Auto industry rates corporate responsibility as core to business

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Auto makers and automotive parts suppliers view corporate responsibiity as a significant business priority.

Eighty-six percent of the world’s big automotive companies — those with revenues of at least $5 billion — say that corporate responsibility is a significant priority for their businesses, according to a 2015 survey by the Automotive Industry Action Group (PDF).

Even among smaller companies CR is a priority, such that overall 70 percent of industry participants call the issue "significant" or "very significant" for their business operations, according to the poll of more than 300 professionals from automotive, manufacturing and related industries in 28 countries.

They cite business ethics as the most important priority, followed by environmental stewardship on energy efficiency, carbon emissions reductions and waste reduction. Third most important are supply chain issues of workers' rights and procurement transparency. 

We think this evidence of the sustained importance of CR, and the growing need for companies to be socially, environmentally and ethically responsible, is leading our industry peers to increase their own understanding of the issues. The survey results bear this out, overall.

Compared to last year, the global auto industry showed it is more informed and active on key corporate responsibility issues — from ethics to the environment companies — with many fewer “don’t know” responses in the survey than last year.

But the global auto industry also faces bigger challenges to making responsible social and environmental practices part of core business operations, the survey indicated.

 By polling these professionals for the second year in a row, our team at the Automotive Industry Action Group (AIAG), where I lead our CR program, can see both the progress and pitfalls in this increasingly complex global industry. Here are some key findings, and the lessons learned.

Reputation, transparency and legislation keep business ethics front and center

While business ethics tops the list of priorities for 80 percent of companies, environmental issues took the next three spots: energy use/conservation, selected by 71 percent; environmental emissions, selected by 71 percent, and waste reduction, selected by 70 percent.

Supply chain transparency and workers’ rights also rate as a significant priority by 61 percent and 60 percent of respondents, respectively.

We think these results are due to a number of trends we’re seeing for businesses in automotive, manufacturing and related industries:

  • Managing reputation and risk: In a globalized industry and 24/7 media landscape, issues from labor rights and working conditions to health and safety pose an increasing threat to both reputation and supply chain continuity.
  • Meeting demands for greater transparency: The industry is facing requests for greater transparency from a variety of stakeholders, mostly the investment community, but also from consumers and B2B customers in the supply chain.
  • Staying on top of legislation: Companies face a growing list of compliance mandates, such as the first U.S. conflict minerals reporting deadline in 2014 (covered in more detail below), and similar laws pending in Europe.

Although most companies, or 73 percent this year compared to 56 percent last year, still say they have enough data to benchmark operations in these areas, there was a significant increase in the percent of companies that don’t have enough data — from 16 percent last year to 28 percent this year. That is likely a sign of the growing number and complexity of data sources to be measured.

And while only about a third of respondents say they have met or exceeded goals in these areas (similar to last year), there was a significant drop in the percent who said they hadn’t measured — meaning companies seem to be more sure of how they’ve done against their goals.

As conflict minerals reporting increases, CR reporting declines

Conflict minerals compliance was a major industry focus in 2014, when new U.S. Securities and Exchange Commission reporting deadlines took effect, and we launched a campaign to engage the global automotive supply chain in a common approach. The industry’s increased action on this issue is one reason why most companies now say they have a conflict minerals reporting policy or process in place, up significantly this year to 57 percent from 46 percent last year.

Of those with a conflict minerals reporting process in place, more than six in 10 said they had met the May 2014 deadline. Yet only about half, or 53 percent, of those companies expect they will meet this May's deadline, likely due to more rigorous guidelines in the U.S. this year and new EU requirements on the horizon.

For these reasons, respondents once again cited conflict minerals reporting as the most significant development in the CR field affecting their companies in the past 12 months as well as the issue most likely to affect them in the next 12 months.

Meanwhile, there was a significant decrease in the number of companies that view general CR reporting — or the documenting of CR in operations — as a significant priority. Indeed, that percent dropped from 67 percent to 58 percent. As a consequence, there’s been a general increase in the number of companies that do not produce a CR report and have no plans to, from 19 percent last year to 30 percent this year.

Still, among those that do produce a CR report, significantly more than last year use the Global Reporting Initiative framework compared to last year, or 41 percent compared with 23 percent. These results reflect changes in the reporting landscape, such as the increasing importance of integrated reporting and issue-specific reporting on conflict minerals and environmental performance.

Facing greater barriers to CR in core business practices

The survey's depiction of mostly positive developments in the attention given to CR by automotive industry participants take place amidst a backdrop of increasingly significant challenges to integrating CR into core business.

While the same four barriers topped the list this year and last, there was a marked increase in the percent of those viewing them as significant barriers:

  • Insufficient resources were cited by 53 percent of respondents, up from 41 percent.
  • Not seen as contributing to the bottom line was cited by 41 percent this year, up from 28 percent last year.
  • Lack of understanding about the business relevance cited by 38 percent, up from 28 percent last year; and
  • Lack of senior management support this year was cited by 30 percent of participants, up from 23 percent last year.

These barriers reflect the realities inside companies, as well as the slow but steady economic recovery.

This latest snapshot of CR in the global automotive industry is generally encouraging for those of us working to advance a shared agenda. And it’s also a reminder that we need to stay focused on demonstrating the kind of impact that strengthens the business case for CR inside every successful company, regardless of its industry, size or country.