Poverty, inequality, discrimination and poor labor practices still plague the global business community. Roughly half of the world lives on just two dollars a day and 60 percent hold no employment contract. According to SDG Compass, 212 million people will be unemployed by next year, which means, to keep up with the growing working age population, the world needs to create 600 million jobs by 2023.
The United Nation’s eighth Sustainable Development Goal (SDG 8) aims to close this gap and “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” While at first glance the statement may seem broad and straightforward, SDG 8 is, in fact, a densely packed objective.
Modern slavery and poor working conditions are tough challenges to circumvent for any industry, and the automotive sector faces unique obstacles. Keeping track of all the suppliers that contribute parts to the vehicles driven off a showroom floor is not a simple task, but as one of the leading sectors in global economic growth, the automotive industry plays an incredibly important role in the promotion of SDG 8 and companies in the sector need to collaborate to drive the initiative forward.
Adhesion to the principles laid out by the United Nations Global Compact (UNGC) is key to ensuring that automobile manufacturers operate in consortium to improve the industry’s global economic throughput. Membership in the UNGC is the first step as it ensures actions of all automotive companies are cohesive and work toward common sustainable development goals. What the respective strategies look like for each company to reach these goals will be different, but each approach should be targeted the same end results.
The economic externalities created by the automotive industry’s internal stakeholders, such as employees, and external stakeholders, including suppliers, need to be curbed for sustained economic growth for all.
Sustainable Internal Practices
The automotive industry relies on both intellectual and physical labor. It stands to reason that healthy and valued employees are more productive at their individual tasks, which results in an overall increase in productivity for businesses. Across the industry, automotive manufacturers have implemented a standard set of tools in CSR management systems to reduce the risk of human rights violations, and consequently increase the value added to human capital, within operations and across the supply chain.
The automobile industry directly employs nine million people globally, representing just over five percent of the aggregate manufacturing workforce. The latent potential of this workforce is a precious resource waiting to be nourished. Historically the automotive industry is notorious for having one of the highest injury rates, and the U.S. Bureau of Labor Statistics findings reveal that a third of employees are hurt each year, and 10 percent of those injured suffer injuries which do not permit them to resume work. The most poignant of those statistics is that 1 in 2000 cases of injuries cripple one for life.
Moving forward with the ambition of SDG 8 is essential for addressing these hazards of automotive operations. Providing a healthy, safe environment is essential to nurture a productive workforce. Reducing the amount of lost time due to chronic injuries and diseases, as well as reducing the frequency of severe accidents will increase the overall economic throughput of the industry through better employee productivity and decreased financial constraints, such as fines and insurance premiums.
The greatest challenge in decreasing the instances of chronic injury is reducing the need for repetitive movement associated with assembly lines. Using robotics in assembly lines decreases the chances of injury while increasing the competency level of employees. It also increases economic throughput of company while upskilling the workforce.
Employees need to be provided with career advancement opportunities and concrete ways to develop their skills. The deployment of performance and talent management is key to enriching the human capital value of the blue or white-collar employees of the industry. Apprenticeships and gender inclusive work environments are also important.
Eradicating Modern Slavery
Automobiles, whether of commercial or private use, require an intricate number of components to be pieced together, making sustainable supplier relationship key for tackling modern slavery. Modern automobiles incorporate electronics, along with mechanical components, in their design. Electronics necessitate the use of conflict minerals in their conception, further adding to the already existing demand of those minerals in the traditional mechanical frame of automobiles . Additionally, in a bid to meet the emissions standards, automobile manufacturers have introduced new lines of electric vehicles to the market, all of which require minerals and metals whose social impacts are known to exceed the standards set by SDG 8.
|Conflict Mineral||Common Use|
|Tantalum||Audio equipment, climate control, sensors, wiper systems, seat belts, fuel pumps|
|Tin||Fuel Tank, Sealants, Wiring, Radiator, Seat Cushion|
|Tungsten||Circuits, Gear Teeth, Bearing components|
|Gold||On-board electronic, fuel cells|
The aberration of modern slavery seeped into public discourse in mid-2016 when reports surfaced that leading automobile manufacturers had sourced paint from suppliers with links to mines using child labor in India 10. The reputational risk for automobile companies is a factor which cannot be ignored, and it is in the best interest of automobile manufacturers to address the risk of modern slavery within their sphere of influence. Failure to do so could result in increased risk reputational damage and decreased stock prices. Early adopters of ethical automobile manufacturing and procurement practices are more likely to perform well in a global economy where the ethical consumption is rapidly becoming a significant market force.
Tackling such a complex problem haphazardly would amount to no effective solution. Collaborations among members of the industry is essential to ensure a cohesive approach to resolving this issue. Industry led initiatives have shaped up in the recent years to provide a platform for information exchange and achievement of a cohesive strategy with specifications tailored to the specifics of the automotive industry.
The Section 1502 of the Dodd-Frank Act, passed by the United States Congress, is a key piece of legislation with the objective of dissociating the link between the sourcing of 3TGs by industries and the funding of modern slavery mines of conflict minerals, specifically in the Democratic Republic of Congo. Though the rule is legally binding for companies based in the U.S., it is being utilized as the basis for the development of the sustainable supply chain practices by companies world-wide. The requirements of the Dodd-Frank Act effectively caused entire industries to rethink supply chain logistics.
The Automotive Industry Action Group (AIAG) is such an initiative. The AIAG is a non-for-profit organization which regroups the shared expertise of the various actors in the automotive industry. In September 2015 the most prolific actors of the automotive industry issued a joint statement to their suppliers of 3TGs, informing them of the new expectations put on them. Those new standards effectively aim to eradicate modern slavery from the sourcing of 3TGs. Leaders in the automobile industry demonstrated they are viewing the requirements related to responsible sourcing of conflict minerals not as a burden to bear, but as an opportunity to increase supply chain efficiency, all while ensuring their contribution to solving the problem of modern slavery .
The Responsible Minerals Initiative (RMI) is an initiative which regroups the efforts of the various stakeholders involved in the sourcing of conflict minerals. It is a concerted effort across multiple industries to tackle the souring of the 3TGs in the supply chain provides members with tools to assess their current capacity and build on existing capacity to improve their human rights impact along their supply chain .
The transition to a new and collaborative sustainable business paradigm requires companies in the automobile sector to really think about the externalities created by supply chain operations and factor positive economic development into decision making and financial matrices.
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