Hyundai-Kia, now the world’s third largest automaker, has been making headways in the transition to electric vehicles. In 2022, its EV sales climbed to 316,821 according to EV volumes, representing 8% of its total sales – an increase of 3% over 2021. Its EVs are also winning many prestigious awards – with the Ioniq 5 taking home awards such as the World Car of the Year and EV of the Year. The Ioniq 6 already seems to be set to continue this trend – it has already taken home the 2023 World Car of the Year, World Electric Vehicle of the Year and World Car Design of the Year awards. It is encouraging to see Hyundai’s investments in the EV transition and its success with EV manufacturing to date demonstrates that the future of the company is clearly electric.
Hyundai also appears keen to position itself as an industry leader on sustainable supply chains. It claims that “sustainability is the center of IONIQ’s brand vision,” and that the Ioniq 6 showcases Hyundai’s commitment to “environmental responsibility”, with “sustainable materials applied throughout,” including “eco-process leather”, “recycled PET fabric” and “bio paint.” It is commendable that Hyundai wants to reduce the environmental impacts of the materials used in its EVs. However, its actions to date miss the bigger picture and its claim that the Ioniq brand is “answering the call for sustainability” is, at best, highly questionable. What Hyundai doesn’t address is how they are cleaning up the impacts of some of the most environmentally impactful materials used to manufacture its vehicles: steel, aluminum and batteries.
The efforts of Hyundai, and its subsidiary Kia, to eliminate emissions, environmental harms and human rights abuses from their supply chains were recently evaluated as part of the Lead the Charge Leaderboard, which revealed that Hyundai Motor Group is falling far behind many of its peers on clean and equitable supply chains. This briefing explains these findings in greater depth, highlighting some examples of the harmful consequences of Hyundai’s failings for the climate, environment and human rights.
Hyundai’s Sustainability Claims: Missing the Big Picture, and Opportunity
Hyundai Motor Group has set a target for carbon neutrality by 2045, and claims that efforts to achieve this target include electrification and actions to achieve a “net-zero automotive parts supply chain.” This prioritization of automotive supply chains is welcome: a recent report commissioned by Polestar and Rivian showed that electrification alone won’t be enough for the automotive industry to achieve 1.5 degree-aligned climate goals by 2050: it must also reduce its supply chain emissions by 81% reduction by 2032.
However, Hyundai’s approach to supply chain sustainability thus far misses the bigger picture – and opportunity. It is estimated that, together, steel, aluminium and batteries constitute approximately 70% of an electric vehicle’s upstream supply chain emissions – making them clear priorities for supply chain emissions reductions. The mining, refining and manufacturing needed to produce steel, aluminium and batteries also has a troubling track record of negative environmental impacts across the globe, including air and water pollution, deforestation and the destruction of natural habitats for endangered species.
The Lead the Charge supply chain Leaderboard found that Hyundai has made some progress on recycled aluminium, steel and batteries – a key intervention for reducing the emissions and broader environmental impacts of these supply chains. Hyundai discloses the amount of recycled steel and aluminum used in its production cycle, and provides information on the closed loop processes it has developed for recovering and recycling steel and batteries. These are positive steps and should be further strengthened, in particular by setting concrete targets to increase the amount of recycled steel, aluminium and batteries used in its production cycle.
Nonetheless, the Leaderboard shows that, overall, Hyundai is failing to take adequate action to reduce the emissions and environmental impacts of these key supply chains. Hyundai scored just 6% for efforts to clean up its steel supply chain: it has not disclosed any targets or progress with regards to increasing the volume of low carbon or fossil free steel in its production cycle and, with the exception of a recent announcement regarding research and development into low-carbon steel, has not disclosed any evidence of using its significant purchasing power to incentivize investment in, and greater production of, fossil-free steel. Hyundai’s failure to prioritize cleaning up its steel supply chain is also exemplified by the fact that it is not a member of ResponsibleSteel or SteelZero, two highly-regarded multi-stakeholder initiatives aiming to reduce the climate and environmental impacts of steel production worldwide.
Hyundai scored even lower for efforts to address the emissions and environmental impacts of its aluminum and battery supply chains, receiving just 4% for both categories. As with steel, Hyundai has failed to set targets or disclosed any progress on increasing the volume of low-carbon aluminum in its production cycle, has not disclosed any efforts to incentivize greater production of fossil-free aluminum, and is not a member of key demand side initiatives aiming to decarbonize the aluminium industry, such as the First Movers Coalition. On batteries, Hyundai has not developed a pathway or targets to reduce the emissions of its battery supply chains or to reduce its reliance on energy intensive minerals, and did not disclose any actions it is taking to reduce the negative environmental impacts of extracting these minerals.
Given Hyundai’s lack of attention to these critically important supply chains for emissions reductions, their commitment to, and ability to achieve, their stated goal of carbon neutrality by 2045 is dubious, especially given that Hyundai’s 2045 carbon neutrality goal has not yet been independently verified by the Science-based target initiative.
Materials that “take care of people”?
Another one of Hyundai’s claims with regards to its Ioniq series is that the Ioniq 6 includes “materials that take care of people.” The Lead the Charge Leaderboard shows that this claim is also problematic: Hyundai scored just 13% on its efforts to ensure that the human rights of local communities, workers and Indigenous Peoples are respected across its supply chain.
It is encouraging that Hyundai has taken some initial steps to ensure respect for human rights in its supply chain. These include developing a standalone human rights policy, explicitly referencing respect for human rights in its supplier code of conduct, auditing its suppliers for compliance with its supplier of conduct, beginning some rudimentary actions to identify human rights risks in its supply chain, and putting into place a human rights grievance mechanism.
However, Hyundai falls far short on the details, particularly in relation to its efforts to ensure the responsible sourcing of transition minerals. The company has developed a responsible minerals policy that applies to minerals from conflict-affected and high-risk areas, cobalt and other minerals that “pose human rights violations or environmental destruction issues,” but it disclosed almost no evidence of actions that it is undertaking to ensure this policy is implemented effectively across its supply chain. It therefore received a meager 8% score for this category.
A similar picture emerged on Hyundai’s performance with regards to upholding workers’ rights in its supply chain. Although Hyundai’s Human Rights Policy and Supplier Code of Conduct both commit to the ILO Declaration on Fundamental Principles and Rights at Work, the Leaderboard found very little evidence of concrete due diligence measures that Hyundai should be undertaking in order to ensure that this commitment is realized. Overall, Hyundai scored just 13% for its efforts to ensure respect for workers’ rights across its supply chain.
Finally, Hyundai scored 0% on the category of Indigenous Peoples’ rights, demonstrating a lack of awareness of the risks that growing EV supply chains present to the rights of Indigenous Peoples around the world.
Real-world impacts
One need not look far for examples of how Hyundai’s poor performance with regards to its supply chains is translating into harmful consequences for people and planet.
Hyundai Steel, a subsidiary of Hyundai Motor Group and a major supplier of the steel used in Hyundai’s vehicles (including the Ioniq series), operates 3 out of the 11 coal-fired blast furnaces in South Korea and is the company with the third largest greenhouse gas emissions in the country.1Yumi Kim (2023), “State Firms and Chaebols Dominate South Korea’s Emissions”, Bloomberg New Energy Finance, March 15, 2023. Recent research by Solutions for our Climate and the Center for Research on Energy and Clean Air showed that the air pollution from these 11 blast furnaces was related to approximately 506 premature deaths in 2021. The research also estimated that the air pollution from these 11 coal-fired steel blast furnaces could cause 19,400 premature deaths by 2050 under a current policy scenario, illustrating the deadly consequences of the failure of companies like Hyundai Motors to seize the initiative and map out a 1.5 degree-aligned pathway to reduce the emissions from their steel supply chains.
There are also multiple examples of the consequences of Hyundai’s failure to take action on the climate and environmental impacts of the aluminium used in its vehicles. Hyundai recently signed a Memorandum to purchase aluminium from PT Adaro Minerals, the second largest coal miner in Indonesia, at an early production stage. Hyundai claims that this aluminium would be classified as “green” or “low-carbon aluminium” because it will be powered using hydroelectric power generation.
However, Market Forces have revealed that Hyundai fails to mention that hydroelectric power will only meet the smelter’s power needs at a later stage, with the early stage being powered by new coal-fired power plant capacity. Market Forces state that the “new coal power capacity needed for the smelter will create massive pollution that would contravene with Hyundai’s Carbon Neutrality Principles.” The International Energy Agency (IEA) has made it clear that we can have no new coal fired power plants if we want to achieve net-zero by 2050.
Hyundai has also been called out by Human Rights Watch and Inclusive Development International over the environmental and human rights impacts of its aluminium supply chain. The organizations’ research identified links between the bauxite used to manufacture the aluminium in Hyundai’s vehicles and the destruction of farmland and natural habitats in Guinea, in addition to damaging impacts on the water resources used by local communities. Disappointingly, Hyundai was one of only three companies contacted by the organizations who did not respond to requests for information – reinforcing the findings of Leaderboard on Hyundai’s poor performance with regards to effective environmental and human rights due diligence.
Finally, investigative reporting by Reuters uncovered child labor “throughout Hyundai-Kia’s supply chain in Alabama.” The investigation found that “at least four major suppliers of Hyundai Motor Co and sister Kia Corp have employed child labor at Alabama factories in recent years… and state and federal agencies are probing whether kids have worked at as many as a half dozen additional manufacturers throughout the automakers’ supply chain in the southern U.S. state.”
Hyundai recently announced that it will divest from its Alabama subsidiary following the revelations and that it is “implementing extensive new corporate measures” to prevent this from occurring again. Nonetheless, the revelations by Reuters lay bare the pernicious consequences of Hyundai’s failures to institute effective due diligence processes to ensure that its suppliers respect workers’ rights.
Time for Hyundai to Lead the Charge on Clean Supply Chains
Hyundai’s award-winning clean vehicles deserve better than dirty supply chains producing greenhouse gas emissions, environmental harms and human rights abuses. If Hyundai wants their claim on sustainable materials to ring true, they will have to up their game and start taking robust measures to clean up their steel, aluminium and battery supply chains.
Fortunately, Hyundai is well placed to achieve this and to become an industry leader on the manufacturing of truly clean cars: to achieve impact, they only need to look inwards to their own steel subsidiary, and then next door to major Korean partners like POSCO, as well as battery manufacturers LG and SK.