Shifting Gears Campaign

IASJ Encourages Auto Companies to Tackle Human Rights in the Supply Chain

Investor Advocates for Social Justice is using our voice as faith-based and responsible investors to engage with our portfolio companies in the automotive sector as part of an initiative called Shifting Gears: Accelerating Human Rights in the Auto Sector.  We recognize that there are deep and complex global supply chains in this industry – with up to 30,000 parts in a car – and these companies are exposed to legal, reputational, and financial risks if they fail to adequately address the risks to workers throughout these operations.

Launch of Shifting Gears Report

June 9, 2020: Investor Advocates for Social Justice (IASJ), is pleased to release its new report: Shifting Gears, An Assessment of Human Rights Risks & Due Diligence in the Automotive Industry. This report is part of the ongoing, multi-year shareholder advocacy campaign called the Shifting Gears Initiative, in which faith-based investors are engaging with 23 auto companies in their portfolios with the goal to improve human rights due diligence. After thorough assessment of each company’s publicly available disclosures, the report finds that companies overall are failing to conduct effective human rights due diligence.

Full Report
Executive Summary
Webinar
Blog Post

Human Rights Proposals Going to a Vote at Auto Companies in 2020

Human Rights Impacts in the Automotive Sector are Severe

Automakers source thousands of commodities from around the globe, all of which play a critical role in the final product. Meanwhile, the conditions of the mine, farm, or factory where these goods are harvested or produced may be be in high-risk contexts that are dangerous and unregulated, exposing workers, as well as companies to risks. According to the ILO, 24.9 million people are trapped in forced labor globally and 16 million of these individuals are exploited by the private sector.  It is difficult to ascertain how many of these individuals may be associated with the automotive supply chain.

• Child Labor: Several commodities in the automotive supply chain are known to be produced with child labor. This includes, for example mica used in metallic car paints which may be mined with child labor in India and Madagascar, cobalt used in lithium-ion batteries for electric vehicles may be mined with child labor in the Democratic Republic of Congo, or children tapping rubber from trees, working with sharp tools in Indonesia.
• Forced Labor: Laborers in the automotive supply chain are also at risk of working in conditions of forced labor. For example, the production of charcoal used for pig iron in steel automotive parts and cattle used for leather in automotive seating are both associated with forced labor risks in Brazil. As with child labor, forced labor often occurs due to weak government oversight. Unethical recruitment practices also put workers at risk.
• Dangerous Working Conditions: Production and manufacturing workers in the automotive supply chain may be engaged in hazardous, labor-intensive work for excessive hours, facing serious health and safety risks without adequate training or protective gear. Barriers to unionization and collective bargaining may also prevent workers from advocating for improved conditions and a living wage.

To see commodity specific risks that are informing the engagement, see the resources below.

Investor Engagement Calling on Companies to Take Action

The goals of this engagement are to:

1. Understand how companies in the automotive sector assess and manage human rights risks in their operations and supply chains;
2. Influence corporate behavior and encourage companies to develop strong management systems to eliminate forced labor, child labor, hazardous working conditions, and other human rights abuses linked to business activities;
3. Encourage increased disclosure from these companies on the management of human rights risks to help investors make more informed decisions; and
4. Raise awareness among the investor community about the risks in the automotive sector associated with the vast supply chain and many individual commodities.

In January 2018, we launched this campaign with an investor letter to 23 companies, including OEMs (original equipment manufacturers), tier 1 suppliers, and a retailer to express our interest and initiate a dialogue.  We recognize these issues are complex and will require sector-wide solutions and collaboration across the industry, along with strong input from impacted workers.  Companies were identified for engagement based on a variety of factors, including existing member holdings, market capitalization, human rights management systems, and known exposure to human rights risks associated with specific commodities.

The UN Guiding Principles on Business and Human Rights state that companies have a responsibility to respect human rights in their own operations as well as in the business relationships where a company has leverage. The UN Sustainable Development Goals commit all actors, including the private sector, to take steps to eliminate poverty and achieve sustained, inclusive and sustainable economic growth, with decent work for all.  There are also regulatory drivers, such as the UK Modern Slavery Act, calling for more transparency in human rights due diligence, aligned with the OECD Due Diligence Framework.

We are pleased that nearly all of the automakers and tier 1 suppliers on our focus list have a Human Rights Policy or Statement and a Supplier Code of Conduct, at minimum prohibiting the use of forced and child labor. However, our Research Memo brings together perspectives from various advocacy groups and government sources which make it clear that these policies have not adequately eliminated the use of forced labor or child labor in the extraction of materials and production of inputs.  Therefore, we will largely focus our engagements on encouraging effective implementation of human rights commitments, cascading of expectations to suppliers, meaningful human rights due diligence, increased transparency of raw materials sourcing, and effective governance of these risks, as outlined in our Investor Briefing.

Investor Expectations for Companies

Responsible companies must take the following steps to reduce the human rights risks in their operations and supply chains:

1. Adopt and implement a robust a Human Rights Policy and Supplier Code of Conduct;
2. Conduct a Human Rights Risk Assessment to identify salient human rights risks;
3. Identify high-risk commodities and set goals to increase visibility into the supply chain;
4. Incorporate human rights in procurement decisions and incentivize suppliers;
5. Participate in multi-stakeholder responsible sourcing initiatives;
6. Engage workers, including through education, training, and integration of worker voice into decision making;
7. Create a credible, accessible grievance mechanism; and
8. Incorporate human rights risk management and due diligence into governance.

Media

Resources

Investors and consumers should be aware of the human rights risks associated with the raw material inputs that go into a vehicle.

Comprehensive Resources Covering Multiple Commodities:

• List of Goods Produced by Child Labor or Forced Labor, Department of Labor, 2016
• Strengthening Protections Against Trafficking in Persons in Federal and Corporate Supply Chains: Research on Risk in 43 Commodities Worldwide, Verité, 2017

Resources on Commodity-Specific Human Rights Risks:

Cobalt

• This is What We Die For: Human Rights Abuses in the Democratic Republic of the Congo Power the Global Trade in Cobalt, Amnesty International, January 16, 2016
• Time to Recharge: Corporate Action and Inaction to Tackle Abuses in the Cobalt Supply Chain, Amnesty International, November 17, 2017
• Video: Inside the Congo Cobalt Mines that Exploit Children, Sky News, 2017
• The High Human Cost of Cobalt Mining, Anna Kucirkova, IQS Directory, November 12, 2018

Conflict Minerals

• Mining the Disclosures, Responsible Sourcing Network, 2019

Iron Ore

• Out of Control: Mining, Regulatory Failure, and Human Rights in India, Human Rights Watch, 2012
• Whose Development? Human Rights Abuses in Sierra Leone’s Mining Boom, Human Rights Watch, 2014

Leather and Cattle

• Countries Where Cattle and/or Beef are Reportedly Produced with Forced Labor and/or Child Labor, Verite, 2017
• Hell-bent for leather: Labour conditions in the leather industry in Pakistan, SOMO, December 2016

Mica

• Beauty and a Beast: Child Labor in India for Sparkling Cars and Cosmetics, SOMO, March 2016
• Vauxhall and BMW among car firms linked to child labour over glittery mica paint, The Guardian, July 28, 2016
• Responsible Mica Initiative
• Video on child labor in India’s mica mining industry

Pig Iron and Charcoal

• Combating Forced Labour: A Handbook for Employers & Business (Case Study on Brazilian Pig Iron), ILO, 2015
• Fighting Forced Labor: The Example of Brazil, ILO, 2009

Rubber

• Rubber Production in Liberia: An Explanatory Assessment of Living and Working Conditions, with Special Attention to Forced Labor, Verite, 2016
• Human Rights in Liberia’s Rubber Plantations: Tapping into the Future, United Nations Mission in Liberia, 2006