Tesla Shareholders Ask: Are Automotive Supply Chains & Labor Rights Incompatible?

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A press inquiry from As You Sow — the nonprofit that tries to harness corporate responsibility and shareholder power — came across my editor’s desk, and I agreed to follow up with the organization. On the 2023 Tesla Shareholder Meeting agenda for Tuesday, May 16, 2023, are 5 different proposals on which shareholders can vote. As You Sow was hoping that we at CleanTechnica would unpack its collaborative Tesla shareholder proposal asking the company to issue a report describing if and how Tesla plans to eradicate child labor and forced labor from its automotive supply chain by 2025. Moreover, As You Sow wanted Tesla to introduce more supply chain transparency.

Both of those requests sound reasonable and humane, right?

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The Tesla SEC filing “Notice 2023 of Annual Meeting of Stockholders” indicates that Tesla has received notice from a stockholder of that it intends to propose a resolution at the 2023 Annual Meeting requesting reporting on plans to eradicate child labor and forced labor from Tesla’s supply chain. The “floor proposal” was filed by As You Sow on behalf of Investor Advocates for Social Justice (IASJ).

In that filing, Tesla states that the company will be publishing its 5th annual Impact Report with enhanced disclosures across people, environment, product, and supply chain. In response to stockholder engagement, Tesla is disclosing additional Scope 3 emissions categories and aligning with the TCFD’s recommended climate-related disclosures. The company will also expand disclosures on the culture it continues to build and enhance at Tesla, how it engages and aims to retain its employees, progress it is making on displacing fossil fuels, the efficiency and safety of its products, and how the company manages risks in the supply chain, among many other topics.

If the floor proposal is presented at the 2023 Annual Meeting, Tesla is recommending shareholders vote AGAINST the proposal.

The Dilemma of EV Battery Composition & the Automotive Supply Chain

Automakers have committed extraordinary amounts of money to boost the production of batteries for electric vehicles in the US, including Tesla’s recent plan to triple lithium-ion cell output at its enormous plant near Reno, Nevada. All of those plants need vast amounts of costly raw materials, including cobalt that’s mainly mined in the Democratic Republic of Congo (DRC)—and often by children.

A 2023 study by New York University (NYU) and the Geneva Center for Business and Human Rights finds that major auto, battery, and electronics manufacturers are doing too little to ensure the cobalt they’re using doesn’t involve child labor at the DRC’s numerous unsafe “artisanal” mines. It also calls on these manufacturers and mining and processing companies to help create safeguards that eliminate the practice and improve overall safety. The report makes the following recommendations to ensure the safeguarding of human rights in cobalt mining operations in the DRC:

• Global cobalt buyers need to legitimize artisanal and small-scale mining (ASM), an integral component of cobalt mining.
• All stakeholders should support the formalization of ASM to address child labor, hasten the integration of women, and improve mine safety.
• Strong leadership from local cooperatives is necessary to further the empowerment of women and protect children.
• Companies in the battery supply chain, the DRC government, other governments, and other stakeholders must collectively develop common standards on mine safety and child labor.
• Participants in the cobalt sector should promote open-pit extraction to reduce safety risks and mitigate child labor.
• The DRC government should strive to mandate formalization and help to develop and apply practical standards on mine safety and child labor.

A CleanTechnica Exclusive with Aaron Acosta of Investor Advocates for Social Justice

With those recommendations in mind, we reached out to Investor Advocates for Social Justice. Aaron A. Acosta, senior program associate, responded to the following questions.

What pathways do As You Sow and IASJ suggest to circumvent supply chains that engage in unethical labor practices?

How do As You Sow and IASJ seek to convince Tesla and other automakers that the confluence of corporate responsibilities for human rights, business relationships, and the power buyers is a significant force for systemic changes in such labor practices?

Thanks for the questions. I will give it my best attempt at answering. I should say that this response reflects IASJ’s understanding of the issue and approach.

First, I would like to start by saying that, while as a whole, the automotive supply chain is complex and tracing is difficult, automakers do have a responsibility under the UNGPs to respect human rights. Additionally, as the EV transition gains momentum, automakers are increasingly more influential over the minerals supply chains. They can and should leverage this influence to demand adherence to human rights at all levels of the minerals supply chains – from extraction to processing to manufacturing. They also should be making supply chain mapping and tracing a priority, and, at least, share such data with their peers.

That being said, I think the issue of supply chains tainted by forced labor in the Xinjiang region is particular in that it is virtually impossible for automakers to conduct more robust human rights due diligence, supply chain mapping, independent audits etc. since forced labor in that region is State imposed and companies’ access is greatly limited. For that reason, the Driving Force report calls on automakers to responsibly exit the region by sourcing elsewhere.

At the end of the day, automakers cannot make the excuse that it’s too complicated to know who their suppliers are and how their suppliers are violating human rights. In my view, the promulgation of new human rights due diligence legislation, like the UFLPA and the EU directive, and the corresponding enforcement, have been the biggest drivers of improvement. To the extent we can show that supply chain business-as-usual will affect a company’s bottom line, we can be more successful at achieving systemic change.

Final Thoughts about Tesla’s Automotive Supply Chain

Hiromichi Mizuno, a Class I director, will not stand for re-election to the Tesla Board when his current term ends at the 2023 Annual Meeting. In Mizuno’s place, the Board has nominated JB Straubel. With a long prior history at Tesla beginning in 2004, and including 14 years as its Chief Technology Officer, Straubel has supply chain experience outside Tesla. He founded Redwood Materials Inc., which is dedicated to building a circular supply chain to power a sustainable world and to accelerate the reduction of fossil fuels. It is likely that Tesla will diminish the As You Sow/IASJ proposal with the endorsement of Straubel.

It will be interesting to see if pushback from Tesla and other automakers who say that conduct by their automotive supply chain is out of their control is diminished at all by Straubel’s reintroduction to Tesla and the persistent transparency demanded by stakeholders.

Featured photo by Julien Harneis (CC BY-SA 2.0 license)