement to reclassify all waste according to a U.S. regulatory framework.

The Auto Parts industry is highly global, as most companies have locations in several countries. For example, the
largest auto parts company by market cap listed on a U.S. exchange noted that it has “257 manufacturing,

                                                            
4
See Revision TR-AP:01 for a revision to the topic name.
5
See Revision TR-AP:01 for a revision to the topic name.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 8

engineering and administrative locations in 39 countries.”6 Similarly, the second largest auto parts company reported
having manufacturing facilities and distribution centers in 24 countries and transferring production outside the U.S.7
As such, most companies must comply with numerous regional hazardous waste regulations, and the application of
RCRA to all non-U.S. operations would be cost burdensome.

The addition of a disclosure requirement to provisional metric TR0102-02 that companies must report the regulatory
framework they use to classify hazardous waste is designed to improve the usefulness and comparability of the metric,
given the departure from a single universal definition of hazardous waste (the approach taken in the provisional
metric). Additionally, the revised technical protocol cites the U.S. RCRA legislation and the European Union Waste
Directive as regulatory frameworks to consider when local regulations are either not applicable or are insufficient.

Separately, but related to the implementation of the metric, it should be noted that the technical guidance that
accompanies the industry standard recognizes that the exclusion of de minimis values may occur for certain
quantitative disclosures. This guidance is relevant to the implementation of the metric, as it may be applicable in
certain situations.

Market Input
Investor: No direct feedback was received from investors on the revised approach to defining hazardous wastes and
hazardous waste recycling.

Companies: Significant corporate input was received in other industries on metrics similar to TR0102-02 about the
metric’s cost-prohibitive nature. Companies and industry associations strongly communicated that the application of
RCRA to non-U.S. operations is either infeasible or overly burdensome from a cost perspective. While no direct input
was received from companies in the Auto Parts industry, the general corporate view on the provisional metric is highly
likely to also be applicable.

Benefits
Improves the SASB Standard: The revision improves the applicability of the metric as a result of the revised approach
to classifying hazardous waste, which relies on the locally applicable regulatory framework by aligning with industry
practices.

Improves cost-effectiveness: The revision improves the cost-effectiveness of the standard by aligning the metric with
current hazardous waste management practices.

                                                            
6
Lear Corporation, FY2017 Form 10-K for the Period Ending December 31, 2017 (filed February 2, 2018), p. 3.
7
Icahn Enterprises L.P., FY2016 Form 10-K for the Period Ending December 31, 2016 (filed March 1, 2017), p. 5.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 9

Revision TR-AP:03 – Industry: Auto Parts; Topic Name:
Product Lifecycle Management
Summary of Change – Split Topic
The SASB split the provisional disclosure topic Product Lifecycle Management into two separate topics: Design for Fuel
Efficiency and Materials Efficiency.

The following metrics are associated with the Design for Fuel Efficiency topic:

 TR-AP-410a.1 – Revenue from products designed to increase fuel efficiency and/or reduce emissions8

The following metrics are associated with the Materials Efficiency topic:

 TR-AP-440b.1 – Percentage of products sold that are recyclable9

 TR-AP-440b.2 – Percentage of input materials from recycled or remanufactured content10

Adherence to Conceptual Framework

The Auto Parts Industry Provisional Standard contains a topic, Product Lifecycle Management, that focuses on
innovations in the industry that drive fuel efficiency and improve end-of-life management of vehicles. However, there
are generally different sustainability impacts, management practices, and ultimately financial impacts associated with
emissions during the use phase and with product waste. Auto parts manufacturers that are able to improve vehicle
fuel efficiency and reduce emissions for the vehicle use phase through product innovation will be able to satisfy
growing demand from original equipment manufacturers (OEMs), which are pressured by stricter environmental
regulations and customer preference for more fuel-efficient vehicles. In contrast, in the face of input price volatility
and resource constraints, automakers and auto parts companies that are able to develop take-back and recycling
systems are likely to improve their long-term operational efficiency and strengthen their risk profile.

As a result, splitting the Product Lifecycle Management provisional disclosure topic and its associated metrics into two
separate topics, Design for Fuel Efficiency and Materials Efficiency, improves adherence to the SASB Conceptual
Framework. Both resulting topics focus on distinct environmental issues, are associated with different financial
impacts, and are likely to contain financially material information.

Description of Design for Fuel Efficiency Topic

Automobile manufacturers are increasingly demanding motor parts and components that can help reduce the fuel
consumption of the vehicles they sell. Fuel-efficient components and parts play a vital role in reducing tailpipe
emissions of automobiles through energy efficiency gains and contributions to weight reductions, among other
factors. Auto parts companies that can design and manufacture such parts will be better positioned to increase sales

                                                            
8
The provisional version of this metric was TR0102-04 - Total addressable market and share of market for products aimed at improved fuel
efficiency and/or reduced emissions. See Revision TR-AP:04.
9
The provisional version of this metric was TR0102-05 - Percentage of products sold that are recyclable or reusable.
10
The provisional version of this metric was TR0102-06 - Weight of products and materials recycled or remanufactured. See Revision TR-
AP:07

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 10

to auto manufacturers that are increasingly facing stricter environmental regulations and customer preferences for
more environmentally friendly cars.

Description of Materials Efficiency Topic

Millions of vehicles worldwide reach the end of their useful lives every year. At the same time, the rate of vehicle
ownership is expanding globally, leading to more end-of-life vehicles. To lower the lifecycle impact of vehicles, auto
parts manufacturers can design their parts to be easily recyclable and reusable and can apply modularity principles to
product design. They can also create take-back programs to ensure safe disposal and reuse of the products. Given
input price volatility and resource constraints, auto parts companies that manage materials efficiency are likely to
improve their long-term operational efficiency and strengthen their risk profile. In addition, companies can potentially
reduce their manufacturing costs by using fewer materials and/or recycling materials, which will improve margins.

Supporting Analysis for Design for Fuel Efficiency Topic

Motor vehicle combustion of petroleum-based fuels generates significant direct greenhouse gas (GHG) emissions and
contributes to global climate change. While these impacts are further downstream from auto parts companies
(resulting from the use of vehicles rather than from the manufacturing process), regulations are focusing on auto
manufacturers to address some of these issues, such as through fuel economy standards. Aside from the regulations,
there is also customer demand for vehicles with lower environmental impacts and lower total cost of ownership.11
Together, these factors are driving auto manufacturers to develop components that lower use-phase emissions, which
in turn increases OEMs demand for auto parts that improve fuel efficiency and reduce vehicle emissions.

Transportation activities12 are a significant source of GHGs, accounting for 28 percent of U.S. emissions in 2016.13
According to the International Energy Agency, global transport14 emitted 7.8 gigatons of carbon dioxide (CO2) or 24
percent of global CO2 emissions from fuel combustion in 2015, and road transport15 alone accounted for three-
quarters of transport emissions. 16

In order to reduce emissions from automobiles, several countries have set emissions and fuel-efficiency targets for
vehicles sold within their borders. They are also providing incentives to consumers to buy low-emission vehicles, often
subsidizing the purchase cost.17 These actions are affecting both the demand for and supply of automobiles, with an

                                                            
11
“Key Charts Highlighting Significant Growth in U.S. EV Market,” The Fuse, December 5, 2017, accessed June 19, 2018,
http://energyfuse.org/safe-fact-pack-highlights-significant-growth-u-s-ev-market/.
12
“The Transportation sector includes the movement of people and goods by cars, trucks, trains, ships, airplanes, and other vehicles” via
“Sources of Greenhouse Gas Emissions,” U.S. Environmental Protection Agency, accessed May 17, 2018,
https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions.
13
“Inventory of U.S. Greenhouse Gas Emissions and Sinks,” U.S. Environmental Protection Agency, last updated April 12, 2018, accessed
May 17, 2018, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks.
14
“Consumption in transport covers all transport activity (in mobile engines) regardless of the economic sector to which it is contributing”
via “Balance Definitions,” International Energy Agency, accessed May 17, 2018,
http://www.iea.org/statistics/resources/balancedefinitions/.
15
“Road [transport] includes fuels used in road vehicles as well as agricultural and industrial highway use. Excludes military consumption as
well as motor gasoline used in stationary engines and diesel oil for use in tractors that are not for highway use” via “Sources of
Greenhouse Gas Emissions,” U.S. Environmental Protection Agency, accessed May 17, 2018, https://www.epa.gov/ghgemissions/sources-
greenhouse-gas-emissions.
16
International Energy Agency, CO2 emissions from fuel combustion: Overview, October 17, 2017, pp. 5-6, accessed May 17, 2018,
http://www.iea.org/publications/freepublications/publication/CO2EmissionsFromFuelCombustion2017Overview.pdf.
17
Zifei Yang, “Overview of Global Fuel Economy Policies: 2018 APCAP Joint Forum and Clean Air Week,” Global Fuel Economy Initiative and
The International Council on Clean Transportation, March 20, 2018, accessed May 17, 2018,
https://www.theicct.org/sites/default/files/Global-Fuel-Economy-Policies-Overview_ICCT_ZYang_20032018.pdf.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 11

impact on automobile company revenues and costs. This explains the relative success of electric vehicles for
commercial and industrial uses, with sales expected to exceed $154 billion in 2023, compared to $119 billion in the
consumer segment.18 The improvement of a vehicle’s fuel efficiency starts at the auto parts level; therefore, the
industry has an opportunity to capture this growing market.

Improving fuel efficiency and reducing air pollution from automobiles are key trends impacting the Auto Parts
industry. Top companies in the industry cite the importance of producing products that help improve vehicle
performance, fuel efficiency, and air quality in their securities filings. For example, an automotive interior systems
manufacturer cited in its Form 10-K that “stricter fuel economy and emission standards, which will require more
efficient engines, lighter weight materials and alternative energy powertrains, driving growth in high-power electrical
distribution systems and lighter weight seating components” is a key trend affecting its business.19 Additionally, a
manufacturer of powertrain components and vehicle safety products identified that its “long-established pledge to
develop innovative, advanced products is enabling increased efficiency, improved fuel consumption and a reduction in
emissions.”20 Similarly, an auto parts company noted in its Form 10-K that “technologies designed to help reduce
emissions, increase fuel economy and minimize the environmental impact of vehicles . . . is a key mega-trend today
because of the convergence of several issues: climate change, volatility in oil prices, an increasing number of vehicles
in use worldwide and recent and pending regulation in the U.S. and overseas regarding fuel economy and carbon
dioxide emissions.”21 By incorporating environmental considerations in their strategic decisions about product design,
tire manufacturers help in improving the fuel efficiency of vehicles.

The evidence above suggests that Design for Fuel Efficiency is likely a material factor for the Auto Parts industry.
Customer preferences for more environmentally-friendly cars may lead to additional research and development (R&D)
expenses in the short-term, but innovative products that help fuel efficiency and emission reductions will drive
competitiveness and revenue growth in the medium-term. In addition, as stricter environmental regulations drive OEM
companies to reduce their environmental externalities, auto parts manufacturers that produce more fuel-efficient
products will be well-positioned for growth.

Supporting Analysis for Materials Efficiency Topic

Millions of vehicles worldwide reach the end of their useful lives every year. At the same time, the rate of vehicle
ownership is expanding globally, and leading to higher numbers of end-of-life vehicles (ELV).22 Recycling rates and
amounts recovered per vehicle vary by country. In the U.S., about 95 percent of vehicles that reached the end-of-life
stage were disassembled for recycling.23 In order to reduce the lifecycle impacts of vehicles and mitigate the strain on
natural resources from the production of new vehicles, OEM companies must consider re-usage, modularity, and/or
recycling principles. Therefore, the role of auto parts manufacturers is critical in the process.

                                                            
18
Leon Walker, “Commercial EV Sales Outstrip Consumer EVs,” Environmental Leader, September 12, 2013, accessed May 17, 2018,
http://www.environmentalleader.com/2013/09/12/commercial-ev-sales-outstrip-consumer-evs/.
19
Lear Corporation, FY2012 Form 10-K for the Period Year Ending December 31, 2012 (filed February 12, 2012).
20
“From our CEOs,” Federal-Mogul, accessed May 18, 2018, http://www.federalmogul.com/en-US/Company/CSR-Report/Pages/From-our-
CEO%E2%80%99s.aspx.
21
Delphi Automotive PLC, FY2016 Form 10-K for the Period Ending December 31, 2016 (filed February 6, 2017).
22
Shin-ichi Sakai, Hideto Yoshida, et al., “An international comparative study of end-of-life vehicle (ELV) recycling systems,” Journal of
Material Cycles and Waste Management 16, no. 1 (February 2014), pp. 1-2, accessed May 17, 2018,
http://link.springer.com/article/10.1007%2Fs10163-013-0173-2#page-2.
23
Five Winds International, Product Stewardship Opportunities within the Automotive Industry, Minnesota Office of Environmental
Assistance, August 2003, accessed October 1, 2018, https://www.pca.state.mn.us/sites/default/files/autoPSreport.pdf, p. 29.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 12

Auto parts manufacturers can lower the lifecycle impact of disposing their products at the end of their productive life
by designing them to be easily recyclable and reusable and by applying modularity principles into their product design.
They can also create take-back programs to ensure safe disposal and reuse of products. Take-back programs are
usually geared toward parts like tires and batteries, which are replaced during the life of a vehicle, and so are disposed
separately from the rest of the vehicle. Proper management of the issue enables reduction of negative environmental
impacts from automobiles’ value chain. Moreover, the emergence of several laws regarding vehicles’ end-of-life phase
have heightened the importance of the issue. These regulations include the EU’s Directive on End-of-life Vehicles,
Japan’s 2002 End-of-life Recycling Law, South Korea’s 2007 Act for Resources Recycling of Electrical and Electronic
Equipment and Vehicles, and the U.S.’s programs for safe removal of mercury from disposed vehicles and tire
recycling and reuse.

Managing environmental impacts at the end-of-life phase of vehicles, including reuse or recycling of auto parts, also
can have a material effect on auto makers and auto parts manufacturers. In the EU, six million vehicles reached the
end of their useful lives in 2015.24 If diverted from landfills, much of the material from vehicles can be recycled or
repurposed for use, enabling cost savings and opportunities for revenue generation. At the same time, new
regulations related to recycling end-of-life vehicles in some markets could create regulatory compliance costs or lead
to penalties for OEM companies.

The U.S. Department of Commerce (DOC) estimates that the global remanufactured automotive parts industry is an
$85-100 billion industry, presenting a significant opportunity for auto parts companies. Remanufactured products are
reconstructed from used products by replacing the worn or damaged components. It is less costly to produce a
remanufactured product than it is to produce a new product, and the process also requires less energy and generates
less waste, contributing to the sustainability of the manufacturing process. For example, the DOC estimates that
remanufactured automotive alternators require only 12 to 14 percent of the energy that it would normally take to
manufacture a new alternator.25

Managing tires at the end of their useful lives can be particularly challenging, but can also present opportunities for
auto parts manufacturers. As of 2006, over 85 percent of end-of-life tires in the U.S., Europe, and Japan were
recycled. However, elsewhere in the world, recycling rates are less favorable. According to the World Business Council
for Sustainable Development, one billion tires are disposed of annually and an estimated four billion used tires are in
landfills and stockpiles worldwide.26 Tires are banned from landfills in the EU. In the U.S., 11 states have placed a total
ban, and an additional 31 states have restrictions. Industry leaders recognize the challenges and opportunities
associated with managing and reducing lifecycle impacts of tires. For example, the Tire Industry Project is an industry
initiative to address the potential health and environmental impacts of the chemicals commonly used in tire making.
The project includes 11 companies, representing more than 70 percent of the world’s tire manufacturing capacity.27

Managing batteries at the end of their useful lives can also present opportunities for auto parts manufacturers. With
respect to batteries, one auto parts company’s recycling center in South Carolina has the capacity to recycle more

                                                            
24
“End-of-life vehicle statistics,” Eurostat, accessed June 20, 2018, http://ec.europa.eu/eurostat/statistics-explained/index.php/End-of-
life_vehicle_statistics.
25
Office of Transportation and Machinery, U.S. Department of Commerce, On the Road: U.S. Automotive Parts Industry Annual Assessment,
2011, accessed June 20, 2018, https://www.trade.gov/td/otm/assets/auto/2011Parts.pdf.
26
World Business Council for Sustainable Development, Managing End-of-Life Tires, November 2008, accessed June 20, 2018,
https://www.wbcsd.org/Sector-Projects/Tire-Industry-Project/Resources/Managing-End-of-Life-Tires.
27
“Tire Industry Project,” World Business Council for Sustainable Development, accessed June 20, 2018,
https://www.wbcsd.org/Projects/Tire-Industry-Project.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 13

than 14 million automotive batteries.28 In addition, the company cited “increasing global environmental and safety
regulations related to the manufacturing and recycling of lead-acid batteries, and transportation of battery materials,”
as well as the company’s ability to secure sufficient tolling capacity to recycle batteries” as material risks to operations
in its Form 10-K.29 Despite high battery recycling rates in the U.S., rates may be lower in emerging markets. For
example, in China, the biggest producer, consumer, and exporter of lead-acid storage batteries in the world, less than
30 percent of batteries are processed under official standards. Lead leaks pose significant environmental and health
threats. The Chinese government is striving to increase the recycling rates of disposed acid-lead batteries. In March
2013, five ministries issued a document that said the rate of standardized recycling of waste lead-acid storage
batteries would reach 90 percent by 2015.30 As production processes in the Auto Parts industry move to developing
countries and environmental regulations become more stringent in those countries, auto parts manufacturers may be
exposed to significant liabilities for noncompliance.

Several U.S. states have regulations requiring battery recycling. In 1996, the U.S. Congress passed the Mercury-
Containing and Rechargeable Battery Act, which simplifies the process of collection and recycling of rechargeable
batteries. The act requires regulated batteries to be easily removable from consumer products and to be properly
labeled. It also establishes uniform standards for the collection, storage, and transportation of certain batteries and
restricts the use of certain mercury-containing batteries.31 To ensure maximum recoverability and recyclability of auto
parts, companies may need to establish relationships with third parties and develop processes to enable efficient
collection and recycling.

The evidence above suggests that Materials Efficiency is likely a material factor for the Auto Parts industry. Stricter
regulations around end-of-life management require higher recyclability and recycling rates of both manufactured
vehicles and specific auto parts such as batteries and tires. These regulations can affect demand and increase
compliance costs for auto parts companies. Recovery and recycling of end-of-life materials can help companies
achieve significant costs savings and insulate them from the risk of rising prices or unavailability of key materials.

Market Input
Investors: The SASB received no direct input on the split of the Product Lifecycle Management provisional disclosure
topic into two separate topics.

Companies: The SASB received no direct input on the split of the Product Lifecycle Management provisional disclosure
topic into two separate topics.

Benefits
Improves the SASB Standard: The revision improves the clarity and decision-usefulness of the information generated
by the standard through a separation of two distinct disclosure topics.

 
                                                            
28
“Johnson Controls opens automotive battery recycling facility in Florence, South Carolina,” Johnson Controls press release, September 18,
2012, accessed June 20, 2018, http://investors.johnsoncontrols.com/news-and-events/press-releases/johnson-controls-inc/2012/18-09-
2012.
29
Johnson Controls, FY2012 Form 10-K for the Period Ending September 30, 2012 (filed November 19, 2012).
30
Wu Wencong, “Poor lead battery recycling raises fears,” China Daily, December 12, 2013, accessed June 20, 2018.
http://usa.chinadaily.com.cn/china/2013-12/12/content_17168678.htm.
31
“The Mercury-Containing and Rechargeable Battery Management Act - Public Law 104-142,” U.S. Environmental Protection Agency,
accessed June 20, 2018, https://www.epa.gov/sites/production/files/2016-03/documents/p1104.pdf.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 14

Revision TR-AP:04 – Industry: Auto Parts; Topic Name:
Product Lifecycle Management32
2017 Technical Agenda Item #5-5 Description
The SASB is evaluating the revision of metric TR0102-0433 to improve the clarity and decision-usefulness of the metrics
associated with the topic.

Summary of Change – Revise Metric

The SASB revised provisional metric TR0102-04 from “Total addressable market and share of market for products
aimed at improved fuel efficiency and/or reduced emissions” to “Revenue from products designed to increase fuel
efficiency and/or reduce emissions.” In addition, in the technical protocol the SASB changed the term “energy
efficiency” to “fuel efficiency” and added "low rolling resistance new and retread tire technologies" to the list of
examples of products that may increase fuel efficiency and/or reduce emissions.

Adherence to Criteria for Accounting Metrics

The Auto Parts Industry Provisional Standard includes a topic, Product Lifecycle Management,34 with three associated
quantitative metrics intended to demonstrate the environmental impacts of a company’s products over the lifecycle of
the products, including both the manufacturing and use phases. Specifically, provisional metric TR0102-04 describes
the extent to which companies address fuel efficiency and emission reduction through the manufacture and sales of
specific products. The provisional metric involves calculating the “total addressable market” and “share of market,”
but these figures are subjective and may not be comparable among peers. Additionally, the provisional technical
protocol lacks specification on the scope of the metric (i.e., which products should be considered). This revision shifts
the metric toward disclosure of revenue from products that meet specified criteria related to fuel efficiency and
emissions. The revised metric is less subjective and retains the original intent of the metric—to measure performance
on performance related to improved fuel efficiency and/or reduced emissions. As a result, the revision improves the
representativeness and comparability of the metric.

Supporting Analysis
Revenue generated from products that are designed to address fuel economy and emissions is likely representative of
performance on the Product Lifecycle Management topic. For example, an automotive interior systems manufacturer
cited fuel economy and emissions reduction as key trends affecting its business: “Customer and consumer demand for
more energy efficient vehicles that meet increasingly strict fuel economy and emission standards . . . We are well
positioned for growth capitalizing on these mega-trends as we supply high value systems and components that drive
critical functionality and core elements of the vehicle’s architecture and design.”35 Other major auto parts companies
also recognize and report on this trend in their securities filings. A large company reported how it is addressing this
trend by stating that approximately 80 percent of the company’s new and incremental business backlog launching

                                                            
32
See Revision TR-AP:03 for a split to this topic.
33
TR0102-04 - Total addressable market and share of market for products aimed at improved fuel efficiency and/or reduced emissions
34
See Revision TR-AP:03 for a split to this topic.
35
Lear Corp, FY2016 Form 10-K for the Period Ending December 31, 2016 (filed February 7, 2016), p. 6.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 15

from 2017 to 2019, an estimated $875 million, relates to its newest all-wheel drive systems designed to improve fuel
efficiency by up to 30 percent and reduce carbon dioxide emissions.36

In order to report addressable market share, companies must calculate industry total sales for specific product
categories. The determination of market share of products designed for improvement of fuel efficiency and reduction
of emissions may be overly cumbersome and not comparable. For example, a leading auto parts supplier produces
seven brands of ride performance products and five brands of clean air products for light vehicle, commercial truck,
and off-highway applications. A single market share number is not a reasonable measure of how the company is
addressing the sustainable product market and providing 12 market share numbers does not help an investor to
benchmark performance and compare companies. To calculate market share, companies have to determine their
competitors’ revenue from comparable products that also improve fuel efficiency and reduce emissions. The
subjectivity of these estimates would not allow for comparability. The revision to the metric removes the subjectivity,
increasing the verifiability of the metric.

The revision to the technical protocol concerning the use of the term “fuel efficiency” as opposed to “energy
efficiency” is a clarification that aligns the language and concepts throughout the technical protocol, thereby
eliminating potential confusion between “fuel efficiency” and “energy efficiency.”

The revision to the technical protocol concerning the addition of "low rolling resistance new and retread tire
technologies" to the list of examples of products that may increase fuel efficiency and/or reduce emissions is also
designed to provide additional clarity on the scope of the metric. This revision recognizes that using certain tires,
particularly low rolling resistance tires, whether new or retreaded, may help reduce fuel costs and harmful NOx
emissions. The U.S. Environmental Protection Agency (EPA) has demonstrated that certain low rolling resistance (LRR)
tires and retread technologies can reduce both costs and emissions for long-haul class eight tractor-trailers by three
percent or more.37 Furthermore, over $3 billion in retread tires are sold annually, 38 and when such are low rolling
resistance tires, improvements in fuel efficiency may occur.

Market Input
Investors: Investors across sectors raised concerns about the subjectivity of the term “addressable market” and
recommended that such metrics be revised in order to improve verifiability.

Companies: The general revised form of this metric, absent the two clarifications to the technical protocol cited above,
was presented in the 2017/18 public comment period. An industry association representing tire manufacturers
provided comments on the exposure draft metric that recommended the clarifications above concerning the misuse of
the term “energy efficiency” and the addition of low rolling resistance tires to examples of products that may fall
within the scope of the metric. Furthermore, the industry association expressed concerns on the use of revenue as an
appropriate unit of measure, and instead, recommended focusing on the percentage of product shipments that meet
certain criteria.

                                                            
36
American Axle & Manufacturing FY2016 Form 10-K for the Period Ending December 31, 2016 (filed February 10, 2016), p. 28.
37
“Low Rolling Resistance (LRR) New and Retread Tires,” U.S. Environmental Protection Agency, accessed May 9, 2018,
https://www.epa.gov/verified-diesel-tech/low-rolling-resistance-lrr-new-and-retread-tires.
38
“Learn more,” Tire Retread & Repair Information Bureau, accessed May 9, 2018, https://www.retread.org/learn-more.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 16

Benefits
Improves the SASB Standard: The revision improves the standard by improving the representativeness and
verifiability of the metric.

   

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 17

Revision TR-AP:05 – Industry: Auto Parts; Topic Name:
Materials Sourcing
2017 Technical Agenda Item #5-8 Description
The SASB is evaluating the revision of metrics TR0102-0939 and TR0102-1040 associated with the topic to improve
cost-effectiveness and decision-usefulness.

Summary of Change – Revise Metrics

The SASB revised the scope of the Materials Sourcing topic to focus on exposure to resource scarcity and supply
constraints and removed two provisional metrics:

 TR0102-08 – Percentage of materials costs for items containing critical materials

 TR0102-09 – Percentage of tungsten, tin, tantalum, and gold smelters and refiners within the supply chain
that are verified conflict-free

Further, the SASB removed conflict minerals from the required scope of disclosure in provisional metric TR0102-10,
“Discussion of the management of risks associated with the use of critical materials and conflict minerals.” The SASB
also added language to the technical protocol of the metric to direct companies to discuss their primary critical
materials used and any related risks.

Adherence to Criteria for Accounting Metrics

The Auto Parts Industry Provisional Standard contains a disclosure topic, Materials Sourcing, that addresses risks
related to sourcing of scarce or otherwise constrained materials. Associated with this disclosure topic are three
provisional metrics that address the costs associated with critical materials (TR0102-08), smelters and refiners that are
verified “conflict-free” (TR0102-09), and risk mitigation strategies related to the sourcing of critical materials and
conflict minerals (TR0102-10).

Resource scarcity and supply constraints are the factors that give rise to significant financial risks and opportunities
that are systematically relevant across the industry. Resource scarcity can arise from low substitution ratio of inputs,
the concentration of deposits in only a few regions, the environmental or social implications of extraction, and
geopolitical considerations such as the existence of conflict in certain regions. These factors can lead to supply
disruptions and/or price increases of key materials.

To ensure that the topic addresses the factors most likely to affect corporate value and operating performance, the
SASB revised the scope of the topic to directly focus on exposure to resource scarcity and supply constraints.
Disclosure on sourcing “conflict” materials is no longer required, unless such materials are also considered “critical”
by the company. This revision ensures that the disclosure topic addresses the factors most likely to be financially
material and improves the relevance of the topic across the industry.

                                                            
39
TR0102-09 - Percentage of tungsten, tin, tantalum, and gold smelters and refiners within the supply chain that are verified conflict-free
40
TR0102-10 - Discussion of the management of risks associated with the use of critical materials and conflict minerals

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 18

As such, the provisional metrics were not well-suited to measure performance in this impact area. The SASB removed
provisional metric TR0102-09 and eliminated the required disclosure of information pertaining to conflict minerals
within provisional metric TR0102-10. These revisions removed disclosures that were not representative of performance
on the topic. Additionally, the SASB removed provisional metric TR0102-08 as it was unlikely to provide decision-
useful information about performance on the topic, because costs associated with procured materials may constitute
sensitive business information.

The SASB added a new disclosure requirement within metric TR0102-10 to require disclosure of the types of critical
materials identified as relevant by the company. This revision improves the representativeness of the metric and
provides investors with useful information to identify the specific procured materials that the company views as
presenting significant risks.

The revised topic scope, removal of two provisional metrics (TR0102-08 and TR0102-09), and revision of the third
provisional metric (TR0102-10) improve the representativeness, cost-effectiveness, and decision-usefulness of the
standard.

Supporting Analysis
Companies in the Auto Parts industry may face risks related to sourcing certain materials due to the low substitution
ratio of these inputs, the concentration of deposits in only a few countries, the environmental or social implications of
extraction, and geopolitical considerations. According to the U.S. Department of Energy (DOE), electric vehicle (EV)
technology is highly dependent on the availability of rare earth metals. Rare earth elements such as lanthanum,
cerium, praseodymium, neodymium, manganese, cobalt, and lithium are materials used to manufacture EV batteries,
and can experience supply shortages. A current-generation hybrid vehicle battery contains several kilograms of rare
earth elements.41 Rare substances such as tungsten, of which China maintains more than 86 percent market share,
are used in a wide variety of industry products, such as lighting filaments, electrodes, electrical contacts, and wiring.
Recycling rates of these substances are typically not high enough to meet global demand, therefore extraction and
processing of new deposits is required. Some countries impose production controls and export restrictions such as
quotas and tariffs, which, in light of increasing demand for these materials, have, in some instances, had a significant
impact on price and availability. For example, between 2010 and 2011, the price of rare earth metals doubled due to
fears of Chinese export quotas.42

Companies also face increasing competition for these materials due to growing global demand from other sectors,
including transportation, renewable resources, and technology and communications, which can exacerbate supply
constraints. Furthermore, companies may face reputational harm from indirectly funding social unrest and causing
environmental damage by purchasing materials extracted from ecologically-sensitive regions of the world.43

Although company management of critical materials is an important topic, provisional metric TR0101-11 presented
challenges to companies with respect to reporting associated information. Specifically, the highly variable nature of
the use of such materials by companies in the industry, as well as the highly granular nature of the existing metric
                                                            
41
Karl West, “Carmakers’ electric dreams depend on supplies of rare minerals,” The Guardian, July 29, 2017, accessed September 24, 2018,
https://www.theguardian.com/environment/2017/jul/29/electric-cars-battery-manufacturing-cobalt-mining.
42
Richard Silberglitt, James T. Bartis, Brian G. Chow, David L. An, and Kyle Brady, “Critical Materials Present Danger to U.S. Manufacturing,”
RAND National Defense Research Institute, 2013, p. 14-15,
http://www.rand.org/content/dam/rand/pubs/research_reports/RR100/RR133/RAND_RR133.pdf.
43
“Potential Human Health and Ecological Risks of Production, Processing, and Recycling of REEs,” Rare Earth Elements Review, Section 6 –
Human Health and Environmental Risks, accessed June 20, 2018, https://www.ecologistasenaccion.org/IMG/pdf/p100eubc-chapter-6.pdf.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 19

with respect to identifying costs associated with such inputs to a company’s mix of manufactured products, may make
reporting on the metric burdensome for companies. A search of securities filings of the top 10 U.S.-domiciled
companies by industry revenue found no quantitative disclosures related to the use of critical materials, although
qualitative disclosures on materials sourcing and supply constraints are made by some companies. For example, a large
automobile company detailed risks associated with materials sourcing in its Form 10-Q: “We use various materials in
our business including aluminum, steel, lithium, nickel, copper and cobalt, as well as lithium-ion cells from suppliers.
The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions
and global demand for these materials, including as a result of increased production of electric vehicles and energy
storage products by our competitors, and could adversely affect our business and operating results.”44 A review of
corporate sustainability disclosures similarly found no quantitative disclosures; however, several top companies discuss
supply chain risks and in some cases directly mention risk pertaining to critical materials.

The revision to provisional metric TR0102-10 improves its alignment with industry disclosures, which typically identify
risks associated with access to specific critical materials. Risk factors associated with access to supply also vary by
material type, and the identification of material type is important for investors to evaluate the risk profile of the entity.
Disclosure of management practices to reduce materials sourcing risks, such as recycling or take-back programs,
complements the entity’s identification of critical materials. In summary, the revised metric provides investors with a
complete understanding of company exposure to risks associated with the topic through disclosure of the materials
the company considers to be “critical” as well as its management strategies to mitigate such risks.

Market Input
Investors: Mixed feedback on the provisional metrics was provided by investors during the SASB's industry working
group phase for the industries where this disclosure topic appeared. A limited number of investors commented that
disclosure pertaining to conflict minerals is not likely to be a focal point in their investment decisions, stating that
resource constraints are more likely to cause financial impacts. During the 2017/18 public comment period, the limited
feedback received from investors suggested strengthening the reporting guidance in the technical protocol of
provisional metric TR0101-13 (in the Automobiles industry) from “the registrant should identify which materials and
minerals present a risk to its operations” to “the entity shall identify which materials and minerals present a risk to its
operations,” as the SASB has done with this revision (provisional metric TR0101-13 is identical to provisional metric
TR0102-10 in the Auto Parts industry).

Companies: A limited number of companies that participated in the 2016/17 consultation period commented that
conflict minerals disclosure is not relevant and not likely to result in material financial or reputational impacts. While
the SASB received no direct input from companies in the Auto Parts industry, companies in other sectors that have
similar metrics on conflict materials indicated that the sourcing of certain materials was likely to be financially material.
Companies also expressed concerns with the difficulty and cost of tracking all instances of the use of critical materials
in their product portfolio, citing that in many cases, trace uses of such materials do not materially contribute to cost of
goods sold and therefore are unlikely to already be monitored and reported. Companies also identified concerns
related to the potential for disclosure of sensitive business information with respect to reporting the portion of costs
associated with the sourcing of specific input materials.

During the industry working groups convened by SASB in the ten industries where materials sourcing metrics
appeared in the provisional standards, the industry working groups’ scoring of the relevance, cost-effectiveness,
                                                            
44
Tesla 2018-Q1 Form 10-Q for the Period Ending March 31, 2018 (filed May 7, 2018), p. 48.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 20

auditability, and comparability of the quantitative provisional metrics was relatively low, suggesting that a broad set of
stakeholders did not support their usefulness. Public comments received during the initial standards development
phase similarly raised concerns about comparability, cost-effectiveness, and the sensitivity of disclosure.

Benefits
Improves the SASB Standard: The revision to the scope of the Materials Sourcing topic improves its relevance and
likelihood of affecting corporate value and/or operating performance. Additionally, the removal of two provisional
metrics (TR0102-08 and TR0102-09) improves the cost-effectiveness and applicability of the standard by increasing
alignment with industry disclosures related to critical material sourcing risks and by removing the potential for
disclosure of sensitive business information. Finally, the revision to provisional metric TR0102-10 improves the
completeness of the set of information provided to investors regarding company exposure to and management of
materials sourcing risks, enhancing the decision-usefulness of the information generated by the standard.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 21

Revision TR-AP:06 – Industry: Auto Parts; Topic Name:
Materials Sourcing
2017 Technical Agenda Item #5-7 Description
The SASB is evaluating revisions to the topic, including the corresponding metrics, based on its potential to affect
corporate value.

No Revision
Based upon research, market input, and/or recommendations of the SASB, no changes related to Technical Agenda
Item #5-7 were made to the provisional standard.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 22

Revision TR-AP:07 – Industry: Auto Parts; Topic Name:
Product Lifecycle Management45
2017 Technical Agenda Item #5-6 Description
The SASB is evaluating the revision of metric TR0102-0646 based on the verifiability of the data associated with the
metric.

Summary of Change – Revise Metric

The SASB revised provisional metric TR0102-06 from “Weight of products and materials recycled or remanufactured”
to “Percentage of input materials from recycled or remanufactured content.”

Adherence to Criteria for Accounting Metrics

The Auto Parts Industry Provisional Standard includes a topic, Product Lifecycle Management,47 with three associated
quantitative metrics intended to demonstrate the environmental impacts of a company’s products over the lifecycle of
these products, including both the manufacturing and use phases. Specifically, provisional metric TR0102-06 describes
the extent to which companies address the recyclability and reusability of products at end-of-life. While the provisional
metric provides investors with useful information, it requires companies to track and obtain data on the disposal of
their products, which is unlikely to be available to companies as part of their scope of business and therefore cannot
be easily verified. Instead, the revised metric focuses on the use of recycled and remanufactured inputs to the
manufacturing process, thereby limiting the scope of the disclosure to factors that are within the direct control of
companies with respect to the environmental impacts associated with the resource-intensive production of vehicles.
The revised metric is more easily tracked by companies, thereby better accomplishing the core objectives of the
standard by enhancing the verifiability and cost-effectiveness of the disclosure.

Supporting Analysis
The Auto Parts industry addresses resource constraints by using recycled materials to manufacture new parts, as well
as by remanufacturing parts from used components. Remanufacturing is prevalent in the industry as a way of
supplying parts that function like new parts but are significantly less costly to manufacture. Direct sales of recycled
original equipment manufacturer (OEM) parts to vehicle owners, repair shops, and automobile dealers exceeds
500,000 units daily.48 The global market for remanufactured auto parts is projected to reach $140 billion by 2020.49

Major auto parts suppliers report on their use of use recycled content as input material. For example, an auto parts
supplier that produces door panels, consoles, flooring and other parts uses about 300 million pounds of plastics
annually, of which one-sixth constitutes recycled plastics.50 A leading battery producer has made significant

                                                            
45
See Revision TR-AP:03 for a split to this topic.
46
TR0102-06: Weight of products and materials recycled or remanufactured
47
See Revision TR-AP:03 for a split to this topic.
48
“Why Use Recycled Parts?” Automotive Recyclers Association, accessed August 11, 2017, http://a-r-a.org/find-a-part/why-use-recycled-
parts/.
49
“Increasing Vehicle Parc and Average Age of Vehicles Drive the Automotive Parts Remanufacturing Market,” Global Industry Analysts,
Inc., January 2015, accessed August 11, 2017,
http://www.strategyr.com/MarketResearch/Automotive_Parts_Remanufacturing_Market_Trends.asp.
50
Jerry Powell, “Use of recycled resin in auto parts advances,” Plastics Recycling Update, May 10, 2017, accessed August 11, 2017,
https://resource-recycling.com/plastics/2017/05/10/use-recycled-resin-auto-parts-advances/.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 23

investments to recycle lead from used batteries to use in its production.51 Recycled lead has significantly less
environmental impact that extracting virgin lead, and costs less to procure.52 Additionally, retreaded tires contain 75
percent recycled content while new tires contain up to two percent.53 These disclosures indicate that companies track
their input materials and are likely to be able to report on the revised metric with some certainty and without
excessive additional cost. In addition, the revised metric is aligned with GRI G4-EN2 metric, “Percentage of materials
used that are recycled input materials.”

About half of the ten largest auto parts suppliers publicly listed in the U.S. disclose on the Product Lifecycle
Management topic in their securities filings. However, most of these disclosures focus on emissions reduction and fuel
efficiency rather than on end-of-life management. End-of-life management is tracked only in specific regions where it
is mandated, such as the European Union. In sustainability reports, disclosures also focus on emissions and sourcing of
materials, rather than end-of-life management of auto parts. This suggests that that reporting on provisional metric
TR0102-06 is not cost-effective or verifiable. Hence, the revision limits the scope of disclosure to data that companies
in the industry are likely to have.

Market Input
Investors: Multiple investors agreed that the revised metric on the use of more sustainable input materials improves
the standard. Investors cited the example of how using remanufactured parts and recycled input materials in battery
manufacturing can reduce costs and environmental damage.

Companies: Multiple companies strongly agreed that the revision is within the scope of company control and is
reportable, in contrast to the provisional metric on end-of-life management. Companies further indicated that auto
parts suppliers have difficulty tracing products at end-of-life, since recycling and waste processing is conducted by
separate entities. For example, the tire industry is only able to report industry-wide numbers for the recycling of end-
of-life tires, which does not allow for comparison among different tire suppliers.

While an industry associating representing the tire industry recommended adding biogenic content to the technical
protocol as an example of a qualifying input under metric TR0102-06, the use of biomass for tire manufacturing is a
nascent technology, so the association’s proposal was not implemented at this time.

Benefits
Improves the SASB Standard: The revised metric focuses the metric on data that companies can measure and are
within their control, thereby improving the metric’s verifiability.

Improves cost-effectiveness: The provisional metric required companies to set up detailed and cost-intensive systems
to track their product end-of-life management across various markets. The revision to the metric to focus on input
materials is less costly to measure and report.

                                                            
51
Jessica Lyons Hardcastle, “Johnson Controls, Aqua Metals Ink Battery Recycling Technology Partnership,” Environmental Leader, February
9, 2017, accessed August 11, 2017, https://www.environmentalleader.com/2017/02/johnson-controls-aqua-metals-ink-battery-recycling-
technology-partnership.
52
Jessica Lyons Hardcastle, “Johnson Controls, Aqua Metals Ink Battery Recycling Technology Partnership,” Environmental Leader, February
9, 2017, accessed August 11, 2017, https://www.environmentalleader.com/2017/02/johnson-controls-aqua-metals-ink-battery-recycling-
technology-partnership.
53
“Waste Tire Recycling,” Iowa Department of Natural Resources, accessed August 11, 2017, http://www.iowadnr.gov/Environmental-
Protection/Land-Quality/Waste-Planning-Recycling/Tires.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 24

Revision TR-AP:08 – Industry: Auto Parts; Topic Name:
Product Lifecycle Management54
Summary of Change – Revise Technical Protocol
The SASB revised the technical protocol of provisional metric TR0102-05, “Percentage of products sold that are
recyclable or reusable,” to recognize scrap tires that fulfill U.S. Environmental Protection Agency (EPA) criteria as
reusable products.

Adherence to Attributes of Technical Protocols

The Auto Parts Industry Provisional Standard includes a topic, Product Lifecycle Management,55 with three associated
quantitative metrics intended to demonstrate the environmental impacts of a company’s products over the lifecycle of
these products, including both the manufacturing and use phases. Specifically, provisional metric TR0102-05 describes
the extent to which companies manufacture products that are recyclable or reusable. While the technical protocol
defines what recoverable materials are excluded from the scope of the metric, it does not make an exception for scrap
tires even though the EPA has recognized these as non-hazardous secondary materials when collected via established
tire collection programs. To address this, the technical protocol was revised from “The scope of disclosure excludes
recoverable material which, consistent with the EU End of Life Vehicle Directive (Annex IIB to Directive 75/442/EEC), is
defined as material that can be salvaged for further use, including use as a fuel or other means to generate energy" to
"The scope of recycled material includes scrap tires classified as non-hazardous secondary materials and able to be
collected via established tire collection programs, as defined by the U.S. Environmental Protection Agency (CFR, Title
40, Chapter I, Subchapter I, Part 241, Subpart A, Section 241.2), but excludes other recoverable material which,
consistent with the EU End of Life Vehicle Directive (Annex IIB to Directive 75/442/EEC), are defined as material that
can be salvaged for further use, including use as a fuel or other means to generate energy." This revision improves the
representativeness of the metrics associated with the Product Lifecycle Management topic.

Supporting Analysis
In 2011, the EPA finalized standards (78 Fed. Reg. 9143, 40 C.F.R. § 241.2) to identify whether non-hazardous
secondary materials are considered waste when used as fuels or ingredients in combustion units.56 Under these
standards, scrap tires that are burned as a fuel in combustion units for energy recovery are not considered waste. This
process must be managed under the oversight of an established tire collection programs, as defined by the EPA, to
minimize the potential negative impacts on air quality of unregulated “tire fires.”

According to the U.S. Tire Manufacturers Association (USTMA), approximately 1,922 thousand tons of scrap tires were
used as tire-derived fuel in 2015. This figure has been relatively consistent over the past several years (2,484 in 2007,
2,085 in 2009, 1,427 in 2011, and 2,120 in 2013).57 In fact, more tires in the U.S are reused as tire-derived fuel in

                                                            
54
See Revision TR-AP:03 for a split to this topic.
55
See Revision TR-AP:03 for a split to this topic.
56
“Final Rule: Commercial and Industrial Solid Waste Incineration Units: Reconsideration and Final Amendments; Non-Hazardous Secondary
Materials that are Solid Waste,” U.S. Environmental Protection Agency, accessed May 14, 2018, https://www.epa.gov/rcra/final-rule-
commercial-and-industrial-solid-waste-incineration-units-reconsideration-and-final.
57
U.S. Tire Manufacturers Association, 2015 U.S. Scrap Tire Management Summary, May 2017, pp. 2-6, accessed May 14, 2018,
https://www.ustires.org/system/files/scraptire_summ_2015_05_2017_Final_USTMA.pdf.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 25

various industrial facilities than are recycled.58 USTMA further notes that tire-derived fuel contains approximately 24
percent natural rubber, which the EPA recognizes as carbon neutral when scrap tires are burned for energy recovery
(40 C.F.R. 98.33(e)(3)(iv)). Also, combustion units that use tire-derived fuel can reduce their reportable greenhouse gas
(GHG) emissions (40 C.F.R. §241; affirmed in Solvay v. EPA).59

Utilizing scrap tires for combustion instead of tradition fossil fuels can reduce GHG emissions and environmental
impacts associated with the extraction and processing of coal.60 Furthermore, the beneficial use of scrap tires may limit
or prevent the growth of scrap tire stockpiles, which may have negative impacts on human health and the
environment. Tire stockpiles are habitats for mosquitos, rodents, and other disease vectors. Also, when stockpiles
catch fire, they generate large amounts of toxic smoke and hazardous liquids.61

Given that there is a regulatory basis to consider scrap tires burned for fuel as a non-waste and that the industry
already uses tire-derived fuel to reduce GHG emissions, the revised technical protocol is more representative of
company performance on the Product Lifecycle Management topic.

Market Input
Investors: No direct feedback was received from investors regarding the revision.

Companies: An industry association representing tire manufacturers recommended this revision to improve the
representativeness of the provisional metric TR0102-05.

Benefits
Improves the SASB Standard: The revision improves the representativeness of provisional metric TR0102-05 by aligning
disclosure with industry practice and U.S. regulatory guidance.

                                                            
58
“Tire-Derived Fuel,” U.S. Environmental Protection Agency, accessed May 14, 2018,
https://archive.epa.gov/epawaste/conserve/materials/tires/web/html/tdf.html/.
59
Solvay v. EPA, No. 11-1189 (D.C. Cir. June 3, 2015), accessed May 14, 2018,
https://www.cadc.uscourts.gov/internet/judgments.nsf/E2E9AA3E546EEEB285257F6F00751877/$file/11-1189-1555561.pdf.
60
Code of Federal Regulations, Title 40, Chapter I, Subchapter I, Part 241, Subpart A, Section 241.2, accessed May 14, 2018,
https://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4492.pdf.
61
“Tire-Derived Fuel Frequent Questions,” U.S. Environmental Protection Agency, accessed May 14, 2018,
https://archive.epa.gov/epawaste/conserve/materials/tires/web/html/faq-tdf.html.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 26

Appendix A. Standards Board – Sector Committee
Assignments

STANDARDS BOARD MEMBER SECTOR CHAIR OTHER COMMITTEES

Jeffrey Hales, PhD (Chair)

Financials, Renewable Resources & Transportation, Services, Resource
Professor, Georgia Institute of Technology – Ernest Alternative Energy Transformation
Scheller Jr. College of Business
Verity Chegar (Vice Chair) Financials, Technology &
Extractives & Minerals Processing
Vice President, BlackRock Communications, Infrastructure

Robert B. Hirth Jr. (Vice Chair)

Health Care, Extractives & Minerals
Senior Managing Director, Protiviti; Chairman Technology & Communications
Processing, Services
Emeritus, COSO
Daniel L. Goelzer, JD Financials, Resource Transformation,
Services
Senior Counsel, Baker & McKenzie LLP Infrastructure

Kurt Kuehn Consumer Goods, Renewable

Transportation, Infrastructure
Former CFO, United Parcel Service Resources & Alternative Energy

Lloyd Kurtz, CFA

Technology & Communications, Food
Senior Portfolio Manager, Head of Social Impact Health Care, Resource Transformation
& Beverage
Investing, Wells Fargo Private Bank

Elizabeth Seeger Health Care, Extractives & Minerals

Consumer Goods
Head of Sustainable Investing, KKR Processing, Food & Beverage

Stephanie Tang, JD Transportation, Consumer Goods,

Food & Beverage Renewable Resources & Alternative
Director of Legal, Corporate Securities, Stitch Fix Energy

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 27

Appendix B. Redline Metric Tables
Redline tables are provided below for all sustainability accounting metrics (Table 1) and activity metrics (Table 2). All
significant revisions to topics and metrics between the provisional standard and the codified standard are shown in
redline; however, such redlines are not intended to communicate the full scope of such revisions, for which readers
should refer to the codified Standard and accompanying content elsewhere in the Basis for Conclusions.

All redlines presented in these tables are associated with a revision number in the Revision Number column. Significant
revisions to the technical protocol associated with a given metric will not necessarily be apparent in redline in the
tables; however, the associated revision number will be noted in the Revision Number column of each table.

Any redlines that depict revisions to metrics but that are not accompanied by a revision number (i.e., “n/a”) are not
addressed in the Basis for Conclusions as these revisions have not altered the scope or content of metrics, such as
those that are intended to improve the consistency, clarity, and accuracy of the standard. Similarly, if a metric is not
accompanied by a revision number, the technical protocol may have been revised to improve the consistency, clarity,
and accuracy of the standard.

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 28

 Auto Parts Industry
Table 1.
CODIFIED
UNIT OF PROVISIONAL REVISION
TOPIC ACCOUNTING METRIC CATEGORY METRIC
MEASURE METRIC CODE NUMBER
CODE62
Energy Gigajoules
(1) Total energy consumed, (2) percentage grid electricity,
Management Quantitative (GJ), TR0102-01 TR-AP-130a.1 n/a
(3) percentage renewable
Percentage (%)

Materials
Efficiency & (1) Total aAmount of total waste from manufacturing, (2) Metric tons (t), TR-AP:01; TR-
Waste Quantitative TR0102-02 TR-AP-150a.1
percentage hazardous, (3) percentage recycled Percentage (%) AP:02
Management

Product Safety Number of recalls issued,and total units recalled Quantitative Number TR0102-03 TR-AP-250a.1 n/a

Design for Fuel Total addressable market and share of market for Reporting
EfficiencyProduct products aimed at improved fuel efficiency and/or reduced currencyU.S. TR-AP:03; TR-
Quantitative TR0102-04 TR-AP-410a.1
Lifecycle emissionsRevenue from products designed to increase fuel dollars ($), AP:04
Management efficiency and/or reduce emissions Percentage (%)

Percentage (%)
Percentage of products sold that are recyclable or reusable Quantitative TR0102-05 TR-AP:03
of units sold

Weight of products and materials recycled or

Quantitative Metric tons (t) TR0102-06 TR-AP:03
remanufactured

Materials Percentage of products, by revenue, that contain critical Percentage (%)

Sourcing Quantitative TR0102-08 TR-AP:05
materials by revenue ($)

Percentage of tungsten, tin, tantalum, and gold smelters

and refiners within the supply chain that are verified Quantitative Percentage (%) TR0102-09 TR-AP:05
conflict-free

                                                            
62
The Provisional Metric Code column provides the metric code that appeared in the Provisional Standard. The Codified Metric Code column provides the revised metric code that appears in the
Codified Standard. The revised metric code is structured as follows: [Sector Code]-[Industry Code]-[Topic Code].[Metric Number].

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 29

 CODIFIED
UNIT OF PROVISIONAL REVISION
TOPIC ACCOUNTING METRIC CATEGORY METRIC
MEASURE METRIC CODE NUMBER
CODE62

DescriptionDiscussion of the management of risks

Discussion and
associated with the use of critical materials and conflict n/a TR0102-10 TR-AP-440a.1 TR-AP:05
Analysis
minerals

Materials
Efficiency Percentage of products sold that are recyclable Quantitative Percentage (%) TR0102-05 TR-AP-440b.1 TR-AP:03

Percentage of input materials from recycled or TR-AP:03; TR-

Quantitative Percentage (%) TA05-06-01 TR-AP-440b.2
remanufactured content AP:07

Competitive Total aAmount of legal and regulatory fines and

Behavior Reporting
settlementsmonetary losses as a result of legal
Quantitative currencyU.S. TR0102-07 TR-AP-520a.1 n/a
proceedings associated with anti-competitive
dollars ($)
practicesbehavior regulations

Table 2.
CODIFIED
PROVISIONAL REVISION
ACTIVITY METRIC CATEGORY UNIT OF MEASURE METRIC
METRIC CODE NUMBER
CODE63
Number of parts produced Quantitative Number TR0102-A TR-AP-000.A n/a

Weight of parts produced Quantitative Metric tons (t) TR0102-B TR-AP-000.B n/a

Square footageArea of manufacturing plants Quantitative Square meters (m2) TR0102-C TR-AP-000.C n/a

 
 

                                                            
63
The Provisional Metric Code column provides the metric code that appeared in the Provisional Standard. The Codified Metric Code column provides the revised metric code that appears in the
Codified Standard. The revised metric code is structured as follows: [Sector Code]-[Industry Code]-[Topic Code].[Metric Number].

BASIS FOR CONCLUSIONS | AUTO PARTS INDUSTRY | 30

 

SUSTAINABILITY ACCOUNTING STANDARDS BOARD

1045 Sansome Street, Suite 450
San Francisco, CA 94111
415.830.9220
[email protected]

sasb.org