Human rights compliance

Public interest in compliance with human rights in the automotive industry is increasing. One important reason for this development involves the new challenges associated with the expansion of electric mobility. More specifically, there are concerns that the raw materials needed to manufacture electric vehicles might possibly be obtained under conditions that are critical in terms of human rights. We at Daimler have noticed an continuing interest in human rights on the part of investors, which indicates to us that corporate activities related to human rights are having an increasing influence on investment decisions. Legislation relating to compliance with human rights is also being expanded. It is conceivable that new laws governing human rights due diligence obligations could be adopted in Germany after the federal government’s National Action Plan on Business and Human Rights comes to an end in 2020. At the EU level, it is possible that legislative initiatives on human rights could be introduced when Germany assumes the Presidency of the European Council.

For Daimler, respect for human rights is a fundamental component of responsible corporate governance. We are committed to ensuring that human rights are respected and upheld in all of our Group companies and by our suppliers. Respect for human rights is therefore a key component of our Group-wide sustainability strategy and our understanding of integrity and ethical behavior. The nature of critical human rights issues varies among regions and suppliers and also depends on the raw materials, services, and supply chains in question. For this reason, when implementing our approach to respecting and upholding human rights, we not only take into account our own plants and facilities but also include risk-based analyses of the entire supply chain.

The following standards and guidelines in particular serve as the key frame of reference for our human rights regulations and our conduct in this regard: the UN Global Compact, the UN Guiding Principles on Business and Human Rights, the Universal Declaration of Human Rights (including the relevant provisions from the International Covenant on Civil and Political Rights and International Covenant on Economic, Social and Cultural Rights), Germany’s National Action Plan on Business and Human Rights, and the Core Labor Standards of the International Labour Organization. The human rights issues we focus on and which have been derived from these frames of reference to enable us to fulfill our due diligence obligations are contained in our Integrity Code (See www.daimler.com/documents/sustainability/integrity/daimler-integritycode.pdf) and the Daimler Supplier Sustainability Standards. (See supplier-portal.daimler.com/docs/DOC-1547)

To ensure that human rights are respected and protected, Daimler has developed a due diligence approach called the Daimler Human Rights Respect System (HRRS). It aims to protect the human rights of our own employees and to ensure that human rights are respected at our direct suppliers (Tier 1) and at risk-relevant points of the supply chain beyond Tier 1. In the spring of 2019, we established a new Social Compliance department. This department is responsible for leading the implementation of our HRRS and to this end utilizes tried and tested methods and processes from our Compliance Management System. Plans call for the HRRS for Daimler AG Group companies to be gradually integrated into the Group-wide CMS. Within the framework of the HRRS, we are also developing a separate due diligence approach for ensuring compliance with human rights in the supply chain. This approach is based on a foundation of proven compliance management systems.

As a proactive risk management system, the HRRS is designed to identify and avoid systemic risks and possible negative effects of our business activities on human rights early on. The HRRS thus primarily protects third parties, i.e. rights-holders, and is aimed at exerting its effect along our supply chain as well.

With regard to Group companies, the risk assessment in the course of the integration into the Daimler CMS envisages the regular classification of the Group companies, initially on the basis of predefined criteria such as the risks associated with specific countries and specific business operations. Here we take into account fundamental human rights standards such as those defined in the Universal Declaration of Human Rights and those formulated by the International Labour Organization (ILO). We plan to use the reviews as a basis for performing a more detailed annual analysis with the help of a human rights survey conducted by the Group. To this end, we launched a pilot project in 2019 that initially includes seven Group companies. We want to use the knowledge gained from the project to expand our range of systematic risk analyses, which will then be performed at all remaining Group companies.

Within the framework of advance risk assessment activities that are part of a separate due diligence approach for our supply chains, we have identified 24 raw materials and 27 services whose extraction and further processing/provision (services) pose a potentially critical human rights risk. Various international reference documents serve as the basis for these risk assessments. With regard to raw materials, we use the “Child and Forced Labor List” from the US Department of Labor, for example. Extraction and mining methods, and the countries where raw materials are located, all play an important role in our analyses. With regard to services, we make use of the Corruption Perception Index published by Transparency International. This list is compiled on the basis of an assumption that countries which display a high risk of corruption are also more likely to pose a risk in terms of human rights.

The lead responsibility for the controlling of human rights issues lies with the Integrity and Legal Affairs executive division of Daimler AG. The member of the Board of Management responsible for Integrity and Legal Affairs works with the procurement units on ensuring human rights compliance and also receives regular information and the corresponding reports on human rights activities from the Chief Compliance Officer and from specialist units in the Social Compliance and Corporate Responsibility Management departments. Relevant procurement units also provide information on their respective human rights compliance measures to the Procurement Council (PC) and the Board of Management members directly responsible for the units in question. This is supplemented by regular reports submitted to the entire Board of Management and the Corporate Sustainability Board (CSB). Cross-functional teams work closely on the development and implementation of suitable preventive activities and countermeasures. The teams consist of human rights and compliance experts, as well as staff from the operational procurement units and, if necessary, from other specialist units as well. The relevant specialist units and units are responsible for implementing and monitoring the measures developed in each case.

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