Accountability for corporate supply chain impacts is now before the courts as Tesla and five other companies face a class action lawsuit filed on behalf of 14 children and parents from the Democratic Republic of Congo (DRC) for allegedly “aiding and abetting in the death and serious injury of children who claim they were working in cobalt mines in their supply chain.” This risk faces all companies in the automotive industry, which relies on complex, extended supply chains to source the wide range of raw materials that go into the 30,000 different parts in a vehicle. Despite the prevalence and severity of risks like forced labor and hazardous working conditions, many companies in the sector fail to conduct effective human rights due diligence, with gaps in policy implementation, impact assessments, and disclosure.
In 2018, Investor Advocates for Social Justice (IASJ), formerly the Tri-State Coalition for Responsible Investment, launched an investor initiative called Shifting Gears for our Affiliates to engage with 23 portfolio companies in the automotive industry to improve respect for human rights. This initiative was born from investors’ concerns about the quality and effectiveness of policies and human rights due diligence to address salient risks and the legal, financial, and reputational risks facing companies. These risks include cobalt used in electric vehicle batteries that may be sourced from mines in the DRC where child labor is prevalent. Leather used in seating may be produced using child labor, while it also contributes to deforestation, and communities and workers may be exposed to hazardous chemicals. Automotive electronic systems require labor-intensive assembly and may be manufactured in countries where forced labor and child labor are present. Mica, a component of paints, coatings, and other parts, may come from illegal mines in India with well-documented child labor risks, which are also present in Madagascar. Operations and manufacturing facility risks include discrimination, harassment, and poor labor conditions.
IASJ’s investor engagement and analysis found that there is inadequate human rights expertise within companies at the staff or board level, weak processes to provide remedy when adverse impacts occur, and poor embedding of human rights commitments throughout business functions such as procurement.
Through the proxy process and ongoing dialogue with management, IASJ has encouraged three companies to take meaningful steps to adopt human rights policies or improve disclosure on human rights due diligence practices. This proxy season, IASJ Affiliates filed six shareholder proposals with companies where we identified significant human rights risks in operations and the supply chain that were not being adequately managed. Three are likely moving forward for a shareholder vote, at General Motors, Tesla, and Lear. At General Motors and Tesla, the proposals request disclosure of systems to ensure effective implementation of human rights commitments. At Lear, the proposal requests a human rights impact assessment to examine the impacts of the company’s high-risk business activities in its operations and value chain. IASJ encourages all shareholders to support these proposals calling for stronger due diligence and welcomes investors to join ongoing engagements.
Mary Beth Gallagher
Executive Director, Investor Advocates for Social Justice
Gina Falada
Senior Program Associate, Investor Advocates for Social Justice