Nearly 200 automotive professionals convened at AIAG’s 8th Annual Corporate Responsibility Summit last week for a deep dive into the industry’s most pressing supply chain sustainability challenges. Held April 18-19, 2018, in Novi, Michigan, the summit featured over 30 speakers, a choice of three tracks, and 25 exhibitors.
The event was sponsored by some of the industry’s leading CR citizens, including FCA, General Motors, Honda, and Nissan. It was an opportunity to catch up on where automotive companies are focusing their CR resources as well as the activities and initiatives of AIAG’s robust Corporate Responsibility products and services.
Popular topics included Sustainability and Ethics, Turning Risk into a Competitive Advantage, Due Diligence in Emerging Risks, and Improving Effectiveness in Your Sustainable Purchasing Program.
Risk as a Competitive Advantage
Speaker Louis Ferretti, project executive for IBM Corporation, said globalization of the auto industry represents the best of times and the worst of times. “It’s the best because we can source boldly and we have access to goods and services that we never had before,” he said. “And it’s the worst because we face unprecedented risks.”
Topping the list of these risks are supply chain continuity, legal and regulatory, reputation, and IT security.
The challenge, he told the audience, is in managing these conditions. “You don’t want to be risk averse. You have to take advantage of the opportunities,” he said. “But at the same time, you have to protect your business.”
The key, Ferretti said, is time. “Time gives you options. The sooner you know about a risk, the better off you are. But you need tools and processes to extract this information. That’s what creates the competitive advantage of knowing.”
Ferretti pointed out that by the time you know your data has been breached — it’s too late. “At that point, they’ve been walking around your house for days checking out what you’ve got,” he said. “The only time you knew they were there is when they left with what they wanted.”
In addition to data breaches, Ferretti said perhaps the biggest disrupter to global supply chains are climatic events. He said automotive companies need cognitive, cloud-based intelligence to help them avoid costly false alarms but also the ability to react in advance of a real threat. He shared an update on what some of these technologies can do to address security issues.
His presentation also provided invaluable information to attendees on how to protect financial reputation, the importance of codes of conduct, how to perpetuate an effective social and environmental management system, and the impact of block chain and bitcoin in automotive.
Ferretti concluded by urging automotive companies to put themselves under the same corporate responsibility scrutiny as they do their supply chains.
Due Diligence in Emerging Risks
Cobalt and mica were topics of concern at this year’s Corporate Responsibility Summit. When it comes to managing supply chain minerals, Hillary Amster, senior program manager at the Responsible Minerals Initiative (RMI), said automotive companies must be clear on their expectations and engage with customers so that they understand what you are trying to achieve.
“You’ve got to get the key players on board,” she said. “An effective risk readiness assessment will give you information on a ton of risk factors as well as different minerals and substances.”
One challenge she discussed at length is that the verification processes are different for each mineral, with some occurring all the way down to the site level. “OEMs, NGOs, governments, and the private sector have to work together,” said Amster. “We have to figure out where we can take lessons learned and replicate, and where we have to customize our approach.”
She gave the audience advice on how to collaborate more successively with NGOs, including the importance of taking time to explain the complexity of supply chain issues.
“Do they understand the complexity? Make sure that they do. And try not to let perfection be the enemy of the good. Try to get things out faster. Get more stakeholders involved. More buy-in is the key because initiatives will fail if everyone is not on board,” Amster cautioned.
Sustainable Purchasing Programs
Kris Spriano, benchmark program manager for the Sustainable Purchasing Leadership Council, talked to attendees about the important transition from a regulatory focus to “one where your company is going beyond what’s required.”
This includes thinking about what things you can bring to the table to create a more formal sustainable purchasing program, “a more holistic program spread among your key suppliers around the world.”
Spriano gave details of a greenhouse gas reduction sustainable strategy for all operations as an example. “Formalizing a supply chain sustainability program is critical for attaining your company leadership and senior management’s engagement and support,” she said.
After sharing her principles for leadership and sustainable purchasing, Spriano concluded with tips on moving from a regulatory (reactive) approach to a program (proactive) approach.
Addressing the Mica Supply Chain Issue
Matthew N. Winokur, vice president, sustainability for Axalta Coating Systems, and Riaz Zaman, E. Counsel, government affairs, and board member on the Responsible Mica Initiative, provided summit attendees with a moving, insider look at child labor in the mica supply chain.
Mica is used in many areas including paint and coatings, electronics and cables, cosmetics, and the oil industry. India and Madagascar are among the largest producers. A big part of the challenge is that mica production and exports are largely unregulated. Mining of mica has created economic dependency in some poverty-stricken districts.
“Automotive companies have to find a way to stay in the mica supply chain, but in a responsible, sustainable way,” said Winokur. “Children are involved in mica mining, sometimes even below-grade mining. It’s a human rights issue. Companies need to use their leverage in the marketplace to affect change.”
Zaman updated the audience on the latest in traceability and community empowerment programs. He urged attendees to go back to their companies and make mica a priority.
“The amount of mica you use isn’t important,” he said. It’s the fact that mica is created by child labor. The public won’t care if only 1 percent of your products have 2 percent or less of mica.”
Winokur advised companies to identify other possible risky materials that might be in your supply chain and explained the importance of risk assessment awareness. While underscoring that automotive companies need a Supplier Code of Conduct, Winokur provided the importance and overview of an effective Supply Chain Risk Management Assessment Program.
Look for more coverage of AIAG’s 2018 Corporate Responsibility Summit in the next issue of this newsletter. To get involved in AIAG’s Corporate Responsibility initiatives or to access additional information, tools, and programs, visit www.aiag.org.