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Panel Discussion.
Our Panelists:
Dr. Garima Dadhich- Associate Professor, Indian Institute of Corporate Affairs
Mr. Gorakh G Velapurkar -Vice President (Materials), Bajaj Auto
Dr. Dev Nathan- Professor, Institute for Human Development, Delhi.
Moderator: Sandeep Sachdeva- Co-Founder and CEO, Safe in India
Will ESG reporting deliver supply chain sustainability in the auto sector supply chain? Does it measure and report on the real changes on the ground that must follow an improvement in policies on paper?
ESG reporting along with associated industries was estimated to be a $7.7 billion market in 2020, projected to grow at 15% and reach $31.2 billion by 2030.The ancillary market includes consulting, training, technology & software, and data
verticals. India with an estimated $138 million market in 2020 is expected to reach $531 million by 2030. But is this growing ESG industry delivering real change on the ground? We have been reporting thousands of workers losing fingers every year, since 2016, in the auto sector. These numbers are not going down in any significant way, despite the fact that in FY 2021-22, the ten largest Indian auto sector brands published several reports on their ESG/sustainability e.g. Sustainability Reports and Integrated Annual Reports.
Sustainability Reports from Mahindra, Honda, and Hero
Thankfully, a number of the top 10 auto sector brands have made some progress since our first report in this series: SafetyNiti 2021 e.g. eight of the top 10 auto sector companies have now declared their OSH policies in the public domain, four auto sector companies have their Human Rights policy in the public domain and categorically cover non-permanent workers and/or deeper supply chain and six of them now have a Supplier Code of Conduct in the public domain.
On the other hand, in a recent initiative under a Haryana State ISH-Maruti-Honda-Hero-SII platform, 30 Tier 2 suppliers were audited by the brands themselves, and majority (c.80%) of the suppliers failed their safety audit.
Govind Maurya, 21, lost two fingers of Kamlesh Patel, 38, lost a finger Kiran, 32, lost 2 fingers at a factory his left hand at a factory making parts of his right hand at a factory making sheet metal parts for
of Maruti, Hero and Honda in Faridabad, making parts of Tata and Mahindra Maruti and Honda in Manesar,
Haryana in 2023. in Pune, Maharashtra in 2023 Haryana.
Therein lies the real danger of focussing only on ESG reporting and not on the real change. In the forthcoming release of our 3rd annual report in the series – SafetyNiti 2023 – we will talk about which of the top 10 auto sector brands have improved their worker safety policies and who have not, and the detail of it.
Below are few sample findings charts of the report. Which brands are in which band – red, amber or green? – will be released on 11th August 230-410pm IST in our third annual report: Safety Niti 2023 analyses and highlights the gaps and the best practices by the top 10 OEMs with respect to OSH in their supply chains, we hope it helps the sector grow sustainably, including in its supply chain, while ensuring a safe environment for the workers Please block your calendars and register for the Zoom Meeting below:
Parity in OSH policies between permanent & contract workers Supplier Code of Conduct (SCoC) in public domain
Status of mapping of supply chain Reporting on monitoring of Tier 1 supplier
Clearly, to ensure improvements in ‘S’ of ESG, much more is needed e.g. it is essential to measure and report on mapping the deeper supply chain (at least Tier 1, Tier 2, Tier 3 and Tier 4), injuries and other safety & health incidents in the supply chain, and actions taken to monitor safety in the supply chain. Most of the auto sector companies are yet to include such information in their ESG reporting.
There is also a need for their leadership to engage much more with these issues e.g. are the corporate boards discussing safety audits, accidents, and injuries frequently, and defining concrete actions to improve safety down the line? We see evidence of this in only two OEMs as of now.
It is also important to note that the Indian and international frameworks for sustainable supply chains have been gathering prominence and are becoming stronger over the past decade or so, which would force companies to report on the ‘S’ of ESG in their supply chains.
As a result, eight of the top 10 auto sector companies listed in India have reported on SEBI’s BRR (Business Responsibility Report) format, even though their reporting on governance, Occupational Safety & Health and Human Rights, as assessed by us in the forthcoming report needs to be improved.
Business Responsibility Reports of Bajaj, Tata and Maruti Suzuki
SEBI’s new BRSR (Business Responsibility and Sustainability Reporting) framework will replace BRR from FY 22-23, which would need the 1000 largest listed companies to improve reporting on the supply chain, including direct questions related to OSH and Human Rights policy and implementation.
SII has been recommending to the government to include large (to be defined) unlisted companies in this requirement too e.g., Honda and Hyundai, two of the largest auto sector companies in India, do not need to report BRR/BRSR, giving them an unfair advantage compared to other eight top auto sector brands, only because they are privately held subsidiaries.
There is an increasing global regulatory momentum too: Increasing reporting requirements from Japan, Europe and others would require these top 10 OEMs, and similar Indian corporates/MNCs in India, to take more responsibility for human rights (including OSH) in their supply chain.
In September 2022, the Japanese Ministry of Economy, Trade, and Industry released its finalised Guidelines on Respecting Human Rights in Responsible Supply Chains which covers OSH in the global supply chains of Japanese companies. Japanese companies operating in India, such as Honda and Maruti Suzuki, will need to prioritize HRDD (Human Rights Due Diligence) in their supply chains and align their practices with the Japanese government's National Action Plan on Business and Human Rights, which includes mapping their supply chains, engaging with suppliers to promote responsible practices, implementing, monitoring and auditing mechanisms, collaborating with stakeholders to address human rights challenges, and transparent reporting on their efforts and progress.
Guidelines and Directives from Japan, European Commission, and Norway
Similarly, the European Commission (EC) published the Corporate Sustainability Due Diligence Directive (CSDDD) imposing reporting requirements in the Non-Financial Reporting Directive (NFRD) on approximately 12,000 companies in February 2022. Individual countries including Germany, Norway, and France have also published directives that require monitoring of health, safety, and environment in the workplace in the supply chains. Compliance with these requirements would be a prerequisite for India to manufacture for the world.
The question of paper v/s real action will remain for some time until proven: does statutory reporting imposed by national and international watchdogs have a higher chance of ensuring improvements in ‘S’ of ESG than corporate ESG reports?
Our panel at the release of SafetyNiti2023, including senior representation from the auto sector industry, academia and the worker sector, will discuss the above issues.
Safety Niti 2023 will be launched on August 11th, 2023, at 02:30-410pm IST. Please block your calendars and join the Zoom Meeting at:
Our blog on the release of the last report in the series – SafetyNiti 2022 - is here.
Our blog on the release of the last report of ground-up evidence of injuries in this supply chain – CRUSHED22 - is here.
Join hand to save hands and help India with ‘Sabka Saath Sabka Vikas’ and ‘Make in India responsibly’.
Please do send us any questions/comments/suggestions/RSVP for the report release event at: team@safeinindia.org