Recently, AIAG had an opportunity to offer an automotive-industry perspective on human rights due diligence for a new report from Investor Advocates for Social Justice (IASJ).

Shifting Gears, An Assessment of Human Rights Risks & Due Diligence in the Automotive Industry is part of an ongoing, multi-year shareholder advocacy campaign called the Shifting Gears Initiative, in which faith-based investors are engaging with 23 auto companies in their portfolios with the goal to improve human rights due diligence. The initiative was launched in January 2018 by sending investor letters to 23 companies in the automotive industry, including original equipment manufacturers (OEMs), Tier 1 suppliers, and an automotive parts retailer.

The letters posed one simple question:
How do you know your business is not contributing to forced labor or child labor?

After thorough assessment of each company’s publicly available disclosures, the report found that “companies overall are failing to conduct effective human rights due diligence. Stronger governance from companies’ board and senior leadership is needed to set the tone at the top and embed it through the lowest tier of the supply chain.”

“Human rights due diligence is especially important for the automotive sector given the high risk of companies contributing or being linked to serious human rights impacts such as child labor, forced labor, and hazardous working conditions in the supply chain,” says the report. “Serious labor rights risks also impact workers in domestic manufacturing operations, including racial justice and exposure to COVID-19.”

For investors, these represent legal, financial, reputational, and human capital management, as well as regulatory risks. To address these risks, companies should strengthen governance of human rights, increase efforts to embed respect for human rights across the business, improve traceability and transparency throughout the supply chain, undertake effective monitoring of suppliers on human rights, and provide access to grievance mechanisms and support provision of remedy.”

The initiative now aims to:

• Encourage companies to act to meet their responsibility to respect human rights, including throughout their operations and global supply chains.
  
  
• Encourage increased disclosure from these companies on human rights due diligence to help investors make more informed decisions.
  
  
• Increase investor awareness of human rights risks in the automotive sector and encourage investors to use their leverage to support more robust human rights due diligence in the automotive sector.

To read the full report, click here.

Investor Advocates for Social Justice (IASJ), a successor to the Tri-State Coalition for Responsible Investment, is a 501(c)(3) non-profit organization representing investors with faith-based values who seek to leverage their investments to advance human rights, climate justice, racial equity, and the common good. On behalf of its investor affiliates, IASJ engages companies to address strategic environmental, social, and governance issues and advocate for change. IASJ uses a variety of shareholder advocacy strategies, including dialogue with corporate investors, investor letters, filing of shareholder proposals, and proxy voting to encourage corporations to adopt more ethical and sustainable business practices. IASJ believes in seeking out and building collaborative partnerships with those who share similar goals, in an effort to increase the effectiveness and impact of this work.

The Sustainable Investments Institute (Si2) is a non-profit Washington DC-based organization that conducts impartial research and publishes reports on organized efforts to influence corporate behavior on social and environmental issues. Si2 closely follows shareholder resolutions proposed by investor activists, analyzing changing reform campaigns and identifying key points of contention in reports that help investors make informed, independent decisions about their votes and views on these proposals. Si2 also publishes related reports for the public on selected topics.