The automotive industry is undergoing a profound transformation. The transformation to carbon-neutral mobility and the associated expansion of electric mobility entail new challenges, for example, also in regards to raw materials and supply chains. For instance, lithium, cobalt and nickel are needed for the production of battery cells.
This raises important questions, which are being critically discussed in public debate, since the required raw materials are mined to some extent under conditions that are critical with regard to human rights. A key issue in this context is child labor. The greatest deposits of cobalt are to be found in the Congo - a politically unstable country that is affected by humanitarian crises. A major challenge, but at the same time also our ambition as a company: How can we ensure that our products are manufactured using materials from a sustainable supply chain, i.e. without violating human rights?
The raw material supply chain is complex
First of all, it is important to understand how the raw materials reach us. We do not directly source the aforementioned raw materials needed for the electric powertrain. Rather, there are several supply tiers, which in turn may contain numerous suppliers. Our supply chains are thus often very complex, and sometimes a supply chain can consist of up to seven supplier tiers. We can only achieve our goal of a "clean" or "legit" supply chain together with our suppliers, because from a legal point of view, no action can be taken, which means it is not possible to access the entire supply chain with legal means alone. That is why we are working closely with our suppliers in this regard.
Our ambition is crystal clear: We want our products to contain only raw materials and other materials that have been mined and produced without violating human rights. On account of the complexity of the supply chain and the variety of raw materials and other materials in our products, we have to act strategically and based on risk in this case. That is why our human rights experts together with our colleagues from Compliance have developed a systematic approach to ensure the respect for human rights – the Human Rights Respect System.
Systematic assessment of risks to human rights
Daimler Procurement non-production material, Germany
The Human Rights Respect System (HRRS) is an industry-unique approach. The aim is to recognize and avoid risks and possible negative effects of our corporate actions on the respect for human rights at an early stage. In future, it will be applied both in our supply chains as well as in our companies in which we are the majority shareholder. It is based on our proven Compliance Management System and consists of four steps.
The first step is the analysis of the risk. For our supply chains, this means: We have taken one of our vehicles in which a particularly large number of parts are installed as the reference. We then compared it with independent lists of risky raw materials, for example, with the OECD Due Diligence Guidance and the "Child and Forced Labor List" of the US Department of Labor. In this way, we have identified potentially risky raw materials.
Transparency all the way back to the mine
Where there are any indications of risk, we look at the entire supply chain from a risk-based perspective in the second step. In so doing, we go beyond the direct suppliers to create transparency, and right down to the mine when necessary. Our interdisciplinary teams conduct, among other things, on-site checks and audits using so-called "supply chain walks," but communications and training measures for suppliers are also part of the HRRS. We also talk with the people locally, the so-called rights holders. Their perspective is an important aspect in the implementation of the Human Rights Respect System. The starting point for the supply chain walks is the Tier 1 supplier, and from there we move along the critical areas in the supply chain, if necessary down into the mine. The on-site audits are conducted by interdisciplinary teams. They comprise quality engineers from Procurement and Supplier Quality as well as experts on sustainability, human rights, and compliance.
In addition, we commission audits of the cobalt supply chains of battery cell suppliers by external auditing firm RCS Global. This involves auditing all tiers of the supply chain as per OECD guidelines. The audit covers aspects such as child labor, modern-day slavery, occupational health and safety measures, material inspection, and existing due diligence systems. If needed, we agree individual corrective action plans with the suppliers, whose implementation we monitor on a constant basis. You'll find an overview of the smelting plants and refineries in our current supply chains here.
We review new supply chains, but also already existing ones if needed: This was the case in the paint supply chain, for example. It involved the source of the raw material mica, whose mining is also being associated with human rights violations. Mica is needed to give the automotive paint a glimmer effect. That is why the company audited the entire mica-paint supply chain - from the mine to the delivery of the automotive paints to the plants. External stakeholders such as the NGO Terre des Hommes take a positive view of this approach. The third step of the Human Rights Respect System is the evaluation of the implementation and the efficacy of the measures. We of course consistently adapt the system to new findings and challenges. We publish the result in our Sustainability Report and on our website, for example.
Permanent task and teamwork
It is our goal to make the supply chains of the risky raw materials transparent step by step. This is a great challenge since transparency cannot be created with the click of a button. It is a permanent task that we always keep in our sights. That is why experts from different specialist units such as Procurement and Supplier Quality, Compliance and Corporate Responsibility work very closely together to advance the topic from different perspectives.
We develop specially tailored trainings in order to train the different specialist units in their respective functions on the issue of human rights. For example, our integrity training for all employees presents sample cases and complex situations from the daily work routine, including related to human rights. We have developed a training course specifically for our compliance experts for identifying human rights risks in our affiliates and for communicating our responsibility as per the UN Guiding Principles on Business and Human Rights. We also provide information for our business partners, which state our requirements on conduct with integrity, including the so-called compliance awareness module, which is publicly accessible.
The Human Rights Respect System enables us to proceed in a strategic and goal-oriented manner and to identify and minimize possible risks at an early stage. In doing so, we are actively committed to respect for human rights in our supply chains. In addition to the engagement in our own supply chains, we also work with aid organizations on the ground. For example, we have a project with Bon Pasteur to support the people in the Kolwezi region (Democratic Republic of the Congo), where there are many cobalt mines. In 2020, Daimler also started a project together with Terre des Hommes in the mining region of Jharkhand (India) to make it possible for children near mica mines to go to school and to provide economic aid to families. The project is slated to run for three years and intended to prevent parents from having to send their children to work in the mica mines. We want to improve the living conditions of the people with our involvement in the Congo and in India regardless of our own supply chains. In this way, we are complementing the strategic and risk-based approach of the Human Rights Respect System with concrete measures on the ground.
