The Automotive Partnership

DRIVE SUSTAINABILITY

19th, 21st, 26th, 27th and 29th of November, 2019Deloitte São Paulo - Av. Chucri Zaidan 1240, 12º andar, Golden Tower. São Paulo, SPDeloitte Campinas - Av. John Dalton 301, Techno Plaza Corporate, Prédio 2, bl. A e B. Campinas, SP

SUPPLY CHAIN SUSTAINABILITY

Training for automotive suppliers

TRAINING CONTEXT

Who is who

BMW Group, Daimler AG, Groupe Renault, Honda, Jaguar Land Rover, Scania

CV AB, Toyota Motor Europe, Volkswagen Group, Ford, Volvo Cars and Volvo

Group joined forces to launch ‘Drive Sustainability - The Automotive

Partnership’.

The Original Equipment Manufacturers (OEMs) are defining the Guiding

Principles and the content of the supplier sustainability training.

CSR Europe is a platform for businesses looking to enhance sustainable

growth and positively contribute to society with 44 corporate and 41 national

CSR members.

CSR Europe is coordinating and facilitating the Drive Sustainability initiative,

the content and the logistics of the supplier sustainability trainings.

Deloitte is a network of firms employing 245,000 people in 150 countries

providing audit, tax, legal, financial advisory, risk advisory, and consulting

services.

Deloitte teamed up with CSR Europe to facilitate the supplier sustainability

trainings in several countries.

ANTI-TRUSTRegarding your company’s and/or your competitors’ product and services, it is forbidden:

• To discuss current or future prices or supply conditions.• To discuss any increase or decrease in price or change of supply conditions.• To discuss pricing procedures.• To discuss standardizing or stabilizing prices or supply conditions. • To discuss current or future demand. • To ask competitors why a previous bid was so low, or to describe the basis for a previous bid.• To discuss profit levels.• To discuss controlling sales or allocating markets for any product.• To discuss future design or marketing strategies.• To discuss credit terms.• To discuss banning or otherwise restricting legitimate advertising by competitors.• To discuss allocating customers.• To discuss volumes.• To discuss any other subject likely to restrict competition.

Regarding your company’s and/or your competitors’ selection of their supplier companies, it is in particular forbidden:

• To disclose or discuss the identity of suppliers if this identity is a competitively sensitive information.• To discuss any boycotting of a company because of its pricing or distribution practices.• To discuss strategies or plans to award business or remove business from a specific company.• To discuss prices, margins, payment terms, volumes, markets, customers or marketing strategies of

suppliers with competitors.

Regarding your company’s and/or competitors’ trade secrets, it is forbidden:

• To discuss trade secrets or confidential information of your company or any other member

CHATHAM HOUSE RULES

• Participants attending the training may discuss the details of the discussion in the outside world, but may not discuss who attended or identify what a specific individual said

• Provides anonymity to speakers and encourages sharing of information;

• Used throughout the world;

• Allows people to speak as individuals, and to express views that may not be those of their organizations;

• Encourages free discussion

Please also keep in mind

AGENDA

Working & leaning together

09:00 – 10:00 General Introduction

• What is Sustainability?

• Drive Sustainability

• The local context vs global context

10:00 – 10:15 Coffee break

Participants form 2 groups Group A: Business Ethics & Social Sustainability

Group B: Environment and

Health & Safety

10:15 – 10:45 Introduction Break-out session

10:45 – 12:15 Improvement plan exercise: Identifying key local challenges

12:15 – 12:45 Improvement plan exercise: Root causes and actions

12:45 – 14:00 Lunch

14:00 – 15:45 Improvement plan exercise: Root causes and actions (cont.)

15:45 – 16:00 Coffee break

16:00 – 17:00 Improvement plan exercise: Budget, responsibilities and timeline

Participants regroup

17:00 – 17:30 Closing

TODAY: WHAT IS IT ABOUT?

Is about

• Drive Sustainability & the automotive

industry

• Individual OEMs

• Common group expectations / position • Individual OEM/ buyer expectations

• Common tools & activities

• SAQ,

• Trainings,

• Local networks

• Individual OEM actions

• Potential future common actions

Finding solutions

• Getting new ideas for improvements

• Learn from your peers

• Working for your company

improvement plan

Ticking a box

• Passing an audit

• Getting a diploma

Is NOT about

WHAT IS SUSTAINABILITY?

And why does it matter?

19th, 21st, 26th, 27th and 29th of November, 2019Deloitte São Paulo - Av. Chucri Zaidan 1240, 12º andar, Golden Tower. São Paulo, SP

Deloitte Campinas - Av. John Dalton 301, Techno Plaza Corporate, Prédio 2, bl. A e B. Campinas, SP

POLLING EXERCISE

Why does sustainability matter?

THE BUSINESS CHALLENGE

…meeting the expectations of sustainable sourcing

PROFITABILITY & COMPETITIVE ADVANTAGE

Timely delivery

Cost

Quality

EnvironmentEnvironment

Traditional

sourcing

Society Sustainable

sourcing

INCREASED EXPECTATIONS AND MONITORING

Commit to full due diligence of supply chain

Enhance transparency of entire supply chain

Environmental impact & circular models

Respect for human rights

Ensure decent working conditions

Implement safeguards for privacy and other rights

THE RISKS

The consequences of ignoring expectations

Legal action

Buyer

expectations

Government

expectations

Failure to meet …

Public

expectations

Quality

standards

Ignorance of CSR

risks

Loss of Business

Reputational damage

… may cause

THE OPPORTUNITIES

Supply chain sustainability is about opportunity!

Flextronics Case Study: Zhuhai plant, China

Automate overtime tracking system to prevent excessive

working hours

Upgrade working and health facilities/policies + set up

closed-loop process for preventing health & safety risk

Training programs to internalize principles of

empowerment, dignity and respect

Form a management council to regularly monitor and

evaluate CSR performance

Partner with community resources to provide employee

assistance programs and other support services

THE OPPORTUNITIES

Supply chain sustainability is about opportunity!

Flextronics Case Study: Zhuhai plant, China

Lower attrition ratehigh % of employees returning

after Chinese New Year

Zero accident rateDecreased below industry average of 2.0

Increased employee satisfaction

Flextronics awarded by BT

• Passing the audit

• Checking the boxes

Compliance

Risk

• Understanding root causes

• Seeking impact

Beyond compliance

• Partnership

• Competitive advantage

Innovation

Opportunity

TURNING RISK INTO OPPORTUNITIES

Mentality shift

THE BUSINESS CASE

Risk Efficiency

Innovation Relationships

• Prevent supply chain interruption

• Increase traceability and quality

• Enhance long-term reputation

• Reduce costs and resources

• Reduce environmental footprint

• Raise employee health, productivity

• Supplier-OEM cooperation

• Solutions to new customer demands

• Access new markets

• Culture of responsibility

• Lasting supply chain relationships

ABOUT DRIVE SUSTAINABILITY

Enhancing sustainability in the automotive industry

WHO WE ARE

THE AUTOMOTIVE PARTNERSHIP

Share experiences and information

Send a common

message to the

supply chains

Develop and apply common

tools and common projects

Partnership owned by

the automotive

companies, facilitated

by CSR Europe

Share a common

approach

Strict compliance with competition laws19th, 21st, 26th, 27th and 29th of November, 2019Deloitte São Paulo - Av. Chucri Zaidan 1240, 12º andar, Golden Tower. São Paulo, SPDeloitte Campinas - Av. John Dalton 301, Techno Plaza Corporate, Prédio 2, bl. A e B. Campinas, SP

The Automotive Partnership

OUR APPROACHDRIVE SUSTAINABILITY APPROACH

Common Screening

Self-Assessment

Questionnaire for suppliers

(SAQ)

3. Im

pa

ct

2. C

om

pli

an

ce

Common Risk

Assessment*

Common Strategy

Vision 2030

2030 Goals and Road Map

OEM Individual Integration

Long-term strategy

Supplier Code of Conduct

Common Requirements

• business impact

• involvement of buyers

• visibility at top

management level

Result Integration

e.g. Common audit

standard*

Further AssessmentInitial Risk Mapping

Common Guidance

Guiding Principles

Practical Guidance

Common Capacity BuildingSupplier trainings (at various tiers*)

(eLearning*, one-day training, knowledge assessment*)

Supplier Dialogue Events

Local networks

Common Leverage

Stakeholder and cross-sectorial exchange

Policy exchange and institutional influence*

Knowledge creation (e.g. studies)

1. D

ire

cti

on

Company supplier development Company institutional engagement and influence

EMBED RESPONSIBLE BUSINESS CONDUCT INTO POLICIES & MANAGEMENT SYSTEMS

IDENTIFY & ASSESS ADVERSE IMPACTS IN THE SUPPLY CHAIN MANAGE RISKS TRACK RESULTS

MANAGE RISKS and PROVIDE FOR OR COOPERATE IN REMEDIATION WHEN APPROPRIATE

= Alignment with OECD Due Diligence Guidance For Responsible Business Conduct Step 1 to 6

1

2 3 4

63

CO

MM

UN

ICA

TE HO

W IM

PA

CTS A

RE A

DD

RESSED

5

= currently OEM Individual Activities * = Future common activities / under development

THE GUIDING PRINCIPLES

A set of common baseline guidelines related to:

Human rights and working conditions

Environmental standards

Business Ethics

• Describe OEMs common expectations towards suppliers/sub-suppliers

• Complemented by OEMs individual set of codes and policies

THE GUIDING PRINCIPLES

• Child Labour

• Wages and Benefits

• Working Hours

• Forced Labour

• Freedom of

Association

• Health & Safety

• Harassment

• Non-Discrimination

Human rights

and working

conditions

• Air/Water Quality

• Emissions

• Natural Resources

Management

• Waste Reduction

• Responsible

Chemical

Management

Environment

• Responsible

sourcing

• Anti-Corruption

• Privacy

• Financial

responsibility/transpa

rency

• Fair Competition

Intellectual Property

• Economic Sanctions

Ethics

What do the Guiding Principles cover?

THE GUIDING PRINCIPLES

“ We endeavor to achieve excellence,

innovation and performance in a sustainable

manner. (…)

For this reason, we are working together to

attain the highest standard in

(1) business integrity and in the

(2) social and

(3) environmental performance of our

supply chain”.

Success depends on the commitment

of our entire global supply chain.

THE PRACTICAL GUIDANCE

• Complements Guiding Principles

• Practical explanations and examples

• How to comply

BUT does not represent the only way

THE PRACTICAL GUIDANCE

Compliance with laws

Obligation to comply

with highest standards

Guiding Principles

demand a preventive

approach

2014 2015 2016 20172018/2019

GLOBAL Reach

• Alignment of

Guiding

Principles

with

Automotive

Industry

Action

Group

(AIAG)

• German

automotive

association

adopts

GPs

• Set up

local

network in

Turkey

• Start

setting-up

a local

group in

China

• Launch of

DS local

group in

China

• Common

revision of

GPs with

AIAG

• Trainings in 9 countries:Spain, Hungary, Thailand China, Mexico, Poland, Brazil, Malaysia and South Africa

19th, 21st, 26th, 27th and 29th of November, 2019Deloitte São Paulo - Av. Chucri Zaidan 1240, 12º andar, Golden Tower. São Paulo, SPDeloitte Campinas - Av. John Dalton 301, Techno Plaza Corporate, Prédio 2, bl. A e B. Campinas, SP

GLOBAL VS LOCAL

Sustainability in Brazil

THE GLOBAL CONTEXTSustainability trends in the global automotive industry

GHG emissions

& energy use

Product lifecycle

Sustainable

sourcing

Market

conditions

Data security

Vehicle changes

CO2 mitigation

technologies

Re-use and refurbishment

of parts

Low energy and emission

technologies

Sustainable materials

Increasing pressure on

compliance

City oriented vehicles

Technologies for recycling

Secure resources

CSR in the supply chain

Attention to sociopolitical

situations (instabilities)

Security and privacy of

systems and processes

Increased air quality

Reduction of solid waste

Lower emissions of GHG

Reduced risks in the

supply chain

Changes in consumption

habits

Circular economy

Better control of suppliers

“Green economy”

Better relationship with

local stakeholders

Better reputation

Electric, autonomous cars

DRIVERS TRENDS IMPACTS

THE GLOBAL CONTEXTGlobal maturity level in Sustainability

Country Rank Index

France 4 81.5

Germany 6 81.1

Czech Republic 7 80.7

United Kingdom 13 79.4

Japan 15 78.9

South Korea 18 78.3

Canada 20 77.9

Spain 21 77.8

Hungary 25 76.9

Slovakia 27 76.2

Poland 29 75.9

Italy 30 75.8

USA 35 74.5

China 39 73.2

Thailand 40 73

Romania 42 72.7

Russia 55 70.9

Brazil 57 70.6

Iran 58 70.5

Malaysia 68 69.6

Morocco 72 69.1

Mexico 78 68.5

Turkey 79 68.5

Indonesia 102 64.2

India 115 61.1

Top 25 passenger car producing countries in 2018 x SDG Sustainability Index

Sources:

- International Organization of Motor Vehicle Manufacturers, available at http://www.oica.net/category/production-statistics/2018-

statistics/, Accessed on August 28th 2019.

- Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G. (2019): Sustainable Development Report 2019. New York:

Bertelsmann Stiftung and Sustainable Development Solutions Network (SDSN).

Scores of the 25 top passenger car

producing countries per region/block

East and South Asia

Eastern Europe, Middle East,

North Africa and Brazil

OECD members

THE LOCAL CONTEXT

Expectations from authorities

• Reduction in governmental attention to sustainability issues

• Concerns on economy development

• Changes to the normative regulations on occupational health and safety

• Anticorruption and bribery

• Incentives to improve vehicles

• GHG emissions reduction

Law nº 8.723 de 28/10/1993

• Economic, safer cars

Law nº 12.715 de 17/09/2012

• Most concerns coming from civil society

Focus on the product (vehicles) over the value-chain

THE LOCAL CONTEXT

Expectations from civil society and media:

• NGOs acting in different areas, such as

• Children rights

• Forest protection

• Sustainable businessStudy sector: http://www.siteuniethos.org.br/wp-content/uploads/2013/11/1_UNIETHOS_auto_bx.pdf

• Media focuses mainly on technological advances of vehicles

• Advances in value chain and production processes not well reported

THE LOCAL CONTEXT

Local sustainability focus topics

Environment

• Energy and emissions

• Wastemanagement

Health & Safety

• Occupationalsafety

• Changes in relatedregulatorynorms

Business ethics

• Anticorruptionand bribery

• Data disclosure

Human Rights & WorkingConditions

• Diversity and inclusion

• Harrassmentand discrimination

THE LOCAL CONTEXTAutomotive industry maturity level to meet these expectations

Low High

▪ Automotive industry very reactive to requirements of regulatory agencies

▪ Moderate management of its supply chain

▪ Focus on the vehicles

▪ Little concern on value chain and production process

▪ Sustainability issues approaching manly environmental issues

▪ Ethics and human rights issues still in need of closer attention

Room to improve

A CLOSER LOOK

Understanding the topic & biggest challenges

AGENDA

Moving on to the next part

Participants form 2

groups

Group A: Business

Ethics & Social

Sustainability

Group B: Environment

and Health & Safety

10:15 – 10:45 Introduction Break-out session

10:45 – 12:15 Improvement plan exercise: Identifying key local challenges

12:15 – 12:45 Improvement plan exercise: Root causes and actions

12:45 – 14:00 Lunch

14:00 – 15:45 Improvement plan exercise: Root causes and actions (cont.)

15:45 – 16:00 Coffee break

16:00 – 17:00 Improvement plan exercise: Budget, responsibilities and timeline

Participants regroup

17:00 – 17:30 Closing

BREAK-OUT SESSIONS

CLOSING

Summary and next steps

19th, 21st, 26th, 27th and 29th of November, 2019Deloitte São Paulo - Av. Chucri Zaidan 1240, 12º andar, Golden Tower. São Paulo, SP

Deloitte Campinas - Av. John Dalton 301, Techno Plaza Corporate, Prédio 2, bl. A e B. Campinas, SP

SUMMARY OF THE DAY

• Which key challenges and actions did you identify?

• How do you plan to implement lessons learned in your company?

Any other comments, feedback or reflections from today?

Findings from group discussion

WHAT’S NEXT?

• Share improvement plan and new ideas with colleagues

• Improve your company’s performance based on today’s learnings

For You…

• Follow up email with all materials

• Improve future actions based on your feedback

…For Drive Sustainability

ADDITIONAL RESOURCES

• Drive Sustainability website

• AIAG Supply Chain Sustainability eLearning

• Econsense Training Video and Handbook: Human Rights in the Supply Chain

• UN Global Compact website

• Global Reporting Initiative: About Sustainability Reporting

• GAN Business Anti-Corruption Portal

• CSR Europe Webinars and business tools and practices

EVALUATION FORMPlease complete & hand it to staff to receive your certificate

THANK YOU