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Mapping compliance in the automotive industry

There’s no GPS for the automotive industry as they navigate an increasingly complex and stringent regulatory landscape. Compliance no longer just concerns safety issues and technical specifications, but now includes a proactive approach to environmental sustainability, ethical labor practices, and more.  

Automotive supply chains are complicated and spread across the world. From raw materials to finished vehicles, every link faces heightened scrutiny through the lens of environmental, sustainability, and governance (ESG). ESG is a major regulatory trend and a significant differentiator. Make no mistake – the consequences of failing to comply with relevant regulations or suffering an ESG scandal could be disastrous, resulting in fines, legal penalties, reputational damage, and loss of market access.  

But automotive players don’t have to come to a sudden stop if they take the right steps now to adjust for existing and upcoming regulations. While the road ahead may be filled with some uncertainties, the direction of ESG regulations and legislation is clear, so make sure you start getting ready now. 

Quick guide to automotive regulations

The regulatory environment for the automotive industry is changing rapidly, with new policies reshaping how automotive companies operate and manage their supply chains.  

Get a clear view of what’s ahead with our Automotive Supply Chain Compliance infographic and navigate the road to success

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Climate and environmental focused mandates already in force include the UN’s Paris Agreement on Climate Change (2015) and the EU’s Carbon Border Adjustment Mechanism (CBAM, 2024). Both of these included carbon-focused objectives. The Paris Agreement set ambitious goals for reducing greenhouse gas emissions. Then, the EU mandated exclusive electric vehicle sales starting in 2035, creating a significant paradigm shift within the automotive industry. Finally, CBAM, which came into effect in 2024, introduced a carbon tax on imports from countries with less stringent climate policies, encouraging exporters to demonstrate compliance with the EU’s carbon standards. Meanwhile, California’s upcoming Climate Corporate Data Accountability Act, which will come into force in 2027, will require climate data disclosures for companies, including automotive manufacturers. 

climate and environmental regulations for automotive compliance

Figure 1: Key climate and environmental regulation dates for automotive compliance

Legislators, regulators, and consumers have also increased their focus on ensuring ethical supply chains. In response, regulations such as the Corporate Sustainability Due Diligence Directive (2024), U.S. Uyghur Forced Labor Prevention Act (2021), and Canada’s Fighting Against Forced Labor and Child Labor Act (2024) mandate that companies understand and proactively discover any exploitative labor practices within their supply chains. The EU’s upcoming Forced Labour Regulation, which will come into force within the next few years, will similarly require companies to seek out and address forced labor practices within their supply chain. The growing global expectations for accountability in labor conditions will force automakers to prioritize human rights.  

due diligence for automotive compliance

Figure 2: Key due diligence regulation dates for automotive compliance  

Furthermore, the EU’s Deforestation Regulation targets materials and products that lead to deforestation, including rubber, which is used for tires. Companies must prove that their materials sourcing isn’t associated with significant levels of deforestation. The EUDR, which was recently postponed, is set to come into effect in December 2025. 

Finally, trade policies will certainly influence automotive supply chains, as sustainability can be used for leverage in trade wars. The US-Mexico-Canada Agreement (USMCA, 2020) introduced stricter rules on regional content for vehicles, while the EU-China Vehicle Tariffs (2025) could potentially increase costs for imports and exports. Meanwhile, the EU-UK Trade Cooperation Agreement (2027) continues to highlight the complexities of the post-Brexit world, and will place new compliance requirements on automakers wishing to sell across the Channel.   

trade for automotive compliance

Figure 3: Key trade regulation dates for automotive compliance 

The goals leading to compliance

The push for automotive supply chain compliance isn’t an end to itself. Rather, it’s driven by ambitious goals for environmental sustainability and ethical practices. That’s why zero-emission vehicle sales and the use of sustainable materials are at the forefront of regulations and legislations around the world.  

Automakers have been preparing for years for a full shift to zero-emission vehicles, investing heavily in electric and other automotive technologies. Norway will be the first to implement zero-emission-only sales in 2025, while the EU, UK, California, Massachusetts, and New York are aiming to hit this goal by 2035.  

While this is a key trend, with a clear mandate to reduce automotive industry greenhouse gas emissions, achieving these targets won’t be as simple. The necessary infrastructure, such as widespread charging networks, is taking a long time to develop and implement.  

Furthermore, battery technology isn’t as advanced as it could be for full dependence, despite significant improvements in range and reliability. Batteries also face notable challenges in production and disposal sustainability. In this vein, the EU Conflict Minerals Resolution seeks to eliminate the use of raw materials linked in human rights abuses, such as cobalt and lithium mined under exploitative conditions. In addition, the EU Batteries Regulation (2025) will enforce rigorous standards for battery sustainability, emphasizing recycling, and requiring battery manufacturers to adopt closed-loop systems to minimize waste and maximize resource efficiency.  

It may not be easy for automakers to meet these goals with their current processes, but the companies who prepare early could become industry leaders in innovation and sustainability. 

Next steps

Automakers – if you don’t have a full understanding of your supply chain already, now’s the time to get into gear. Effective supply chain monitoring is the first vital step in meeting the growing demands of global regulatory compliance. 

Start by finding and implementing the right tools that allow you to fully visualize your value network to the nth degree. Make sure you know where your materials are coming from, and how they’re sourced. This is particularly important for compliance with regulations such as the US’s Uyghur Forced Labor Protection Act (2022), which requires proof that products are free of forced labor.  

Furthermore, using a tool that helps you analyze large amounts of supply chain data will help you continuously monitor for emerging risks or instances of non-compliance. Identifying risks early can help you either adjust your supply chain as necessary, or give you plenty of lead time to work with suppliers to stay compliant with minimal disruption.  

Remember, the automotive landscape will continue to change. From political and economic shifts to growing ESG concerns from stakeholders and consumers to supply chain disruptions, unpredictability is the only certainty. Ensuring that your business has tools in place to easily understand and adapt your supply chain will be key to staying competitive in such a complicated industry. 

The journey to automotive compliance is never-ending, complex, and constantly evolving. Shifting regulations and increased global scrutiny around ESG is pushing the automotive industry to adapt and innovate. Therefore, successful companies must implement a proactive approach to their supply chains by investing in the right monitoring tools, fostering transparency throughout their value networks, and keeping an eye on emerging rules. By aligning sustainability and ethical practices with long-term business strategies, automakers can turn compliance into a competitive advantage.  

Get a clear view of what’s ahead with our Automotive Supply Chain Compliance infographic and navigate the road to success

DOWNLOAD NOW

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