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An Assessment of Human Rights Risks & Due Diligence in The THE SHIFTING GEARS REPORT: An Assessment of Human Rights Risks & Due Diligence in the Automotive Industry JUNE 2020 Mary Beth Gallagher & Gina Falada Research & Company Profiles Written by: Sara E. Murphy Edited by: Heidi Welsh TABLE OF CONTENTS Executive Summary ............................................................................................................................................... 3 Introduction ........................................................................................................................................................... 5 Company Assessment Results .............................................................................................................................. 12 Key Points from Company Profiles ....................................................................................................................... 16 Overview of Human Rights Risks in the Automotive Industry ............................................................................... 20 Salient Human Rights Issues for the Automotive Sector ........................................................................................ 24 Investor Call to Action ......................................................................................................................................... 30 Sector Specific Strategies to Support Effective Human Rights Due Diligence ........................................................ 32 Recommendations for Automotive Sector Companies on Human Rights Due Diligence ...................................... 36 A History of Human Rights Violations .................................................................................................................. 38 Company Profiles ................................................................................................................................................ 42 Axalta Coating Systems ............................................................................................................................... 43 BASF ........................................................................................................................................................... 46 BMW .......................................................................................................................................................... 51 Bridgestone................................................................................................................................................. 57 Continental ................................................................................................................................................. 61 Denso ......................................................................................................................................................... 66 Fiat Chrysler Automobiles ........................................................................................................................... 68 Ford Motor ................................................................................................................................................. 71 General Motors ........................................................................................................................................... 76 Genuine Parts ............................................................................................................................................. 80 Goodyear ................................................................................................................................................... 82 Groupe PSA ................................................................................................................................................ 85 Honda Motor.............................................................................................................................................. 88 Lear ............................................................................................................................................................ 90 Nissan ........................................................................................................................................................ 92 Nucor ......................................................................................................................................................... 94 PPG Industries ............................................................................................................................................ 96 Renault ....................................................................................................................................................... 98 Tesla ......................................................................................................................................................... 101 Toyota....................................................................................................................................................... 103 Volkswagen ............................................................................................................................................... 105 Assessment Methodology .................................................................................................................................. 108 Glossary of Terms & Resource List ..................................................................................................................... 111 Index of Multi-Stakeholder Initiatives ................................................................................................................. 116 Investor Advocates for Social Justice Affiliates .................................................................................................... 119 SHIFTING GEARS | HUMAN RIGHTS DUE DILIGENCE IN THE AUTOMOTIVE SECTOR 2 EXECUTIVE SUMMARY The automotive industry has a history of innova- tion, revolutionizing transportation, and secur- ing its role in daily lives. The complex logistics, Key Findings of Research supplier relationships, safety checks, and manu- 1. Governance and management sys- facturing operations that come together to bring tems for human rights is the weakest consumers a shiny new vehicle significantly im- area for all companies. Only 3 com- pact the dignity and rights of employees, stake- panies (BMW, Ford, VW) have at least holders, and communities. As the industry stands limited disclosure of their human at the brink of disruption – adaptation for climate rights governance and management change and electrification, the future of mobili- systems. ty, and dawn of autonomous vehicles – it is also 2. The second-weakest scores overall contributing to exploitation of human rights. Ex- occur in the area of embedding re- tensive research documents human rights risks in spect for human rights across the the supply chains for commodities that go into a business. car, from leather to mica to rubber. Many work- ers, including children, are vulnerable in the ex- 3. Traceability and supply chain trans- tensive global supply chain, in which automotive parency is the third weakest area brands and their “Tier 1” suppliers hold signifi- assessed and is lacking across all cant buying power. This system contributes to companies surveyed, with limited ex- downward pressure throughout the supply chain ceptions for conflict minerals. to cut prices, often at the expense of wages and protections for workers. 4. Even the stronger performing compa- nies have only limited monitoring of The shareholder advocacy initiative, Shifting human rights commitments among Gears, led by Investor Advocates for Social Justice suppliers. (IASJ), started with one simple question to com- 5. Access to grievance mechanisms is panies: How do you know your business is not weak, constituting only hotlines, and contributing to forced labor or child labor? The disclosure on remedy is absent. companies IASJ engages have been unable to an- swer this question in dialogue or their disclosures with certainty. This is a problem. The automotive industry has adapted its disclo- in company policies that fails to bind a compa- sures to respond to the emergence of corporate ny and its suppliers to any specific actions or re- social responsibility and increasing expectations quirements. Therefore, investors and stakeholders from investors, customers, and regulators. How- have legitimate uncertainty about the level of rig- ever, the core business model, supplier relation- or and authenticity of companies’ efforts to ad- ships, and the way things are done systemically dress human rights risks. More importantly, it is have not shifted. As this report shows, evidence unclear whether any company in the sector has is absent across the automotive industry that effective systems in place to meet their human corporations are effectively embedding commit- rights responsibilities. ments to ensure respect for human rights. This is After extensive sector analysis, investor engage- reinforced by the prevalence of vague language ment, and the independent research commis- SHIFTING GEARS | HUMAN RIGHTS DUE DILIGENCE IN THE AUTOMOTIVE SECTOR 3 EXECUTIVE SUMMARY sioned for this report, IASJ concludes that the to crises and standard business activities. Many automotive industry is failing to demonstrate re- individuals impacted throughout the supply chain spect for human rights. Stronger governance from face vulnerabilities - both
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