Context

Our Environmental Aspects

A range of environmental impacts is associated with the manufacture and use of automobiles. A high-level view of impacts throughout our value chain is set out here.

Analyzing our Environmental Issues

As part of our commitment to comprehensive environmental management using the ISO 14001 framework, we have analyzed both our environmental aspects and potential environmental impacts. Environmental aspects is a term used in the ISO 14001 framework to denote elements of an organization's activities, products and services that can interact with the environment. Potential environmental impacts include any change to the environment, whether adverse or beneficial, wholly or partially resulting from an organization's activities, products or services. Local facilities use corporate lists of environmental aspects and potential impacts to identify and amplify those aspects that apply to their operations. We are incorporating ISO 14001 aspects into our overall Environmental Operating System (EOS) currently being rolled out globally.

Quantifying Environmental Burdens

To quantify the environmental aspects and the potential environmental burdens associated with them, we have analyzed resource use and emissions throughout the life cycle of many of our products. These analyses have been done in our research labs, by Ford of Europe's recycling experts and in cooperation with others in the industry. The stages of a vehicle's life cycle include materials production, parts fabrication, vehicle assembly, vehicle operation (including fuel production), maintenance and repair, and end-of-life disposal and recycling. While estimates vary depending upon the specifics of the vehicle analyzed, one cooperative, multi-industry analysis of a typical family sedan (a spark-ignited, gasoline-powered, Taurus-class family sedan weighing 1,532 kg) found that during its life cycle:

• 961 GJ of energy are consumed
• 21,000 kg of hydrocarbon are consumed
• 60,000 kg of CO2 are emitted

In that study, it was assumed that the vehicle was driven a total of 120,000 miles at an average metro-highway fuel efficiency of 22.8 mpg. The study also found that:

• Vehicle operation consumes 86% of the life cycle energy
• Vehicle operation generates 87% of the life cycle CO2
• Vehicle production generates 65% of the particulates and 34% of the life cycle sulfur dioxide

This is consistent with a recent review of life cycle studies, in which it was found that the operational stage generally accounts for 80 to 90 percent of the total energy consumption and carbon dioxide emissions of conventional gasoline-powered vehicles, depending on the vehicle's material composition, average fuel efficiency and lifetime drive distance.

For example, a recent ISO 14040-reviewed Life Cycle Assessment study of the Ford Galaxy and S-MAX confirmed the high-use-phase share for these impact categories. Other impact categories are mainly dominated by the mining and material production phase.

Precautionary Principle

The precautionary principle is the idea that if the consequences of an action are unknown, but are judged to have some potential for major or irreversible negative consequences, then it is better to avoid that action. We do not formally apply the precautionary principle to decision making across all of our activities. However, it has influenced our thinking. For example, in addressing climate change as a business issue, we have employed the precautionary principle.

Assessing Materiality

The materiality analysis conducted for this report showed that climate change and other environmental issues are among the most significant issues for Ford and stakeholders alike.

While these issues were deemed in our 2004/5 materiality analysis to be material issues for Ford, their importance to the Company and stakeholders alike was even higher in this most recent analysis. We attribute this increase to several key factors:

• Fuel prices were volatile and rising during 2005 and 2006
• Vehicle markets in North America began to show a clear shift toward more fuel-efficient products
• The regulation of greenhouse gas (GHG) emissions increased in Kyoto signatory countries
• U.S. states continued to adopt GHG regulations for automobiles, and the 2006 U.S. elections raised the potential for additional fuel economy/GHG regulation at the federal level
• The development of carbon markets offers opportunities as well as risks
• The Iraq war spotlighted energy security concerns

These factors have also raised the profile of the energy security issue, particularly in the United States, where dependence on imported oil has been growing. This issue is linked to climate change concerns because of common solutions; it is also a driver of interest in alternative fuels.

Our more granular 2006/7 materiality analysis identified six environment-related issues as among the most material:

• Low carbon strategy
• Vehicle greenhouse gas emissions
• Fuel economy
• Cleaner technologies
• Clean/alternative fuels
• Public policy: GHG/fuel economy regulation

We also found an overall global theme of increasing expectations and regulation of a range of environmental issues associated with our products and manufacturing facilities. Thus, several issues rose in importance to Ford, including energy and water use (due to rising costs and concerns about long-term availability); tailpipe emissions and end-of-life management (due to increasing regulation) and product materials use (due to opportunities to improve the environmental performance of vehicles and cut costs through "cradle to cradle" solutions).