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 – a finding consistent with nongovernmental organization and media concerns that were brought to Ford’s attention in 2006. Charcoal can be used to make pig iron, a key ingredient in steel production. Given the persistence of risks associated with this material, Ford is working toward a multilateral solution with key players.

California’s New 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. Ford has a zero-tolerance policy for both forced labor and child labor. We have instituted a number of actions to safeguard against the use of human rights abuses, including forced labor. For example:

• We regularly assess risk related to 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. In-depth supplier self-assessments are conducted biannually with our strategic suppliers as a part of our ongoing development work with them.
• Our Standard Terms and Conditions forbids 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 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 Standard 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 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 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 AIAG.
  • Ford and five other automakers at the AIAG have funded and created 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. This is made available to all companies for free on the AIAG website.
• Ford regularly conducts audits of at-risk Tier 1 supplier factories to monitor compliance with Ford expectations and legal requirements. 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 return to the facility within six to 12 months as required to confirm resolution of the issues. Forced labor has never been identified by third-party assessments of our supply chain, although lack of a forced labor policy at the supplier level is common and is always an element addressed in the corrective action plan when identified. These audits are independent and announced. We choose which facilities to audit based upon our risk assessment as described above. 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, NGOs and governments to explore the options for appropriate validation systems.