AN INDUSTRY-WIDE PROBLEM THAT REQUIRES INDUSTRY-WIDE SOLUTIONS
We traced the customers of companies that mine, process, and manufacture products relevant to the automotive industry that have engaged in forced labor in the Uyghur Region. The results were startling – practically every major traditional automotive and electric vehicle manufacturer has significant exposure to forced labor in the Uyghur Region. The auto industry cannot wait another day to trace their supply chains back to the raw materials. To do anything short of full tracing would be an enormous legal, ethical, and reputational risk.
Manufacturers have indicated that thorough supply chain tracing is out of reach and that understanding the situation in the Uyghur Region is a challenge. Despite acknowledging their responsibilities under domestic law, internal governance, and public expectations to respect human rights, their human rights due diligence efforts to date have been incommensurate with the supply chain risks they face. Current efforts through industry associations and certification schemes emphasize links to raw materials mining but are comparatively blind to the processing and refining involved in converting ore into forged, rolled, cast or manufactured car parts and do not take account of the significant expansion of manufacturing of car parts in the XUAR in recent years.
This report provides a starting point for identifying materials and parts at most significant risk of being sourced directly or indirectly from abusive facilities in the XUAR and models a methodology for companies to vet and adjust their own supply chains to withdraw from the Uyghur Region crisis. It also provides clarity to automotive industry actors that the forced labor risks are, in fact, pervasive in their supply chains. Though the report cannot address every single company in the region, evidence shows that the parts manufacturing, materials processing, and mineral mining associated with the automotive industry is substantially tainted with forced labor. This report shows that the automotive industry should conduct significantly more thorough supply chain tracing to ensure that it is not complicit in the forced labor regime in the Uyghur Region.
A significant, swift shift in supply chains is needed to extricate the automotive sector from the Uyghur Region. Other industries that rely on similar raw materials (e.g. alloys of steel, copper, aluminum, and silicon) are comparably implicated in abuses underway in the processing of these materials. The information provided in this report should serve as a wakeup call to manufacturers across sectors worldwide and as a foundation for cross-sectoral collaboration to end forced labor in raw materials and manufacturing.
Based on the severity and pervasiveness of forced labor identified in this report and the extent to which it pervades automotive supply chains, we recommend that governments and businesses take immediate action. We recommend the following:
RECOMMENDATIONS TO GOVERNMENTS
1. Governments and legislatures should enact and implement mandatory human rights due diligence laws and ensure the laws require companies to address human rights risks beyond first-tier suppliers, in recognition that abuses can easily be distanced from direct suppliers under state-controlled economic systems. Laws and enforcement should apply to the full supply chain, without exception. In addition to countries that already have enacted human rights due diligence laws (e.g. Germany and Norway), or are developing them (the European Union), human rights due diligence laws should be a priority for countries with deep involvement in the automotive industry, such as Japan and South Korea.
2. Governments and legislatures should enact and implement bans on imports linked to forced labor. Forced labor import bans are a necessary complement to mandatory human rights due diligence, especially where state-sponsored repression prevents companies from conducting on-the-ground assessments of forced labor risks. Forced labor bans should include specific provisions to identify and prohibit the import of goods linked to state-sponsored forced labor.
3. Governments should identify the automotive sector as a priority for the implementation of forced labor import bans. Governments should devote substantial resources to identifying automotive parts and materials linked to forced labor. The United States should, in particular, name the aluminum, steel, and automotive industries as high-priority sectors under the Uyghur Forced Labor Prevention Act (UFLPA).
RECOMMENDATIONS TO AUTO COMPANIES
1. Car companies should work individually and collectively to conduct or commission their own supply chain mapping and analysis of raw materials mining and processing and parts manufacturing in the XUAR.
2. Corporations in the automotive industry and commodities trading firms should engage in both internal and cross-sector collaborative efforts to cease sourcing all products mined, made, or manufactured, in whole or in part, in the Uyghur Region. This would include ending business relationships or contracts, whether direct or indirect, with any companies that have operations in the Uyghur Region or that have accepted government-supplied laborers from the Uyghur Region in other parts of China.
3. In adherence to the UN Guiding Principles on Business and Human Rights, automotive companies conducting enterprise-wide human rights due diligence should prioritize links to the XUAR as a matter of urgency, as the human rights impacts are severe and pervasive in the region. Given the impossibility of conducting meaningful assessments of forced labor risks at facilities in the XUAR, car companies’ due diligence efforts should focus on identifying supply chains links to the XUAR and working with suppliers and sub-suppliers to responsibly exit the region.
4. Auto manufacturers should publicly report on findings of supply chain links to the XUAR to facilitate knowledge of supply chain risks across the automotive industry and industries with related supply chains. Decisions to terminate procurement relationships should also be made public to inform other industry actors of identified supply chain problems and promote supply chain transparency.
5. Car companies should not assume that suppliers or sub-suppliers, including mines, mineral processors, and other facilities, are free from links to forced labor in the XUAR, whether at their own facilities or in their supply chains, simply because they have made an attestation to that effect, received an industry certification, or conducted an audit pursuant to industry initiatives or supply chain due diligence schemes.
6. Automotive manufacturers should sign the Call to Action from the Coalition to End Forced Labour in the Uyghur Region.
7. Remediation of harms inside China is impossible at this time, so car companies are recommended to collaborate with raw metals industries and industry associations to implement reparations to Uyghurs and other minoritized populations in the diaspora working to address oppression and exploitation in the Uyghur Region.
RECOMMENDATIONS TO OTHER STAKEHOLDERS
1. All financial institutions and other investors (e.g. commodities traders) should divest from all companies operating in the XUAR or using state-supplied laborers from the Uyghur Region. Passive investment index funds should de-list the companies identified in this report as engaging in state-sponsored labor transfers.
2. The London Metal Exchange should suspend issuing warrants to and withdraw current warrants for any companies linked directly or indirectly to state-sponsored labor transfers in the Uyghur Region. The voluntary "LME Passport" program, wherein metals traders provide ESG information and traceability/transparency data about the ingots they are trading on the exchange, should be made mandatory, and the disclosures should include full supply chain data, describing the origin of the ore, and the locations for mining, processing, smelting, other refining, and trading undertaken.