Forced Labor and Human Trafficking in Supply Chains

In the automotive industry, it is difficult to assure that the extraction and original production of raw materials is done responsibly, because these processes occur so far up our supply chain and, therefore, are far outside of Ford’s direct control. Nonetheless, we are actively engaging with our industry, stakeholders and direct suppliers to address the risk of human rights abuses, including forced labor and human trafficking, deep in our supply chain.

A range of products and materials sourced from specific geographies have been identified and described by the U.S. Department of Labor as posing potential human rights concerns. Included on this list is charcoal from Brazil, which can be used to make pig iron, a key ingredient in steel production.

We take a proactive approach to addressing human rights concerns associated with these materials. Our response to the discovery that charcoal made with slave labor had entered our supply chain provides an example of how seriously we take this issue. It also exemplifies our approach to addressing the issue.

In 2006, Ford discovered that charcoal produced in Brazil with the use of slave labor had found its way into our supply chain through our purchase of pig iron. When we learned of the situation, we immediately stopped sourcing from the site that was identified in the investigation, but we continued dialogue with the supplier and helped them to develop management systems until such time as the supplier could ensure it was not supporting forced labor in the supply chain for pig iron. We then identified all potential points of entry for pig iron in the Ford value chain and engaged with all relevant suppliers, seeking assurances from them that forced labor was not employed anywhere in their value chain. This included an intensive mapping of five to six tiers of suppliers (including importers, exporters and trading companies) (see pig iron supply chain illustration below). We also requested additional detail regarding our Tier 1 suppliers’ systems for safeguarding human rights throughout their operations, including procurement. We continue to remain vigilant on this and other potential opportunities for slave labor or human trafficking to occur in our supply chain.

In addition to working with our suppliers to ensure responsible procurement of this material, we also work with the U.S. State Department, the International Labour Organization and the governing committee of the Brazil’s National Pact to Eradicate Slave Labour to seek multilateral solutions that will help to validate information and improve transparency. Ultimately, we hope to enable responsible purchasing decisions throughout the supply chain.

California’s Transparency in Supply Chains Law

Beginning in 2012, many companies manufacturing or selling products in the state of California are required to disclose their efforts (if any) to address the issue of forced labor and human trafficking, per the California Transparency in Supply Chains Act of 2010 (SB 657). This law was designed to increase the amount of information made available by companies, thereby allowing consumers to make better, more informed choices regarding the products they buy and the companies they choose to support.

Forced labor and human trafficking can take many forms, including child labor. Our Policy Letter 24: Code of Human Rights, Basic Working Conditions and Corporate Responsibility, makes it clear that we will not tolerate forced labor or child labor in our operations and we conduct internal audits of our manufacturing locations to ensure compliance We have instituted a number of actions to safeguard against human rights abuses, including forced labor in our supply chain. For example:

• We regularly assess risk related to human trafficking and forced labor associated with our supply base. Our preliminary assessment is based upon geography, the commodity purchased, the level of manual labor required for part/assembly production, the supplier’s ownership structure, supplier quality performance and the nature of the business transaction. This risk assessment is performed by Ford with input from external stakeholders.
• Our Global Terms and Conditions forbid the use of forced labor, child labor and physically abusive disciplinary practices. Our definition of forced labor is inclusive of trafficking, and this was made explicit in the 2012 revisions to our Policy Letter 24: Code of Human Rights, Basic Working Conditions and Corporate Responsibility. Ford’s purchase orders require suppliers to certify compliance with our prohibition of forced labor, child labor and physical disciplinary abuse as part of our Global Terms and Conditions that govern the purchase by Ford of goods and services from suppliers. We reserve the right to terminate our relationship with a supplier if issues of noncompliance with our policies are discovered and/or noncompliance is not addressed in a timely manner.
• We conduct training and capability building.
  • We regularly conduct internal training on our Policy Letter 24: Code of Human Rights, Basic Working Conditions and Corporate Responsibility with our Global Purchasing staff, including management and supplier quality teams. Additional training is conducted regarding our Supply Chain Sustainability Program, including coverage of the Code and our Global Working Conditions Program, emphasizing the role of our buyers and supplier quality engineers in responsible decision making.
  • Ford requires suppliers in high-risk markets to attend training that increases awareness of Ford’s requirements and legal requirements, including those related to forced labor and child labor. The training enables management systems that will ensure compliance over time. We conduct this training at Ford where necessary but increasingly with other automakers in the industry through the Automotive Industry Action Group (AIAG) or CSR Europe.
  • Ford and other automakers at the AIAG have funded and created a training for buyers and supply chain managers on supply chain sustainability. This training addresses issues including supply chain risk assessments, policy and supplier contract development and other actions that can be taken to ensure that forced labor and child labor do not enter the automotive supply chain.
• We regularly conduct audits of at-risk Tier 1 supplier factories to monitor compliance with Ford expectations and legal requirements. These audits are independent and announced. We choose which facilities to audit based upon our risk assessment as described above. Following audits, suppliers are required to complete corrective action plans, which Ford reviews and approves. The corrective action plans outline how a supplier will resolve issues uncovered in audits and include clear responsibility and timelines for completion. We continue to regularly work with the supplier to resolve the identified issues – and, depending on the severity of the issue identified, we will return to the facility within 12 months to confirm resolution. Our supply chain work has demonstrated to us that the risk for issues such as forced labor and child labor (as well as other human rights and working conditions issues) are relatively low for Tier 1 suppliers. The risk increases, however, the further down the tiers of suppliers toward the source of the raw materials. Ford does not have visibility or direct access to these suppliers for the purpose of verification, and thus we work with our Tier 1 suppliers as well as other industries, non-governmental organizations (NGOs) and governments to explore the options for appropriate validation systems.