Simon Croom, professor of supply chain management at the University of San Diego School of Business, discusses what it will take for Volkswagen and other automakers to create a truly green vehicle and its supporting supply chain.

Volkswagen is purchasing green car credits from Tesla, as an initial step in the automaker’s strategy to fashion an environmentally friendly product. The goal, says Croom, is to become a “net zero” organization in terms of carbon output. Like nearly every major auto manufacturer, VW is moving in the direction of electric vehicles, with the long-term intent of phasing out internal combustion engines altogether.

Electric cars have their own environmental consequences, however. “It’s a process of looking at your vehicle’s total lifecycle,” says Croom, “not just batteries but also construction and extraction of materials all the way back to the mine. Going for electric vehicles doesn’t immediately equate to a lower carbon footprint.” That’s especially the case if the electricity used to power the vehicle is generated by fossil fuels and non-renewable energy sources.

Environmental rules must be followed all over the world. Like a number of other automakers, Volkswagen has a joint venture for building cars in China, which has declared that green concerns are at the forefront of its economic policy. (China is currently the world’s largest emitter of greenhouse gases.)

All automakers must transition to making electric vehicles. “The writing’s on the wall,” says Croom. But the switch also carries potentially huge economic benefits, as manufacturers undertake massive investments in the technology. Every dollar spent by a consumer on an electric vehicle creates $7 in economic activity throughout the automotive supply chain, he says. Still, automakers will have to overcome some major challenges associated with sourcing and building electric vehicles.