APG advocates ‘just transition’ in the automotive industry

APG advocates ‘just transition’ in the automotive industry

Published on: 16 November 2020

Corporate Human Rights benchmark includes sector for the first time

 

The shift to a low-carbon business model has taken center stage in the automobile sector, but the implications for workers and communities are often overlooked. That is one of the findings of the Corporate Human Rights Benchmark (CHRB) published today, of which APG is a co-founder. On behalf of our pension fund clients, we advocate a ‘just transition’ and urge car manufacturers to invest in employee resilience and prevent human rights risk in the supply chain.

According to the CHRB, automotive companies do not yet sufficiently demonstrate that they work with suppliers or set expectations to prevent human rights issues. This is particularly relevant given that the sector relies on supply chains with numerous areas of risks for human rights violations. It is the first time that the automotive sector is included in the benchmark.

Increased awareness

Anna Pot, Head of Responsible Investments Americas at APG Asset Management US, welcomes the inclusion of more companies and sectors in the CHRB. “The results suggest that the implementation of core human rights principles in still weak in the automotive sector. But experience shows that publication of the benchmark can have a positive effect on corporate awareness and overtime lead to improved human rights performance. The ICT sector, for instance, was added last year and now the average score of these companies has substantially improved.”

Although the automotive sector is newly added to the CHRB, the sector is not ‘new’ to APG in terms of human rights engagement. Pot: “On behalf of our clients, we have until the end of 2019 been engaging with thirteen large car producers to improve labor conditions and tackle child labor in cobalt mining. Cobalt is an indispensable raw material for batteries in electric vehicles. We have made progress. For instance, Renault initiated inspections of the cobalt smelters it does business with, and Daimler has created a program to support local communities.”

Insight in human rights performance

APG, on behalf of its pension fund clients, co-founded the CRHB in 2017 and actively takes part in the development of the benchmark. “We contribute to this since we, as stewards of capital, are keen to improve corporate human rights performance,” Pot explains. “The CHRB provides good-quality data about an increasing number of companies which we, as a responsible long-term investor, need to make investment decisions and engage with investees.”

The CHRB benchmarks the human rights performance of companies in the apparel, agriculture, extractives, ICT and automotive sectors. Companies are assessed on 100 indicators based on the United Nations Guiding Principles (UNGP), using publicly available data on issues such as labor conditions, workers’ safety and living wage. This year however, the full assessment was only made for the automotive sector; the other sectors were assessed on a smaller subset of indicators. 

‘Just transition’

The automotive companies included in the CHRB were also assessed by the Climate and Energy Benchmark. Interestingly, some car manufacturers that demonstrated action on climate issues – such as carbon reduction targets – disclosed little information on human rights (and vice versa). “This suggests that the sector considers climate and human rights issues separately, despite them being increasingly recognized as interconnected,” says Pot.

The emission-intensive automotive sector faces the challenge of shifting to a zero-carbon economy while upholding the principles of a ‘just transition’. Pot: “That is why we are engaging with car producers on the impact of this transition on the workforce and local communities. Automation, industry transformation and digitalization could result in the loss of thousands of car manufacturing jobs. We encourage producers to make their workforce part of the transition by offering training and development opportunities.”

With regard to the other sectors, the CHRB results show an overall improvement in the scores across indicators, especially on public commitments to protect human rights and grievance mechanisms. The lower areas of improvement relate to human rights due diligence. This is the process a business is expected to follow to identify, assesses and act on human rights risks. Pot: “A growing number of companies are getting better at the fundamentals, but there is still ample room for improvement.”

Published in these collection(s)

Responsible investing

Collection in Sustainability, Long-term investment

Economy

Collection in Income