Material Change Report
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MATERIAL CHANGE A STUDY OF RISKS AND OPPORTUNITIES FOR COLLECTIVE ACTION IN THE MATERIALS SUPPLY CHAINS OF THE AUTOMOTIVE AND ELECTRONICS INDUSTRIES Use of this report and information in it is covered by the conditions of a Creative Commons-Attribution- NonCommercial-NoDerivative Works License. Please always credit Drive Sustainability, the Responsible Minerals Initiative and The Dragonfly Initiative for compiling and analysing this information. Version 1, July 2018 Cover and report design by SOS Design Consultancy FOREWORD 5 Environmental, social and governance issues associated with corporate supply chains and the sourcing of materials used in the manufacture of industrial and FOREWORD consumer products are subject to increasing scrutiny. Regulators, investors, consumers and This report gathers, analyses and presents environmental and human rights groups are publicly available information on materials appealing to companies to publicly disclose commonly used in the automotive and the results of supplier due diligence and electronics industries. It aims to positively commit to engaging business partners in contribute to discussions on responsible efforts to address negative impacts associated sourcing among industry peers and with their activities and improve operating stakeholders by enabling industry wide practices. Navigating the path towards comparisons of the materials’ and main achieving that end however, is not simple. producing countries’ environmental, social and governance issues and their importance The supply chains of businesses today are in the manufacturing of consumer and highly complex. They extend to multiple industrial automotive and electronic products. tiers and to thousands of suppliers. In the manufacture of their products, businesses The report does not attempt to evaluate source parts, components, and modules the net contribution of materials to society containing many materials from hundreds of or to weigh the costs and benefits of natural countries across the globe, and from a wide resource development. There are both adverse range of environmental, social and political and positive outcomes associated with contexts. To meet the challenge of conducting industrial activity. Rather, the goal of DS and due diligence, appropriately monitor the RMI is to raise awareness of potential risks performance and enable improvements at the and the opportunities for collective action to operations of their suppliers, companies today catalyse systemic improvements throughout need tailored information on the environmental, the supply chains of both industries. social and governance risks in their supply chains. Furthermore, to identify and prioritise The scope of the study is intentionally broad. opportunities to collaborate with their peers to Instead of narrowing the analysis to a few effect positive change, analytical comparisons materials and researching their supply chains across many materials, industries, countries in detail, Material Change presents a general and issues considerably aid sound strategic industry level assessment of many materials decision making. One of the biggest obstacles with the goal of challenging the reader to to setting and implementing strategies for broaden their view of multifaceted and responsible sourcing, however, is the interconnected manufacturing supply chains. constrained access to and limited public Similarly general in presentation are the availability of reliable current data and analysis environmental and social information and on the environmental and social dimensions economic and governance indicators for of material production and processing. countries identified as top producers of the materials. Material Change presents findings from studies carried out by Drive Sustainability (DS) and the Responsible Minerals Initiative (RMI) on the responsible sourcing of materials in the automotive and electronics industries. It includes results from these studies but is not comprehensive in its coverage of the studies’ areas of research, nor are the results conclusive. Rather, this report is an early milestone in the continuing programmes of both DS and the RMI. The use of this report and information in this report is covered by the conditions of a Creative Commons-Attribution-NonCommercial-NoDerivative Works License. Please always credit the Responsible Minerals Initiative, Drive Sustainability and The Dragonfly Initiative for the work they have done compiling and analysing this information. 6 7 The report uses publicly available information. DS and the RMI acknowledge that companies Despite the very considerable research have a responsibility to conduct due diligence efforts of industry associations and research on their supply chains in accordance with institutes, there are gaps in contemporary internationally recognised standards and that information on environmental, social and decisions on supply chains and material governance issues associated with the sourcing are a matter for the management of production of many materials and on their individual businesses. Material Change is not supply, demand and use. DS and the RMI a replacement for company due diligence, will continue to explore ways in which the and the information presented in this report two organisations and their members can should not be interpreted as representing contribute to improving the availability of specific risks to any one individual company reliable information and to incorporate or as being irreversibly present in a particular that information into future reports as it material supply chain. becomes available. DS and the RMI recognise that collaborative From material to material, and from company action among businesses, across industries, to company, supply change risks can vary and with governments and civil society is a significantly, as do the opportunities for powerful tool to address some of the serious members of the two industries to catalyse social and environmental problems affecting change. The corporate policies of individual workers and communities in countries where companies and management practices at many of the materials in this report originate. sites and facilities are very often the primary Material Change aims to be a starting point factors determining the sound management from which to stimulate an exchange of of potential impacts associated with business information on where collective actions by activities and associated reputation risks. industry groups or trade associations might be best focused to maximize positive social, environmental and governance impacts. The use of this report and information in this report is covered by the conditions of a Creative Commons-Attribution-NonCommercial-NoDerivative Works License. The use of this report and information in this report is covered by the conditions of a Creative Commons-Attribution-NonCommercial-NoDerivative Works License. Please always credit the Responsible Minerals Initiative, Drive Sustainability and The Dragonfly Initiative for the work they have done compiling and analysing this information. Please always credit the Responsible Minerals Initiative, Drive Sustainability and The Dragonfly Initiative for the work they have done compiling and analysing this information.Modern car TABLE OF CONTENTS 9 TABLE OF CONTENTS DRIVE SUSTAINABILITY AND THE STUDY 1 RESPONSIBLE MINERALS INITIATIVE 10 4 LIMITATIONS 28 1.1 Drive Sustainability 11 Table 2: Completeness of material data sets 29 Figure 1: Drive Sustainability’s Raw Materials Observatory 11 1.2 The Responsible Minerals Initiative 12 STUDY Figure 2: The RMI approach to identify & prioritise salient risks 12 5 RESULTS 30 HOW TO USE 5.1 The materials heat maps 32 2 THIS REPORT 14 Table 3: Key to materials’ ratings 32 Figures 5/6: Materials heat maps 34-37 STUDY 5.2 Materials’ ratings 38 3 METHODOLOGY 18 The automotive and electronics industries’ consumption plotted against: 3.1 The materials 20 Figur es 7/8: Environmental, social and governance aggregated risk rating 39 Figures 3 & 4: Illustrative products: Passenger vehicle, Smartphone 21-22 Figur es 9/10: Association with Artisanal and Small-Scale Mining 40 Box 1: 37 Materials 23 Figur es 11/12: Association with child labour and forced labour 41 3.2 The assessment criteria 24 Figur es 13/14: Association with countries associated with weak rule of law 42 Table 1: The assessment criteria 25 3.3 Considerations in the choice and formulation of the criteria 26 Figur es 15/16: Association with countries experiencing corruption 43 3.4 Assessing opportunities for collective action 27 Figur es 17/18: Association with countries experiencing high-intensity conflict 44 Figur es 19/20: Association with high CO2 emissions 45 Figur es 21/22: Association with incidences of conflict with Indigenous Peoples 46 Figur es 23/24: Association with the potential for harm from hazardous materials or chemicals 47 5.3 Material profiles 48-95 Box 2: List of 18 material profiles and profile breakdown 48-49 Aluminium / Bauxite Nickel Cobalt Palladium Copper Rare Earth Elements Glass (silica sand) Rubber (natural) Gold Steel / Iron Graphite (natural) Tantalum Leather Tin Lithium Tungsten Mica Zinc 5.4 References cited in the material profiles 96 APPENDICES 106 Appendix A: Materials analysed in this study and completeness of data sets 107 Appendix B: Guide to the assessment criteria and rating system for materials 108 Appendix C: Guide to the producer-country and additional material criteria and indicators 119 The use of this report and information