Heavy transport and construction sit at the uncomfortable centre of the climate transition. Diesel trucks, buses and machines keep cities moving and economies growing, yet they account for a disproportionate share of global emissions and local air pollution. Regulators are tightening standards, customers are under pressure to decarbonise their value chains, and infrastructure for zero-emission fleets is still catching up.

Volvo Group is one of the manufacturers most exposed to this transition risk. It is also one of the players trying hardest to turn that risk into an operating model for a net-zero economy.

 

Volvo Group’s net-zero North Star

 

Volvo Group has anchored its strategy around a net-zero value chain target by 2040, ten years earlier than the standard Science-Based Targets initiative (SBTi) timeline for heavy industry. This ambition covers not only direct emissions from factories and testing operations, but also the “use phase” of vehicles and machines in customers’ hands, where the vast majority of lifecycle emissions arise.

The company’s climate pathway has been validated by SBTi at the 1.5°C level, and includes interim 2030 targets for operational emissions and for the use of sold products. In 2025, Volvo reports that greenhouse gas emissions from its own operations were 33 percent lower than in 2019, with direct scope 1 emissions down about 20 percent and scope 2 emissions more than halved, mainly due to greater use of renewable energy.

💡By 2025, use-phase emissions from Volvo Group’s products had fallen to about 228 million tonnes of CO₂e, down from 331 million tonnes in 2019, a reduction of roughly 31 percent.​

CEO Martin Lundstedt has started using global stages to frame this transition as a competitiveness question for the entire ecosystem. At CES 2025, he argued that “the time for talking has passed. The time for action is now,” calling on policymakers and industry to fast-track zero-emission vehicles and the enabling infrastructure.

 

Decarbonising what customers actually use

 

Most of Volvo Group’s footprint sits in scope 3 category 11, the fuel burned in trucks, buses and construction equipment once they leave the factory. That reality is reshaping its product roadmap.​​

The group’s climate strategy is built around three main technology levers: battery-electric vehicles and machines, fuel-cell electric platforms, and internal combustion engines using low or zero carbon fuels. Together, these are intended to phase out fossil diesel while still offering the performance and uptime demanded in freight, construction and public transport.

Despite that long-term vision, the present is still transitional. In 2025, around 3 percent of Volvo Group’s delivered products were fully electric. Yet the company has committed that at least 35 percent of sales will be fully electric by 2030, and that all new products delivered after 2040 should be net-zero compatible so the rolling fleet can be decarbonised by mid-century.

💡A quarter of Volvo Group’s R&D spend in 2025 qualified as EU Taxonomy-aligned low carbon technology, even though only about 3 percent of products sold were fully electric, a sign of how front‑loaded the innovation curve is in heavy transport.​

 

Cleaning up factories and energy use

 

Volvo’s own operations are a much smaller share of its total footprint, but they are a visible test of credibility. In 2025, energy use in Industrial Operations was 4.9 MWh per SEK million of net sales, up slightly from 4.5 in 2024, reflecting cyclical volume shifts and mix effects. Over the same period, combined scope 1 and 2 emissions per SEK million of net sales rose from 0.5 to 0.6 tonnes of CO₂e, even though absolute emissions remain significantly below 2019 levels thanks to higher shares of renewable energy and process efficiencies.​​

The company acknowledges that changes in sales volumes and product mix can temporarily mask intensity improvements. That nuance matters in heavy industry, where a single new testing facility or model line can affect short-term ratios. What is more structurally important is the sourcing shift: Volvo reports that the majority of electricity used in its operations now comes from renewable sources in many markets, although the global mix still depends heavily on local grids.​

 

Supply chains, materials and embedded emissions

 

As more of Volvo Group’s direct emissions decarbonise, attention is moving up and down the value chain. The group works with roughly 12,000 suppliers supporting series production, and more than 50,000 supplier locations at tier 1 alone, with steel, aluminium, polymers and critical minerals like cobalt, tin, tungsten and mica creating both climate and human rights risks far beyond Sweden.​

To manage that complexity, Volvo has embedded its Supply Partner Code of Conduct into contracts, setting expectations on labour rights, climate, environmental management and business ethics, including a strict prohibition of forced and child labour and requirements for responsible mineral sourcing. In 2025, 93 percent of the company’s direct material purchasing spend came from suppliers that had completed a standardised sustainability self-assessment, and 86 percent of spend was with suppliers assessed as conformant to those requirements.​

💡Volvo Group carried out 254 in-depth on-site sustainability audits at suppliers in 2025, with the most frequent findings involving excessive working hours, weak supply chain management, and gaps in management commitment to ESG.​

For higher-risk raw materials, Volvo runs a Sustainable Materials Program aligned with the OECD Due Diligence Guidance and the Responsible Minerals Initiative. In 2025, 556 suppliers were in scope for 3TG (tin, tantalum, tungsten, gold) and 339 for cobalt and mica, yielding disclosure on more than 700 smelters and refiners and allowing Volvo to track which upstream actors are conformant or non‑conformant with responsible sourcing standards.​

Recognising that governance needs to match this technical work, Volvo has also introduced a Sustainable Materials Sourcing and Due Diligence Policy to guide purchasing decisions, and has started to systematise remediation where abuses are found.

 

Human rights as part of climate strategy

 

Volvo Group’s human rights agenda has matured quickly in parallel with its climate program. Since 2022, a group-wide Human Rights Program has set minimum standards for due diligence across operations, supply chains and downstream relationships, overseen by a cross-functional Human Rights Board that includes executive leadership.​​

In 2025, the company completed a human rights risk and maturity assessment across its businesses, identifying salient risks such as forced labour, child labour, unsafe working conditions and impacts from product misuse in conflict-affected or high-risk areas. These insights are feeding into updated processes for screening high-risk customers and markets, particularly where products can be militarised or used in security contexts.​​

Karin Svensson has been vocal about the cost of delay. Reflecting on COP29, she observed that “a lot of time is spent discussing the cost of taking action, but not enough time is spent on the cost of inaction. We need to act now.”

 

People, diversity and a just transition

 

ESG at Volvo Group is not only about technology and climate metrics. It is also about the 99,000 people who will make or break the transition. In 2025, women represented 24 percent of the workforce and 29 percent of presidents and other senior executives, modestly up from the prior year. While still far from parity, these figures show gradual movement in an industry that has historically been male-dominated.​

Health and safety remain another core pillar. Volvo’s long-term ambition is to cut accident rates in its own operations by 50 percent between 2019 and 2030, and it continues to track and report workplace accidents and safety programs as part of ESRS S1. At the product level, safety remains an area of differentiation: in 2024 and 2025, Volvo’s FH Aero and FM models received five-star Euro NCAP truck safety ratings and CitySafe accreditation, reflecting high performance on driver support, collision avoidance and protection of vulnerable road users.​​

Beyond its own walls, the company is using vocational training as a lever for a “just transition” in key markets. Programs in Morocco, Ethiopia and Zambia, run in partnership with agencies like SIDA and UNIDO, have trained more than 12,000 drivers and mechanics since inception, with employment rates nine months after graduation ranging from roughly 38 percent in Zambia to above 80 percent in several Ethiopian and Moroccan programs.​

💡One flagship program in Ethiopia, MiSALE, has reached over 9,000 participants with an estimated 81 percent employment rate nine months after graduation, linking local livelihoods directly to safer and more efficient transport operations.​

 

Partnerships, policy and the system challenge

 

Volvo Group is candid that it cannot decarbonise transport and construction alone. Its climate and human rights disclosures highlight a large portfolio of collaborations, from battery and fuel cell joint ventures to charging infrastructure ventures such as Milence, and sector partnerships with customers like CRH to pilot fossil-free trucks and machines.​​

Lundstedt has distilled this into a simple equation. In one public intervention, he noted that the ramp-up of fossil-free transport depends on equipment availability multiplied by total cost of ownership, charging infrastructure, grid capacity, green energy and supply chain maturity: if any parameter is effectively zero, the whole transition stalls.​

At CES 2025 he went further, arguing that “partnership is the new leadership,” and stressing that Volvo’s goal to reach net-zero emissions by 2040 will only be possible if policymakers, grid operators, energy companies and customers align around infrastructure, pricing and regulation.

From a governance perspective, the group is putting money and transparency behind that policy agenda. It is registered in the EU and US lobbying transparency registers, and reported about SEK 21 million in lobbying costs in 2025, with a clear focus on rules that shape the net zero transition, such as EU CO₂ standards, Euro 7 and US EPA greenhouse gas regulations for heavy vehicles.​

💡Volvo reports that 3 percent of products delivered in 2025 were fully electric, yet it is already lobbying and partnering as if 35 percent electric sales by 2030 and net zero by 2040 were non‑negotiable constraints. That disconnect between today’s fleet and tomorrow’s regulation is exactly where transition leaders are positioning themselves.

 

From disclosure to execution

 

Volvo Group’s 2025 sustainability statements are among the first in its sector to follow the European Sustainability Reporting Standards, with limited assurance from its auditors on the climate and broader ESG disclosures. The report is underpinned by a structured double materiality assessment that explicitly links climate, pollution, resource use, human rights and governance to financial risk and strategic decision‑making.​

The picture that emerges is not one of a company that has already “solved” heavy transport’s climate problem. Use-phase emissions are still in the hundreds of millions of tonnes of CO₂e, only a small slice of sales are zero tailpipe, and supplier audits continue to uncover serious issues in working conditions and management systems.​​

Yet compared to peers, Volvo Group is increasingly a test case for what it takes to operationalize net zero in a hard‑to‑abate sector. Its leaders are clear that the transition is as much about policy and partnership as it is about technology.

For ESG practitioners and investors, the key question over the rest of this decade will be whether Volvo can keep translating that narrative into sustained emissions cuts in the use phase, a faster share shift toward zero‑emission products, and measurable improvements in human rights outcomes across its far‑flung supply network. The 2025 report suggests that the groundwork is there, and that the group now understands the cost of inaction as clearly as the opportunity in leading the transition.