Examining Strategies Developed by Insurance Companies for Addressing Carbon Emissions in the Automotive Supply Chain in the UK

Abstract

The automotive supply chain is one of the top eight value chains that cause 50% of global emissions. Despite its significance, limited literature has researched the role of insurance companies in addressing automotive supply chain emissions. This research explores strategies developed by insurance companies for addressing carbon emissions in the automotive supply chain in the UK. It employs a qualitative multiple case study approach and conducts in-depth analysis of main drivers, barriers, and strategies in four insurance companies in addressing automotive supply chain emissions. It finds that cost savings and competitive advantage, changing mindset, impending regulation, market changes, and increased connectedness are the main drivers. But further progress is slowed down by five main barriers: ‘the complexity of tracking and quantifying emissions’, ‘conflicts of interest in the supply chain’, ‘skill shortage’, ‘lack of accountability’, and ‘profit prioritisation’. To overcome this, the study establishes five main strategies for insurance companies to follow: ‘circular business model with green parts and repair-over-replace methodologies’, ‘supply chain collaboration’, ‘quantifying emissions and setting key performance indicators’, ‘higher weighting for ESG in tenders and policies’, and ‘education and awareness’. If followed correctly, businesses will be able to achieve ‘emission reductions’, ‘gain competitive advantage’, and ‘reduce costs in the supply chain’. Taking into account these findings and the academic literature, this study develops a framework for insurance companies to mitigate automotive supply chain emissions. This is one of the first papers to study carbon emissions in automotive supply chains from the perspective of the insurance industry. It provides practical implications for the insurance industry in developing carbon emission strategies in automotive supply chains.

1. Introduction

There is an almost universal consensus that climate change is happening from human activity and there needs to be a reduction in CO₂ levels. The Intergovernmental Panel on Climate Change (IPCC) suggests that limiting climate change to 1.5 degrees Celsius would ensure a more sustainable and fair future [1]. This will require changes to all aspects of society. The UK government has implemented mandatory legislation for Britain’s largest businesses to disclose their environmental social governance (ESG) plans in line with the Task Force on Climate-Related Disclosure (TFCD) recommendations [2,3]. This means businesses with over 250 employees will have to highlight how they are implementing sustainable business practices [2,4].

Noticeable advancements have been made, as businesses are now addressing direct emissions, often accompanied with carbon neutrality strategies [5]. However, supply chain emissions, known as scope 3 emissions, are not being addressed and reported on in a number of industries. These involve the upstream and downstream indirect emissions within a company’s value chain and can be up to 11.4 times the operational emissions [6,7,8].

The insurance industry operates in the automotive supply chain as it provides cover and repair services for vehicles [9]. This supply chain is highly complex as it has multiple stakeholders. It is also a significant contributor to scope 3 emissions [10]. This presents an opportunity to significantly reduce emissions.

Some insurance companies have made market commitments to reducing CO₂ production in their automotive supply chains, whilst others have stayed silent. For example, Direct Line has launched the Supply Sustainability Programme. This outlines a plan to be consistent with the 1.5 degrees guidance, which includes addressing indirect scope 3 emissions [11].

Overall, the insurance industry is trying to navigate practical ways of reducing CO₂ emissions in their supply chains whilst also dealing with significant inflationary pressures in the current economic climate [12,13,14]. Currently there is a lack of research into the decarbonisation of the automotive supply chain in the UK, even though, from the insurance perspective, it is crucial for the sector to achieve carbon neutrality. Thus, this research raises the following research questions:

• RQ1. What are the key drivers and barriers for insurance companies to facilitate decarbonisation in the automotive supply chain?
• RQ2. What strategies can insurance companies implement to overcome barriers and leverage drivers in promoting decarbonisation within the automotive supply chain? And to achieve which performance outcomes?

These research questions are explored throughout the study. First, this study examines the academic literature on the drivers, barriers, and strategies for supply chain decarbonisation in general. Secondly, this research applies a qualitative multiple case-study method [15]. This includes 11 open-ended questions based on the academic literature, in order to extract knowledge from key managerial professionals involved in the insurance automotive supply chain [16]. Thirdly, the findings consolidate contributions from the interviews, using thematic analysis before combining with the academic literature in order to propose a framework in the Discussion [17]. By following this structure, the study is able to examine strategies that UK insurance companies can implement in their automotive repair supply chains to reduce CO₂ emissions. It adds valuable knowledge from the insurance industry perspective and makes several unique contributions to the limited literature on this topic.

2. Literature Review

This section aims to review recent academic work appertaining to the insurance automotive supply chain in order to highlight the research gaps.

Table 1. Drivers, Barriers, and Strategies of supply chain decarbonisation.

Drivers	Sources
Customer requirements.	[6,10,18,19,20,21]
Competitive pressure.	[18,19,21]
Government regulation.	[18,20,22,23]
Long-term economic benefits.	[6,18,19,21,23,24]
Barriers	Sources
Complexity of scope 3 emissions.	[8,10,25,26]
Lack of expertise.	[8,25,27,28]
Investment costs.	[27,29,30,31]
Lack of an overarching scope 3 emission reduction framework.	[18,25,26,27,32]
Strategies	Sources
Circular economy framework.	[33,34,35,36]
Supply chain leadership.	[8,21,23,26,27,37]
Set scope 3 targets.	[6,7,8,10,19,26]
Invest in and align carbon-efficient practices.	[19,21,25,27,32]

shows the main academic references for drivers, barriers, and strategies for supply chain decarbonisation in general. These are then critically discussed in Section 2.1, Section 2.2 and Section 2.3. Following this, Section 2.4 explores recent articles on the concept of insurance automotive supply chain decarbonisation in the UK and then concludes.

2.1. Drivers

One of the main drivers that many studies found was customer requirements. Ref. [21] finds that in the supply chain, customers were the most influential stakeholders at the external level. This is an effective driver for change, as it would be challenging for a business to stay in the market if it did not follow environmental standards and demand from the business’s customers. Additionally, ref. [19] finds that customer-led competitive advantage has led to more carbon-efficient practices. However, this study is only focused on the manufacturing industry. Therefore, further research needs to be conducted into the impact on other industries, including the automotive supply chain.

Competitive pressure is another main driver that studies have identified. According to [18], firms cannot afford to ignore trends, as competitors could get too far ahead of the market. Instead, firms need to exploit these new climate strategy opportunities in order to stay competitive. ref. [6] states that by investing today, businesses will foster more resilience to economic trends in the future. It will also lower costs and foster a better reputation for the business.

Some early studies explored government regulation as a driver towards supply chain decarbonisation. Ref. [22] finds that institutional pressure can be used to encourage the adoption of environmental practices within the supply chain. Further studies by [18] confirmed that the UK government is beginning to increase pressure on firms. However, a lot of this regulation is behind what businesses have already implemented for carbon neutrality. Therefore, to impose rules and regulation on supply chain emissions, governmental policies will need to stay ahead of business.

Long-term economic growth was also found to be a driver behind decarbonisation in the supply chain. Ref. [24], who first coined the phrase ‘triple bottom line’, highlights that businesses need to prioritise profit, people, and planet together in order to help build economic resilience in the long term. Ref. [21] identifies that the early movers towards supply chain decarbonisation are driven by the efficient business models that carbon neutrality offers, resulting in long-term economic growth. Therefore, unlocking more strategies towards decarbonisation could be an opportunity for insurance companies to grow whilst addressing climate change.

2.2. Barriers

A major barrier that studies found was the complexity of scope 3 emissions. This prevents businesses from tracking emissions and investing in reduction strategies. According to [8], supply chain emissions are hard to track as the process can involve thousands of stakeholders. Consequently, engaging with all of these suppliers would be practically unfeasible. However, ref. [26] finds that the data may be available, but they are unreliable as they are received from a vast number of secondary sources. This is a complex issue and will take several years to work through in supply chains. Therefore, further research is needed for accurate tracking strategies.

Numerous studies find a lack of expertise as a barrier towards achieving emission reduction in the supply chain. The authors of [25] study the net-zero economy and claim that there need to be more employee knowledge and training to implement carbon neutrality. These new strategies will require more training and expertise within the supply chain. The authors of [27] study this further and find a shortage of specialist knowledge. This means that firms will either need to educate existing employees or outsource. These are both costly, and further research is required in order to devise a strategy that educates and attracts this talent within the supply chain.

Other studies attribute high investment costs as a barrier to decarbonisation. Ref. [31] finds that manufacturing supply chains that focus on financial incentives do not have the resources to implement emission initiatives. According to [29], the lack of investment is also due to risk-averse governance within the supply chain, which avoids sustainability decisions that are uncertain. This is due to the practice of ‘short termism’ as firms look to make a profit in the near term. Furthermore, ref. [30] studies the textile supply chain and suggests that customers have a desire for lower prices, which impacts the feasibility of implementing emission reduction initiatives.

Studies have also attributed the lack of an overarching scope 3 emission reduction framework as a barrier to supply chain decarbonisation. The study by [27] states that businesses often rely on government policy for guidance. This is currently not available for scope 3 emissions, which hampers businesses from addressing the issue. Ref. [8] suggests that not enough attention is being paid by industry ecosystems and regulators due to the complexity of scope 3. However, this is likely to change. More studies are needed in order to help the government develop a framework to aid stakeholders involved in supply chains.

2.3. Strategies

The majority of studies suggest that the circular economy model can be used as a strategy for supply chain decarbonisation by businesses. Ref. [36] studies 114 definitions and concludes that the circular economy concept is a combination of reduce, reuse, and recycle activities and that this links to environmental and economic prosperity. However, this paper does not detail how this process can be minimised in terms of emissions. Ref. [34] takes the circular economy framework further, suggesting that emissions can be minimised in the supply chain by ‘digitalisation, servitisation-sharing solutions, long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing and recycling’ [34] (p. 4). This is particularly useful in the supply chain as it identifies where there is waste. This creates a more efficient business model and therefore derives competitive advantage. However, this study does not look at specific case examples of circular business models. Some papers, such as [33], try to apply the circular economy model to the automotive industry. These studies identify environmental benefits and cost benefits if the model is followed. However, the study looks at the automotive industry from just a manufacturing standpoint. Overall, there is limited research offering an insurance perspective. This would be beneficial to insurers as [8] forecasts that USD 4.5 trillion globally could be generated from circular economic benefits.

Recent research has also recommended that supply chain leadership should be used as a strategy for decarbonisation. Ref. [37] studies sustainable supply chain management and states that different types of leadership are needed in specific sectors to communicate carbon reduction strategies and coordinate supply chain partners’ efforts. Ref. [27] develops this further and finds that businesses need to take a proactive role in suppliers’ learning in order to transfer technical knowledge and requirements to the supply chain for carbon neutrality. This is important in order to align and educate stakeholders. If there is not this process of education and learning, there may be resistance in the supply chain.

Other research is pushing companies to set targets for their scope 3 emissions. Ref. [10] states that to overcome barriers, reduction targets on scopes 1, 2, and 3 should be publicly reported. This would enforce compliance and could be achieved at a small cost. However, there is still an issue of providing correct statistics for scope 3 emissions. The Science Based Targets Initiative (SBTi) addresses this issue by providing a framework to encourage transparency and support for scope 3 emissions. It also requires companies to set short- and long-term scope goals. Currently, the initiative is optional and it only recommends that companies state a plan for scope 3 emissions. More academic literature is needed to find ways to encourage scope 3 emission reduction uptake.

Studies also suggest that firms should invest in and align carbon-efficient practices with activities as a competitive strategy. Ref. [19] suggests that a carbon reduction strategy that aligns with the organisation’s activities should be used, as competitive advantage arises directly from supply chain activities. Ref. [21] recommends spreading these large capital expenditures over several years to see the return on investment. It also suggests implementing easier green initiatives first in order to create awareness and showcase economic benefits to the supply chain.

2.4. Automotive Supply Chain and Insurance Industry

According to [38], at the insurance level, companies are beginning to look towards the use of the circular economy and greener practices. Ref. [39] states that this will help reduce costs, emissions, and reliance on global supply chains. Despite this, there is still a lack of academic literature and strategies for implementing automotive supply chain emission reduction strategies in the insurance industry. A study by the part provider eBay in 2019 found that there is a need for a higher commitment to sustainability practices. A possible solution eBay recommended was implementing green parts policies within insurance contracts. This could save money for the customer and insurer as there is a 60% cost reduction when buying that green part compared to a new original manufactured part. It also estimates that increasing the use of green parts by 10% would stop 390,000 parts from going to landfill and a reduction in carbon emissions of 190,000 tonnes in the UK. According to [40], other suppliers and salvage providers such as Synetiq also state that increased collaboration is needed to expand these policies.

As strategies begin to emerge within the UK insurance industry for addressing automotive supply chain emissions, this highlights an opportunity to produce new academic literature. This study will therefore examine strategies developed by insurance companies for addressing carbon emissions in the automotive supply chain in the UK.

To conclude, research on decarbonisation from a supply chain perspective is scattered. Research has attributed different drivers of ‘customer requirements’, ‘competitive pressure’, ‘long-term economic benefits’, and ‘government regulation’ to the shift. It has also identified several barriers, which are the ‘complexity of scope 3 emissions’, ‘lack of expertise’, ‘investment costs’, and the ‘lack of an overarching scope 3 emission framework’. Recent research recommends several strategies for decarbonisation in the supply chain which includes a ‘circular economy framework’, ‘supply chain leadership’, ‘setting scope 3 targets’, and ‘invest in and align carbon-efficient practices’. Overall, there is limited research in regard to applying drivers, barriers, and strategies to insurance automotive supply chains. For this reason, there is a need to conduct research into strategies developed by the insurance industry for automotive supply chain decarbonisation in the UK.

3. Methodology

This research follows a multiple case-study method [15] in order to extract drivers, barriers, strategies, and expected performance outcomes in regard to insurance automotive supply chain decarbonisation. This study specifically uses explorative qualitative research within an inductive context to find out what is happening and to gain new insights [16].

3.1. Data Collection and Interview Design

Data collection was conducted using semi-structured interviews [41]. This helped the study probe into specific areas of expertise for each interviewee.

The design helped keep a flexible approach when asking questions. The interview used 11 different open-ended questions (see Appendix A). This works well for investigating insurance automotive supply chain emission strategies as it uses semi-structured questions to gain insight into the issue by taking accounts from experts [16]. It is also flexible to change so that the study can adapt to new developments [42]. When designing these questions, secondary data sources were also viewed, which included company annual reports to inform these questions [43]. This study therefore provided questions which were able to gather insight into all relevant drivers, barriers, and strategies that the insurance companies can implement. It also highlights the expected future performance outcomes that insurance companies expect to see.

All interviews were conducted online via Teams, after obtaining written permission from the participating interviewees. Each interview lasted 30 to 60 min and was audio recorded via Sonocent Voice Recorder 2022. This software was then able to develop a transcript of the discussion. To ensure reliability, the research team conducted thorough data analysis and checked the transcripts against the audio recording for enhanced accuracy.

3.2. Selection Criteria

For case selection, purposive sampling was used [44]. First, the researchers conducted an online search to find firms that had made specific commitments to carbon neutrality in the automotive insurance industry. Senior managers who had an in-depth understanding of the insurance industry and its automotive supply chain in the UK were then contacted for interviews. Once this had been exhausted, snowball sampling was then used to generate more interviews from contacts thus made [45]. The rationale behind interviewing these participants was to gain insight from industry leaders to deduce the most useful carbon emission reduction strategies.

Five companies with four insurance companies and one salvage company agreed to take part in the study (see

Table 2. Case Company Description.

Case Company	Data Source	Managerial Interviewees	Background
A	Interview—Teams—21 December 22—1 h	1	UK-based car insurance company that uses telematic technology to offer policies to drivers. The insurer subcontracts its salvage operations and works with several independent bodyshops.
B	Interview—Teams—9 January 23—1 h	2	Management service provider for insurance companies in the UK. The company provides access to a network with more than 1000 privately owned bodyshops and is partnered with one main provider of salvage.
C	Interview—Teams—24 January 23—1 h	3 and 4	Insurance provider with operations in the UK. It uses both a green parts specialist and a salvage company to deliver sustainable solutions in the motor repair industry. It also partners up with several bodyshops that can use these services to put the customer back in the position they were in prior to the incident.
D	Interview—Teams—3 March 23—1 h	5 and 6	Provides insurance management and solutions in the UK. It works on behalf of several insurance companies and provides access to over 100 partners and bodyshops in the supply chain.
S1	Interview—Teams—19 January 23—1 h	7	Salvage company in the UK that acts as part of the supply chain for insurance. It provides vehicle dismantling and used car parts.

). The professionals selected were all at the senior managerial level in each company. For companies C and D, there were two interviewees. A salvage company S1 was also interviewed as it provides dismantling services to the insurance industry. S1 helped triangulate the findings by validating insurance companies’ statements and also widened the study to include a supply chain partner [46].

3.3. Data Analysis

A reflexive thematic analysis approach was used in this study [17]. It was chosen in order to explore the collected data and to generate patterns and themes (see

Table 3. Description of the Thematic Analysis Process.

Phase of Thematic Analysis	Description of the Thematic Analysis Process
1	Familiarise and transcribe the managerial interviews.
2	Code into drivers, barriers, strategies, and expected performance outcomes.
3	Collate different themes within the codes drivers, barriers, strategies, and expected performance outcomes.
4	Check if the themes work within the codes and the data set.
5	Clarify the themes by generating clear definitions and names.
6	Extract the clearest quotes based on the themes to answer the research questions, compare with literature, and aid the discussion.

). This approach was inductive and explored the data first to avoid predetermined bias and choose codes that were relevant to the research questions. The codes derived were drivers, barriers, current strategies, and expected performance outcomes, which provided the structure for the Section 4. The researchers then developed tables which used grounded theory to go from open to selective to axial coding in order to develop the key themes [47]. These were analysed extensively to reach a verified result for the insurance industry’s automotive supply chain emissions.

3.4. Reliability and Data Protection

To maintain reliability and validity during data collection, this study applied Yin’s case study of four tests to each step of the research [48] (see

Table 4. Case Study of Four Tests applied to research.

Case Study of Four Tests	Description of Application.
Construct Validity	Interviewing key managerial professionals from a variety of insurance companies helped construct the validity.
Internal Validity	Using categories in the data analysis labelled barriers, drivers, strategies, and expected performance outcomes to look for patterns, internally validated the results.
External Validity	Developing explanations using the results prevented biasedness. Analysing secondary sources established external validity.
Reliability	Presenting the data in a logical manner and using a thematic design overall made sure reliability was established.

).

It was paramount in this study that participants had confidentiality and anonymity throughout the process [49]. By complying with the General Data Protection Regulation by the European Union Regulatory body, individuals were asked to consent before transcribing and recording the interview [50].

4. Results and Findings

This section presents findings in four categories which are the drivers, barriers, circumventing strategies, and expected future performance outcomes for each case company.

4.1. Drivers

Table 5. Drivers encouraging insurance automotive supply chain emission reduction.

Drivers	A	B	C	D	S1	Quotations
Cost savings and competitive advantage	✓	✓	✓	✓	✓	‘Using recycled parts reduces the miles people are driving, helps price and profits’ (A) ‘We see cost reductions of up 40 to 50% on the cost of buying that part second hand compared to an original manufactured part’ (B) ‘We need to be at the forefront to make sure that we are doing absolutely everything that we can do to reduce our footprint’(D) ‘Keeping vehicles, vehicle parts and materials helps make a profit’ ‘We are winning more work due to our focus as a business on sustainability’ (S1)
Changing mindset	✓	✓	✓	✓	✓	‘As an industry in insurance and financial services, there is a desire to address the carbon emissions in the automotive supply chain’ (A) ‘Customers are definitely becoming more aware of their environmental impact’ (B) ‘The insurance industry operates with a long-term mindset, which fits within sustainability’ (C) ‘There is a reliance on these strategies’ (D)
Impending regulation from governmental bodies	✓	✓		✓	✓	‘As the Financial Conduct Authority strategy and consultation gathers more pace, carbon emissions in the supply chain will be addressed anyway’ (A) ‘In the last 12 to 18 months, we’re seeing a lot larger focus on sustainability as Cop 26 and climate initiatives come forth’ (B) ‘Consumer Duty Regulation, which holds companies more accountable for consumer emissions, is live from June 2023’ (D)
Market changes, including COVID-19	✓	✓	✓	✓		‘We are genuinely seeing motor market part stockpiles become a thing of the past’ (A) ‘A lot of the innovation in this space has come post covid as production is now two years behind’ (B) ‘Second-hand cars are really valuable … This particularly helped in terms of availability of parts through Covid’ (C)
Increased connectedness			✓	✓		‘When it was tried before, there wasn’t this combined view on the world which caused it to fail … parts that were not fit for purpose were turning up to repairers … We now work with a partner that is keen to increase connectivity’ (C) ‘Technology matches part numbers to exactly what we require. sophisticated providers in the supply chain have got their houses in order’ (D)

summarises the drivers encouraging the insurance industry to address CO₂ emissions in the automotive supply chain. S1 validates these results.

According to all case companies, the most important driver towards supply chain decarbonisation is the ‘cost savings and competitive advantage’. By successfully identifying strategies such as green parts that are cost-beneficial, insurance companies can make sustainability profitable, ‘Using recycled parts reduces the miles people are driving, helps price, and profits’ (A), ‘We see cost reductions of up 40 to 50% on the cost of buying that part second hand compared to an original manufactured part’ (B). Companies are looking to stay ahead of competitors, and sustainability provides an opportunity to do this, ‘We need to be at the forefront to make sure that we are doing absolutely everything that we can do to reduce our footprint’ (D).

All interviewees discussed the driver ‘changing mindset’. There has been a shift in mindset from the policyholder, ‘Customers are definitely becoming more aware of their environmental impact’ (B). The insurance industry is also shifting as it ‘Operates with a long-term mindset, which fits within sustainability’ (C).

Most interviewees stated that ‘impending regulation’ was shifting insurance to address its automotive supply chain emissions, ‘Consumer Duty Regulation, which holds companies more accountable for consumer emissions, is live from June 2023’ (D). Additionally, several initiatives, such as ‘COP26’ (B), encourage organisations to take accountability through agreements to cut supply chain emissions.

Most interviewees mentioned ‘market changes’ as a prominent driver. Recent market changes such as buy-to-order were particularly accelerated during COVID-19 when production ceased and ‘motor stockpiles became a thing of the past’ (A). Firms are ‘now two years behind in terms of production’ (B), so they have become innovative with policies such as green parts.

Two companies mentioned that ‘increased connectedness’ drives insurance companies to exploit new sustainability opportunities within the supply chain. Previously the technology was not advanced enough, so ‘parts that were not fit for purpose were turning up to repairers’ (C). However, now there is a technology that ‘matches part numbers to exactly what we require’ (D). Some suppliers, such as (C), have partners focused on increasing ‘connectivity’.

4.2. Barriers

Table 6. Barriers preventing insurance automotive supply chain emission reduction.

Barriers	A	B	C	D	S1	Quotations
Conflicts of interest in the supply chain (B1)	✓	✓	✓	✓	✓	‘Green parts, require extra work for the garage to fit the part’ (A) ‘We are working with over 100 different work providers who want different things from us’ (D) ‘We often have a battle to whose is the best policy’ (B)
Profit prioritisation (B2)	✓	✓	✓	✓	✓	‘Cost is 65–70% of the deciding factor when it comes to policies’ (B) ‘A large proportion of our customers are coming from those price comparison sites … they’re not looking for a company with good ESG credentials … particularly in the current economic climate’ (C)
Skill shortage (B3)		✓	✓	✓	✓	‘There is a skill shortage in the industry with plastic welding’ (C) ‘Some repairers are not approved to work on electric vehicles … labour time’ (D) ‘Parts for the vehicle may often come in the wrong colour’ (S1)
The complexity of tracking and quantifyi-ng emissions (B4)	✓		✓	✓		‘You can’t just measure one thing because it’s five or ten other things your measuring which are out of direct control’ (A) ‘Our green parts partner and their platform gives us a CO2 number … but I don’t know whether that’s good, bad or indifferent, to be honest … We refrain from reporting emissions externally because we don’t produce the number itself’ (C) ‘You’ve got to have that full visibility of your supply chain. We’re not there yet’ (D)
Lack of accounta-bility (B5)	✓	✓		✓		‘We don’t have a specific commitment’ (A) ‘It is difficult to understand who is responsible for what carbon emissions’ (B) ‘We’ve had to define our specific scope 3 emissions are everything excluding indirect supply chain’ (D)

summarises barriers the insurance industry faces in addressing automotive supply chain emissions with S1 validating these results.

The main barriers preventing further progress in addressing automotive supply chain emissions are ‘conflicts of interest in the supply chain’. All interviewees agreed that the supply chain was vast and complex. ‘We are working with over 100 different work providers who want different things from us’ (D). This results in several different policies, which is ‘Often a battle to whose is the best policy’ (B).

The other main barrier was ‘profit prioritisation’. Currently, the business model is centred around cost as ‘cost is 65–70% of the deciding factor’ (B). This is driven by consumers as ‘A large proportion of our customers are coming from those price comparison sites’ (C), so they are not necessarily interested in what is best for the environment.

Many of the interviewees also stated that there was a ‘skill shortage barrier’ within the supply chain. The complexity of modern automotive design requires more expertise in fixing the vehicle. ‘Some repairers are not approved to work on electric vehicles’ (D). Additionally, using green parts can take longer to fix as the ‘Parts for the vehicles may often come in the wrong colour’ (S1), so it requires more ‘labour time’ (D).

Three out of the five companies suggested that the ‘complexity of tracking and providing quantifiable emissions’ prevents further progress. None of the interviewees reported on emissions externally as they either ‘don’t produce the number itself’ (C) or do not have full visibility of the supply chain, ‘We’re not there yet’ (D).

Other companies alluded to the ‘lack of accountability’ preventing automotive supply chain emission reduction, ‘We don’t have a specific commitment’ (A). Furthermore, some companies within the insurance industry have not included indirect supply chain emissions in their definition of scope 3, ‘We’ve had to define our specific scope 3 emissions are everything excluding indirect supply chain’ (D).

4.3. Current Initiatives and Future Strategies in Response to Barriers

Table 7. Current initiatives and future strategies in response to barriers for insurance automotive supply chain emissions.

Strategies	A	B	C	D	S1	Quotations	Barriers Addressed
Quantifying emissions and setting key performance indicators	✓	✓	✓	✓	✓	‘We’re going to use the supply chain for their support and expertise to help us frame an overriding guide’ (A) ‘At the beginning of 2022, our group set for the first time some sustainability KPIs that we are going to report on externally’ (C) ‘We are focusing on the quantification of carbon emissions over time and reduction strategies and impacts on various scopes and definitions of scopes and alignment with global standards… It’s about expanding our scope 3 definitions. It’s about achieving Science Based Targets Initiative compliance’ (D)	B4, B5
Circular business model with repair-over-replace methodologies		✓	✓	✓	✓	‘Looking at the 360 view of sustainability which includes carbon emissions, financials, customer service, growth, market and safety’(B) ‘50% of our instructions that go into our repair network are carbon neutral … not just about Green parts, its about repair over replacing’ (C) ‘We have calculations for the amount of CO2 saved as a result of using green parts in comparison with brand new manufactured parts’, ‘circular business model in mind’ (S1) ‘Making dismantling and recycling a bit more simple and cost effective as well as reducing the emissions from the vehicles whole lifecycle’ (S1)	B2, B4, B5
Supply chain collaboration		✓	✓	✓	✓	‘Engaging with the supply chain, understanding what they do and learning from each other’ (B) ‘Supplier charters code of conduct, to help explain to our suppliers, our ESG policy’ (C) ‘Invested in our supply chain management operations … a collaborative process and now starting to get more direct’ (D)	B1, B3, B5
Higher weighting for ESG in tenders and in policies		✓	✓	✓	✓	‘When we’re going out to tender, we are making sure ESG is very much part of the question and our supplier management’ (C) ‘Gradually increasing the weighting associated with ESG metrics’ (D)	B2, B5
Education and awareness			✓	✓	✓	‘Work closely with partners to encourage suppliers to use green parts and policyholders to accept green parts … delivery of carbon electricity training programmes to colleagues at all levels of the business’ (S1)	B1, B3, B5

summarises the current strategies and future initiatives that the insurance industry can implement to address carbon emission barriers in the automotive supply chain in the UK.

The main strategy that all case companies are working towards is the ‘quantification of carbon emissions’. ‘We are focusing on the quantification of carbon emissions over time and reduction strategies and impacts on various scopes and definitions of scopes and alignment with global standards’ (D). These will be aligned with global standards such as the ‘Science Based Targets Initiative’ (D).

Four case companies are all increasing the use of the ‘circular business model’ with ‘repair-over-replace’ methodologies (C). This can be carried out via goals within the business model such as ‘50% of our instructions that go into our repair network are carbon neutral’ (C). Other interviewees recommended balancing all aspects of the business by taking a ‘360 view of sustainability which includes emissions, financial customer service, growth, market and safety’ (B) for the strategy to be implemented correctly.

Most interviewees also want to increase ‘supply chain collaboration’ by ‘Engaging with the supply chain, understanding what they do and learning from each other’ (B). However, this process would ‘get more direct’ (D) if suppliers were not making an effort to implement environmental governance.

The majority of interviewees also planned to introduce ‘higher weighting for ESG in tenders’ as a way to overcome barriers. This involves ‘making sure ESG is very much part of the question and our supplier management’ (C).

Three out of five interviewees are also providing more education in the supply chain, such as ‘carbon electricity training programmes’ (S1). This will bring the right skills to the supply chain that sustainability requires. These firms are also working to provide awareness to partners and customers by providing initiatives that ‘encourage suppliers to use green parts and policyholders to accept green parts’ (S1).

4.4. Expected Performance Outcomes

Table 8. Expected performance outcomes for insurance automotive supply chain emissions.

Expected Performance Outcome	A	B	C	D	S1	Quotes
Emission reductions	✓	✓	✓	✓	✓	‘A goal of reducing the impact of our business activities on the environment by 70% by 2050’ (A) ‘In the long term the aim is to be net zero by 2050 and in the short term reduce emissions by 50% by 2030’ (D) ‘Committed to Science-Based Target with a new 2030 net zero target’ (S1)
Competitive advantage	✓		✓		✓	‘We want to lead the way in protecting people as mobility changes’ (A) ‘We expect reduced costs in the long term’ (C)
Reduced cost in the supply chain		✓	✓	✓		‘Working together to push together in the same direction’ (B) ‘We want to share spoils with the repairer as it is cost-beneficial for both parties’ (C)

highlights the expected future performance outcomes for each case company, given the strategies mentioned previously.

All companies are expecting emissions reductions in the supply chain, ‘In the long term, the aim is to be net zero by 2050 and in the short term reduce emissions by 50% by 2030’ (D). Companies also expect to increase competitive advantage, ‘We want to lead the way in protecting people as mobility changes’ (A). Other companies expect reduced costs throughout the supply chain, ‘We want to share spoils with the repairer as it is cost-beneficial for both parties’ (C).

5. Discussion

The findings provide empirical evidence for the drivers, barriers, and strategies displayed in the academic literature for the automotive supply chain. It also expands upon previous literature by analysing the insurance industry, as opposed to a broader supply chain perspective. Besides developing upon prior research, this study identifies the expected performance outcomes of implementing these initiatives. Therefore, this section summarises and compares the academic literature with the research findings in order to propose a conceptual framework that answers the two research questions.

5.1. Drivers

This study identifies that insurers have five significant drivers towards automotive supply chain emission reduction. These findings build upon and advance the academic literature.

Firstly, this study found that ‘cost savings and competitive advantage’ are a major driver towards emission reduction in the automotive supply chain. This is consistent with the academic literature, which found that long-term economic benefits can be gained through efficient business models and building environmental resilience [6,18,19,21,23,24]. However, this research also finds that insurance companies are driven by the short-run cost reductions that automotive supply chain decarbonisation offers. Implementing easier initiatives first, with opportunities for cost reductions (the so-called ‘low hanging fruits’), will help motivate the supply chain to invest in long-term strategies and thus receive a competitive advantage.

Secondly, the findings present ‘changing mindset’ as a major driver towards carbon reduction in the insurance automotive supply chain. The academic literature states that customer requirement is driving change towards carbon-efficient practices within the supply chain. If businesses do not follow the demand from these consumers, they will lose market share [6,10,18,19,20,21]. This study disagrees with the literature, as it finds that insurance companies are the stakeholders who are most actively pushing to address automotive supply chain emissions in the UK. The research also finds that sustainability fits with the long-term mindset that the insurance industry operates in. It also finds that the majority of customers prioritise costs over commitment to sustainability when looking for a policy for their vehicle on price comparison sites.

Thirdly, this study reveals that ‘impending regulation from governmental bodies’ is another significant driver for insurance. Previously, the academic literature suggested that government regulation was not a major driver as it often lagged behind business activities [18,20,22,23]. However, this research explains that impending regulation forces insurance companies to prepare and implement these strategies prior to being imposed by statute. For example, insurance companies are looking at the incoming Consumer Duty Regulation and are planning to deal with its implications.

Fourthly, this research uncovered that ‘market changes’ are driving insurance companies to address their automotive supply chain emissions. Previously, academic research stated that firms could not afford to ignore competitive pressure and climate strategy opportunities due to the tight margins in the industry [18,19,21]. This study advances the literature as it also includes the effect of recent market conditions, such as COVID-19, on sustainability in the insurance automotive supply chain. The pandemic accelerated the depletion of part stockpiles and created long back orders, which has forced firms to be innovative strategically. This includes using more recycled green parts and promoting other sustainability policies within the supply chain.

Finally, this study finds ‘increased connectedness’ as a driver within the insurance industry. This was not detailed in the literature but it is an important factor. Recent developments in technology have enabled the complex supply chain to be managed more efficiently and cost effectively. Technology reduces errors, such as parts arriving at the wrong place, which increases supply chain efficiency and sustainability.

5.2. Barriers

This research identifies several important barriers preventing further progress in reducing insurance automotive supply chain carbon emissions. These findings advance and build on the academic literature.

Firstly, this study found ‘conflicts of interest in the supply chain’ as a barrier for insurance in terms of addressing scope 3 emissions. This was not found in the literature but it is important. If business goals do not align in the supply chain, it will be difficult to implement successful decarbonisation policies. The problem is establishing which is the best policy when there are so many different stakeholders in the complex supply chain.

Secondly, the findings reveal ‘profit prioritisation’ as another major barrier for insurance. This is consistent with the academic literature, where the high investment costs and the focus on short-term financial incentives prevent supply chains from investing in carbon reduction [27,29,30,31]. This study shows cost to be the driver behind 70% of decisions by the end consumer. Current UK inflationary pressures are only going to increase this significant figure. This profit prioritisation barrier needs to be addressed so that insurance companies can implement automotive supply chain decarbonisation.

Thirdly, the results find that ‘skill shortages’ in the automotive supply chain are another barrier for scope 3 strategies. These findings agree with the previous academic literature, as the lack of new knowledge and training required to implement carbon neutrality strategies is slowing progress towards the reduction of emissions in the supply chain [8,25,27,28]. The findings specifically mention that extra staff will also be needed. For example, if more parts come in the wrong colour due to increased use of recycled parts, new craftsmen will be needed. Therefore, companies need to be able to upskill existing workers and attract new employees to the profession and train them.

Fourthly, the ‘complexity of tracking and quantifying emissions’ is another barrier for insurance automotive supply chain decarbonisation. This is consistent with the literature, which states that supply chains involve gathering information from many different stakeholders, which increases complexity in regard to emission tracking [8,10,25,26]. This is also common to insurance as the supply chain either does not provide emission calculations or the figures produced are not reliable. This needs to be addressed to understand where the emissions are in the supply chain. Strategies can then be implemented in the correct areas.

Finally, this research found that a ‘lack of accountability’ is preventing insurance automotive supply chain emission reduction. Previously, the literature stated that a lack of an overarching scope 3 emission reduction framework from the government resulted in limited enforcement and liability for companies who have indirect supply chain emissions [18,25,26,27,32]. This study also finds that some insurance companies have not made specific commitments. Other insurers do not have indirect supply chain emissions in their scope 3 definition. This results in these emissions not being addressed. Therefore, more needs to be done in terms of increasing accountability for insurance automotive supply chain emissions.

5.3. Current Initiatives and Future Strategies in Response to Barriers

This research finds several strategies that insurance companies are able to use in order to overcome automotive supply chain emission reduction barriers. These findings develop upon the academic literature and suggest strategies that are unique to insurance.

Firstly, this study finds that the main strategy insurance companies are planning to use is the quantification of emissions in order to set key performance indicators. This strategy is similar to the academic literature as it involves setting scope 3 targets using the Science Based Targets Initiative [6,7,8,10,19,26]. However, this study also recommends that insurance companies work with supply chains in order to understand them in more detail before setting key performance indicators. An insurance company can report these externally to consumers in order to create awareness, take accountability, and improve transparency.

Secondly, this study recommends implementing the circular business model with repair-over-replace methodologies. These findings agree with the previous academic literature that the circular economy framework can be used to identify and minimise waste emissions, such as scope 3, whilst unlocking cost savings [33,34,35,36]. However, this research also finds that a repair-over-replace methodology should also be incorporated within this circular economy framework. This would allow insurance companies to have a 360-degree view of the business and prevent as much waste as possible in terms of scope 3 emissions. One insurance company is currently using this policy and recommends to its supply chain that 50% of repair instructions are carbon neutral.

Thirdly, this study found that supply chain collaboration is an important strategy for insurance. This concept involves engaging with suppliers to better understand what they do. This strategy is important as it involves the supply chain in each stage, which aligns expectations with regard to scope 3 policy. A supplier’s code of conduct can also be established by collaborating with suppliers to devise a scope 3 strategy.

Fourthly, this study found that insurance can use ‘higher weightings for environmental social governance in tenders and in policies’ as a strategy for decarbonising the automotive supply chain. Previously, the academic literature suggested using competitive strategies with a focus on aligning carbon-efficient practices within supply chain activities [19,21,25,32]. This is hard to carry out in a complex supply chain and depends on the context of the industry. Therefore, this study recommends that insurance companies start to implement higher weightings for sustainability when going out to tender with supply chain partners. The supplier’s code of conduct can also be used here to establish what is expected.

The final strategy that this study recommends for insurance is to increase ‘education and awareness’ within the automotive supply chain. This study agrees with the previous literature that companies should take a leadership role within the supply chain to educate stakeholders on emission awareness and that new skills are needed for carbon neutrality strategies [8,21,23,26,37]. This research provides examples of these strategies within the insurance automotive supply chain. Such examples include carbon electricity training programmes and education on green parts.

5.4. Expected Performance Outcomes

The expected performance outcomes for insurance company strategies were not mentioned in the academic literature. This study, therefore, finds that by following the current initiatives and strategies mentioned above in both the short and long term, managers within insurance companies expect to achieve improvements. These include the ‘ability to reliably track emissions and subsequent reductions’, ‘competitive advantage’, and ‘reduction of costs in the supply chain’.

5.5. Conceptual Framework

Based on the literature and findings, this research proposes a conceptual framework, as presented in Figure 1. This is useful to depict what the barriers and drivers are. It also shows strategies that insurance companies can use to address carbon emissions in the automotive supply chain and the positive outcomes available if implemented correctly.

6. Conclusions

Globally, there is a consensus that climate change from human activity needs to be reduced in terms of CO₂ levels. Previous studies have found that supply chain emissions can be up to 11.4 times operational emissions and that they need to be addressed in order to keep within the 1.5 degrees Celsius climate change limit that the Intergovernmental Panel on Climate Change recommends [1,6]. This requires industries such as insurance to devise strategies to address their automotive supply chain emissions.

This pioneering study therefore explores the themes of barriers, drivers, strategies, and expected performance outcomes in order to propose a conceptual framework that insurance companies can follow to reduce automotive supply chain emissions. It answers why insurance companies have a role in addressing sustainability within their automotive supply chain and how they can use the conceptual framework from this study to develop a viable business model to lower emissions. Therefore, this research adds valuable knowledge from the insurance industry perspective and makes several unique contributions to the limited literature on this topic.

Specifically, this study finds five main drivers that are causing insurance companies to address their automotive supply chain emissions. These are ‘cost savings and competitive advantage’, ‘changing mindset’, ‘impending regulation’, ‘market changes’, and ‘increased connectedness’. It also shows how further progress in regard to automotive supply chain decarbonisation is slowed down by five main barriers. These are ‘conflicts of interest in the supply chain’, ‘profit prioritisation’, ‘skill shortage’, ‘complexity of tracking and quantifying emissions’, and ‘lack of accountability’. Lack of accountability was especially concerning as some insurance companies did not include indirect supply chain emissions within their scope 3 definitions. To overcome these barriers, this study establishes five main strategies for insurance companies to follow. These are the ‘quantifying emissions and setting key performance indicators’, ‘circular business model with green parts and repair-over-replace methodologies’, ‘supply chain collaboration’, ‘higher weighting for ESG in tenders and policies’, and ‘education and awareness’. Insurance companies can apply these strategies to influence the automotive supply chain partners towards carbon neutrality. In particular, green initiatives can be carried out jointly with part suppliers or workshop managers. If followed correctly, businesses will be able to achieve ‘emission reductions’, ‘gain competitive advantage’, and ‘reduce costs in the supply chain’.

Despite this study’s original contribution, it also has its limitations. One of the limitations of this study was the number of participants. This research involved five companies within the UK as it proved difficult to recruit participants who had the relevant managerial knowledge and expertise. In addition, a lot of potential participants were concerned about confidentiality. Their emission reduction strategies have not been reported externally, and they were concerned about competitive advantage if they discussed their future plans outside of the company. This highlights the need for deeper collaboration within the industry to confront a global threat.

As insurance automotive supply chain emission reduction is a new and evolving area, more research can be conducted as governmental and insurance strategies develop. Due to its importance throughout this study, future research should concentrate on scope 3 development in more detail. Finally, it would also be beneficial to research the insurance industry outside of the UK to determine best practices elsewhere.