Supply Chain Sustainability Group

Supply Chain Sustainability

Ford’s suppliers are critical allies in helping our Company to achieve success in the marketplace and meet our sustainability goals. We promote long-term relationships with our suppliers and seek alignment with them on sustainability-related issues such as greenhouse gas emissions management and human rights. Within Ford's Purchasing organization, the Supply Chain Sustainability Department develops and implements strategy for engaging with suppliers on sustainability issues. The group also helps build capability within the Purchasing function to address sustainability issues through routine business processes.

Business Integration

As part of its mandate to integrate sustainability considerations to the business, the Supply Chain Sustainability Department coordinates training on supply chain sustainability. This includes e-learning for the entire global Purchasing organization as well as in-person workshops for Ford Purchasing personnel and quality engineers that work directly with at-risk markets. These sessions provide interactive dialogue and inform sustainability processes to ensure that they are designed for integration into the business.

The organizational structure of Ford's Supply Chain Sustainability Department is directed at further integrating capability within the Purchasing function to address sustainability issues. The group consists of 5 staff located at headquarters in Dearborn and four regional leads based within the regional business units in Brazil, Germany, India and China. Four of the positions are on rotation and the staff comes from traditional business positions such as buyers, quality engineers and program managers. Within a reasonable period of time in which they build competency and experience, these individuals rotate back into a traditional purchasing role, taking their new expertise with them to further apply within the context of the business.

Human Rights and Working Conditions

The basis of our work on human rights with suppliers is the Ford Code of Basic Working Conditions. This Code was formally adopted in 2003 and applies to our own operations as well as our $65 billion supply chain. It addresses workplace issues such as working hours, child labor and forced labor as well as non-discrimination, freedom of association, health and safety, the environment and other issues.

Our approach has emphasized building capability throughout the supply chain to manage working conditions effectively. Our primary focus has been on training and education about working conditions issues, in conjunction with assessments of individual suppliers in order to verify performance and progress. We are committed to collaborative action to more effectively influence all levels of the automotive supply chain. Our view is that all participants in the automotive supply chain – from the original equipment manufacturers (OEMs) such as Ford, to the suppliers themselves, to the government agencies that set and enforce the regulations governing operations – must be involved to make these efforts sustainable in the long run. More information about the corporate responsibility accomplishments and ongoing work of the industry through the Automotive Industry Action Group - our forum for collaboration - can be found at http://www.aiag.org/scriptcontent/index.cfm.

Additional Information from Our Sustainability Report

Environmental Responsibility

Since 2006, all "Q1," or preferred, production suppliers have ISO 14001 environmental management system certification for facilities supplying Ford. We also encourage our suppliers to extend the benefits of improved environmental performance by implementing similar requirements for environmental management systems in their own supply base. In 2010, Ford took significant steps to better understand the risks and opportunities of greenhouse gas (GHG) regulation and climate change for our suppliers and, by extension, for our Company. We conducted a pilot project with a select group of our suppliers to better understand the collection and reporting of greenhouse gas emissions data in our supply chain and executed this pilot in cooperation with the World Resources Institute (WRI), World Business Council on Sustainable Development (WBCSD) and the Carbon Disclosure Project (CDP). In 2011, we significantly expanded the program to include a wider range of suppliers and commodities. Our goal is to better understand the carbon footprint of our supply chain and use the data to create a broad-based carbon management approach for our supply chain.

Additional Information from Our Sustainability Report

Strategic Suppliers

Since 2005, Ford has been taking steps to rationalize and streamline our supply base through a strategic supplier strategy called the Aligned Business Framework (ABF). The strategy is designed to create a sustainable business model to increase mutual profitability, improve quality and drive innovation. What it means in practice is that we are working more closely and collaboratively with a smaller number of global strategic suppliers. Ford has approved a total of 102 ABF suppliers, 12 of which are owned by minorities or women.

Ford and our strategic production suppliers work together at the corporate level to align and enhance approaches to a range of sustainability issues. All developmental work with ABF companies is extended to the supply chain below Tier 1.

Additional Information from Our Sustainability Report

Extended Supply Chain and Sustainable Raw Materials

As automobiles incorporate more advanced technologies, the material content of vehicles becomes more varied. Ford has a long history of seeking to use sustainable materials in our products and source from suppliers that demonstrate sustainable business practices, including respect for human rights and the environment. Although the majority of what we buy are parts and assemblies directly used in vehicles, there is a need to take a closer look at the farthest reaches of the supply chain, including raw material extraction.

The extraction of raw materials can have significant social and economic impacts – both positive and negative. Most raw materials are not supplied directly to Ford; rather, they are provided to our suppliers or our suppliers’ suppliers. On average, raw materials pass through six to 10 suppliers before reaching Ford. This makes tracing the source of raw materials very challenging.

Ford is concerned with the potential connection between the automotive industry and conflict in the Democratic Republic of Congo. We intend to require suppliers to use only metals that have been procured through a validated supply chain, so as to ensure that they have not, at any point, financed conflict. The processes to support validation are in development by local governments, industry groups, international organizations and NGOs, with support from other governments outside of Central Africa. While these processes are being developed and implemented, Ford is taking action to educate ourselves and our suppliers on the issue of Conflict Minerals, initiate automotive industry activity and begin the necessary due diligence as per the OECD Framework for Due Diligence regarding conflict-affected and high-risk regions.

Beginning in 2012, many companies manufacturing or selling products in the state of California will be required to disclose their efforts to address the issue of forced labor and human trafficking, per the California Transparency in Supply Chains Act of 2010 (SB 657). Forced labor and human trafficking can take many forms, including child labor. Ford has a zero-tolerance policy for both forced labor and child labor. We provide our full disclosure statement - the first in our industry - in our 2011/12 sustainability report.

Additional Information from Our Sustainability Report