Environmental requirements and due diligence in supply chains
Automakers can and should play a proactive role in reducing the environmental impact of their suppliers across their supply chains. This includes impact on water, biodiversity, land, and forests. As with human rights due diligence, supply chain environmental due diligence is essential for risk management.
Automaker supply chains can be made up of thousands of suppliers, operating across dozens of countries and multiple continents. Automakers are therefore uniquely placed to raise the sustainability standards of their suppliers through enforceable supplier mandates governing effective environmental due diligence and management. As the head of procurement at Audi explains: “If we have our suppliers enforce our sustainability ratings to their suppliers, we’re talking about 14,000 direct partners in 60 countries multiplied by ‘N’ acting on it. When we look across the group, it is 60,000 suppliers. This is a power we are aware of. We want to use our supply chain as a force for good.”
According to the OECD, taking action to minimize and address the environmental impacts of their suppliers also brings multiple benefits to downstream companies, as it can “help an enterprise maximise positive contributions to society and sustainable development, improve stakeholder relationships, protect its reputation, and create more value by reducing operational costs by, for example, finding ways to use less water or energy. Due diligence processes can also help prevent supply chain blockages and delays, and reduce the time it takes to bring new assets onstream, which is of critical importance when delivering the digital and low-carbon energy transitions. Comprehensive due diligence processes can also help an enterprise meet legal requirements on labour, environmental, corporate governance and anti-bribery requirements.”
What can automakers do?
- Explicitly take environmental and water management into consideration in their tendering and contract processes for new suppliers.
- Include stringent environmental protection requirements in contracts with suppliers, for example by requiring suppliers to disclose their environmental, biodiversity and water impact assessments and plans.
- Implement mechanisms to audits and monitor suppliers for compliance with their plans and targets to minimize environmental impacts.
- Require suppliers to be audited or certified by credible schemes, such as the Initiative for Responsible Mining Assurance.
- Publicly adopt a moratorium on deep seabed mining and ensure no deep sea tailing disposal or upstream tailings dams are present within their supply chain.
- Ensure responsible tailings management is implemented throughout their supply chains.
- Support government legislation and regulation, for example mining law reform and regulations, to raise environmental protection standards across the industry.
- Implement grievance and remedy mechanisms to ensure that environmental harms are remedied if they occur in their supply chains.