Responsible Innovation in the Automotive Industry

Key Points

• The automotive sector is experiencing a period of significant change.
• With growing concerns about climate change and environmental impacts, sustainability has become a strategic priority for automotive organizations.
• BSR has recently published a Human Rights Primer for the Automotive Sector designed to help companies navigate emerging regulations, meet customer expectations, and prevent costly delays, fees, or litigation due to human rights incidents.

For the past couple of decades, the automotive industry has been under considerable pressure to uncover and address adverse human rights impacts in their business and value chains. Recent regulations, such as the EU Corporate Sustainability Due Diligence Directive (CSDDDD) have introduced comprehensive human rights due diligence requirements for companies across their value chains, directly impacting many automotive companies with substantial market presence in Europe.

As these regulations come into effect, are you confident that your company fully understands the human rights risks within its value chain? Are you prepared to meet these new requirements?

The Corporate Human Rights Benchmark 2022 report, identifies the sector as the poorest performer in human rights, with civil society organizations revealing significant human rights violations within the automotive supply chain. Understanding these human rights concerns and adverse impacts are not just a regulatory necessity, but also a strategic imperative for safeguarding reputation, ensuring operational integrity, preventing litigation risks, and avoiding supply chain and production delays.

To help automotive companies understand adverse human rights impacts across their value chain, BSR has released a primer on the top 10 human rights issues impacting the sector.

Based on BSR’s engagement with the transport and logistics sector, and over 30 years of experience across human rights, the primer highlights the issues that automotive companies will likely need to manage in order to prepare to comply with emerging regulations, meet customer expectations, and avoid costly delays, fees, or litigation due to human rights incidents.

In addition to the primer, we outline below three key trends across the automotive sector value chain and their potential human rights impacts.

Human Rights Issues in Sourcing Raw Materials for Electric Vehicle Batteries

Amidst a slowdown in consumer adoption of electric vehicles, the sector continues to invest in advancing new Electric Vehicle battery (EV battery) technologies. Currently, competition has intensified with the entry of new players from China and India, aiming to carve out market share by offering cost-effective EVs.

The human rights and environmental concerns associated with mining the associated raw materials such as cobalt, lithium, manganese, graphite, and nickel is now well documented.

For instance, nickel mining in Indonesia and the Philippines has been linked to deforestation, water contamination, and adverse health impacts on local communities; cobalt mining in the Democratic Republic of Congo (DRC) has been marred by allegations of forced evictions and child labor; and there is continued concern about forced labor practices in Xinjiang, China, particularly in the processing of cobalt and the mining of key materials such as aluminum and graphite.

Beyond the risks associated with sourcing raw materials for EV batteries, emerging human rights challenges are arising in the maintenance and repair of EVs. Changes in technology and safety standards necessitate ongoing reskilling and retraining of technicians in production sites and repair workshops to mitigate potential job losses and ensure occupational health and safety standards are upheld.

Responsible Use of AI is Key to Mitigate Human Rights Risks

This year, we also see several businesses are gearing up to introduce advanced levels of automated self-driving technology.

Autonomous driving and other driving assistance technologies can pose various human rights challenges. Errors in AI-driven driver assistance technologies may compromise safety and security in the event of accidents. These technologies may also exhibit performance disparities for underrepresented groups in the dataset.

The implementation of higher levels of automated self-driving technology often involves the collection and utilization of larger volumes of sophisticated data to train algorithms and support decision-making processes. This also raises privacy concerns if automakers fail to clearly explain the types of data being collected, processed, and used, making it difficult to obtain proper user consent.

The Shift from Ownership to Subscription Models

There is a noticeable trend emerging within the transportation sector, particularly in car rental markets, towards offering Car-as-a-Service (CaaS) via an on-demand subscription model. This shift is fueled by in- vehicle connectivity and data on vehicle usage, facilitating easy and flexible real-time servicing. However, from a human rights perspective, compared to the traditional sale and ownership model, this trend may pose higher risks for CaaS providers. As the CaaS model allow a higher level of oversight and control over the vehicle’s location and data, as well as granting a higher leverage in selecting customers/users due to recurring contractual relationships.

Periodically, there are reports in the news about vehicles being intentionally misused for harmful purposes, such as facilitating armed operations or criminal activities like human trafficking. With the subscription model, the auto-providers track the geographical location and usage of the vehicles. This would lead to greater expectations and responsibilities to prevent and detect illicit use of vehicles, or usage in conflict prone and higher risk locations known for activities such as deforestation, illegal mining activities, or human trafficking hotspots.

This may also increase the probability of law enforcement agencies requesting real-time data from CaaS providers to support combating crimes. The increased ability for law enforcement to access vehicle position information could facilitate real-time tracing and surveillance of targeted individuals, such as dissidents or human rights defenders—and exacerbate further human rights risks.

BSR’s human rights team advises business from across sectors on human rights due diligence, assessment, and management of risks. Please get in touch to discuss how our team can help yours navigate these emerging trends and manage the key human rights risks in the sector.

This article was originally published at the BSR website "Sustainability Insights" and is written by Cynthia Wang and Jenny Vaughan at BSR.