Mercedes-Benz’s Green Ambition Faces Hurdles Amid Executive Pay and Lobbying Concerns

Mercedes-Benz Group AG is pushing forward with its goal to become carbon-neutral by 2039, positioning itself as a leading player in the global shift to sustainable mobility. The German automaker has announced major investments in electric vehicles (EVs), sustainable supply chains, and renewable energy. However, governance-related issues—including controversial executive compensation and lobbying practices—have cast a shadow over its sustainability ambitions in several global markets.

The company’s Ambition 2039 strategy outlines a roadmap for halving carbon emissions per passenger car over the lifecycle by the end of this decade. This includes a transition to electric-only vehicle platforms by 2025, increasing the share of renewables in production, and establishing a circular economy for raw materials. Mercedes-Benz has also committed to using green steel, sustainable battery sourcing, and increased energy efficiency across operations.

Despite these advancements, stakeholders and watchdogs have raised concerns over corporate governance. In 2024, Mercedes-Benz shareholders and governance experts criticized the automaker’s board for approving a substantial pay rise for CEO Ola Källenius, despite market volatility and mixed financial performance. His compensation increased by over 20%, while other European firms in the auto sector maintained more moderate executive pay packages. Critics argue the pay structure does not sufficiently reflect sustainability targets or shareholder value creation, pointing to a misalignment between the company’s ESG narrative and its governance framework.

Lobbying efforts have also come under scrutiny. Environmental groups and transparency organizations have flagged Mercedes-Benz for its lobbying activity, particularly in the European Union, where the automaker has reportedly advocated for delayed emission regulations and softened EV mandates. While lobbying is a legal and standard practice, the nature of these efforts appears to contradict the company’s publicly stated climate goals, raising questions about the consistency of its ESG commitments.

These governance issues come at a time when regulatory bodies and investors are increasingly tying financial incentives to environmental performance. The European Union’s Corporate Sustainability Reporting Directive (CSRD), for instance, demands clearer disclosures on ESG performance. In this climate, Mercedes-Benz’s actions regarding pay and lobbying could affect its credibility among regulators, investors, and consumers alike.

Mercedes-Benz’s efforts on the sustainability front remain significant. Its shift toward a fully electric lineup and its role in establishing sustainable battery production in Europe signal a major industrial transformation. However, experts argue that for the company to maintain investor and consumer trust, it must address the governance issues that could undermine its broader ESG strategy.

In global markets, particularly in the U.S. and China, Mercedes-Benz is also grappling with regulatory differences and market readiness for electrification. Its sustainability agenda must be balanced with financial realities and local compliance standards, making corporate governance a key enabler—or barrier—to progress.

As the automotive sector undergoes a profound transformation driven by climate policies, technological disruption, and consumer preferences, Mercedes-Benz’s trajectory will be watched closely. Delivering on climate pledges requires not only technical innovation but also strong governance and transparency. Whether the company can align its internal policies with its external promises will determine how seriously it is taken in the ESG landscape.