Anchoring due diligence in the supply chain.
Ensuring compliance with environmental and social standards in the supplier network is the declared aim of the BMW Group. This specifically includes respect for human rights and responsible extraction of raw materials.
Creating transparency around far-reaching, dynamic supply chains and making goods flows traceable are the most important requirements for this. That is why we are constantly expanding our close cooperation with our partners in the supplier network.
We source components, materials and other services from a variety of production and delivery locations worldwide. The social and environmental due diligence obligations associated with this are set out for our suppliers in our contractually binding sustainability standards.
When we identify risks at our direct suppliers, we respond to these with preventive and corrective measures, as well as enabling activities. We do the same for our indirect suppliers on an ad-hoc basis. These measures have been systematically anchored in our processes.
Parallely we are also working on reducing the consumption of raw materials and increasing the use of secondary materials.
Sustainable supply chain management.
A multi-stage due diligence process anchors our responsibility for the supplier network in all relevant areas of the BMW Group. We have incorporated requirements relating to social and environmental standards in areas including component development, product group strategies and our target system, as a decision criterion in the tendering process and in supplier development.
The purchasing terms and conditions in BMW Group’s supplier contracts always include specific clauses based – among other things – on the following external frameworks:
- UN Guiding Principles on Business and Human Rights
- Universal Declaration of Human Rights
- Principles of the UN Global Compact
- Principles of the International Labour Organisation
- OECD Due Diligence Guidance for Responsible Business Conduct
- The national action plan of the German government and the German Supply Chain Act derived from it
The standards of these charters and guidelines that affect us and our suppliers are established within our company in the following internal documents:
Sustainability is an important part of the BMW Group’s corporate strategy. The focus for the Purchasing and Supplier Network is on compliance with environmental and social standards – and, specifically, respect for human rights, protecting natural resources and reducing supply chain CO2 emissions.
The BMW Group has established PSC (Performance Steering Cockpit) targets for corporate due diligence in the supplier network that are also factored into manager compensation. For example, we have set ourselves the goal of ensuring compliance with sustainability standards at suppliers where there is a potential risk as early in the process as possible, with the help of preventive measures. We do so by focusing on the award date and start of production at around 1,300 direct supplier locations for vehicle parts every year and agree on corrective preventive measures to minimise potential environmental and human rights risks. We use control mechanisms such as certification and audits conducted at the supplier location to ensure implementation.
The policy statement defines our commitment to human rights and environmental standards. It also outlines our approach to engaging with business partners – because we not only respect these fundamental rights in our own business area, but also make every effort to ensure compliance in our global supply chains, both upstream and downstream. In order to fulfil this objective, we require our suppliers and other business partners to comply with our standards – and to ensure the same from their own suppliers and business partners.
The policy statement defines our commitment to human rights and environmental standards. It also outlines our approach to engaging with business partners – because we not only respect these fundamental rights in our own business area, but also make every effort to ensure compliance in our global supply chains, both upstream and downstream. In order to fulfil this objective, we require our suppliers and other business partners to comply with our standards – and to ensure the same from their own suppliers and business partners.
The BMW Group Supplier Code of Conduct (developed from BMW Group’s sustainability standard for the supplier network) was updated in 2022 in the context of the Supply Chain Due Diligence Act. It summarises the BMW Group’s minimum requirements and expectations for the global supplier network in accordance with internationally recognised standards and guidelines for ESG topics.
The BMW Group Supplier Code of Conduct outlines:
- Our due diligence processes
- Primary human rights and environmental risks identified by risk analysis
- The identification of the human rights-related and environmental requirements and expectations we have of our supplier network (based on the risk analysis)
The BMW Group Supplier Code of Conduct forms an integral part of the purchasing terms and conditions of the BMW Group and is therefore established in the requirements of our contracts with our direct suppliers. We also expect them to pass on the requirements to the respective sub-suppliers, where relevant.
Further requirements for the supplier network are set out in offer-solicitation documents. These must be fulfilled no later than the start of production or by an agreed target date. Compliance with these requirements is verified using the Drive Sustainability questionnaire, among other tools.
Overview of key raw materials.
As part of our Materials Strategy, we constantly analyze and pay special attention to raw materials that could be linked to potential breaches of environmental and social standards. The potential risks are highest during the extraction and processing of 37 raw materials and raw material groups of relevance to the automotive industry. For each material, the BMW Group not only implements standardised preventive and reactive measures but also applies its own specific measures.
A particular challenge in this context is to ensure transparency and traceability within the ever-changing supplier network. We do this in various ways, such as our commitment to the Catena-X alliance for secure, standardised data exchange.
We are also working to reduce or eliminate our use of critical raw materials and have established raw material-specific sustainability standards for the relevant components. This has already enabled us to gradually reduce the share of cobalt in battery cells, for example, to just under 10 percent at present.
In addition, until sufficient research has been carried out on the environmental impact, we have pledged not to use any cobalt, nickel, manganese or other minerals that are extracted via deep sea mining. We have also joined other companies in imposing a monatorium on these materials.
To reduce emissions and raw materials extraction even further, the BMW Group is significantly increasing the share of secondary materials in its cars, to as much as 50 percent . Closed material loops reduce the need for new raw materials and also lower the risk of environmental and social standards being breached within the supply chain. For example, for the first time, we have now successfully established a closed loop for the re-use of nickel, lithium and cobalt from high-voltage batteries in China.
The following raw material profiles provide information on our measures and are expanded on an ongoing basis.
Risk assessment and avoidance.
The BMW Group has made compliance with defined sustainability requirements a prerequisite for awarding all contracts. To fulfil its environmental and human rights due diligence for the supply chain, the BMW Group therefore evaluates sustainability risks and impacts throughout its supplier network on an ongoing basis. We determine what action needs to be taken and develop preventive and corrective measures from this that we implement together with our suppliers.
Knowing the risks.
The BMW Group uses various instruments to continuously assess sustainability risks and their impacts in the supplier network.
We evaluate all commissioned and potential BMW Group supplier locations using our risk filter, which has access to various national and commodity-group-specific risk databases. This risk perspective is supplemented by internal, commodity-group-specific assessments.
The first step is to cluster potential and active supplier locations according to country-specific and regional environmental and human rights risks. The standardised risk roadmap of the Responsible Business Alliance (RBA) serves as the basis for this, as well as other data sources that focus on supply chain risks. RBA has worked with the BMW Group to update the risk roadmap in accordance with the Supply Chain Law and is now sharing it with all members. Step two is to combine these risks with commodity-group and company-specific risks. Standardised online assessments of (potential) supplier locations form the basis for this, determining the companies’ social, environmental and governance risks, including their own supply chains (n-tier). In this way, potential risks can be calculated and mapped on the basis of how likely they are to occur, their severity and our possible causal contribution measured in terms of purchasing volumes.
We also use other methods to identify potential and actual risks from our direct (tier 1) and indirect (tier n) suppliers, such as artificial intelligence (AI). The BMW Group operates an AI-based early warning system, for example, which analyses vast amounts of data from online media and social networks in over 50 languages to alert us to suppliers who may be breaching human rights or environmental standards. This way, we can detect any potential sustainability risks in the supply chain early on.
The BMW Group has defined minimum requirements for supplier locations throughout its global value chain. These are based on the findings of the risk assessment and include implementation of preventive measures to minimise the potential negative impact for the parties involved, such as supplier employees. To minimise risk, we attach particular importance to preventive measures. Compliance with these requirements is verified using tools such as the Drive Sustainability questionnaire, which we continue to refine as part of the initiative.
Direct suppliers are required to provide information on their sustainability performance and the preventive and corrective measures they have implemented. The same applies to indirect suppliers on an ad-hoc basis. The accuracy and completeness of this information is then verified by independent third parties. This information is obtained from new suppliers as part of the tendering process. In the case of existing business relationships, it must be updated on a continuous basis by the suppliers.
Risk assessment and preventive measures to minimise potential negative impact on the parties involved. Production sites operated by direct suppliers that will deliver components to the BMW Group from 2023 onwards.
For suppliers identified as particularly high-risk, additional audits are carried out at the supplier location by our own assessors or external auditors. We are working with the Responsible Business Alliance (RBA) and the German Association of the Automotive Industry (VDA) to achieve this. Together with other automotive manufacturers and suppliers in the VDA, we helped develop an assessment programme specifically for the mid-sized companies that dominate the automotive industry. This has been implemented since 2022 with the newly formed Responsible Supply Chain Initiative (RSCI). We have been using the RBA’s established cross-industry audit programme, which is mainly for large supplier locations, for a number of years. The audit findings of both initiatives are shared between members via corresponding platforms. This can avoid multiple audits and increase acceptance among the companies audited.
As part of its supply chain assessments, the BMW Group also identifies risks at indirect suppliers in the downstream value chain between Tier 1 suppliers and suppliers of raw materials. Audits are also carried out through supply chain mapping with the help of media analyses.
Countering risks.
To counter known risks at indirect suppliers, the BMW Group is developing sustainability strategies for specific raw materials and initiating enabling and hedging activities from this, as well as pilot projects.
We source all critical raw materials – such as lithium and cobalt, which are key raw materials for production of battery cells – for the current fifth generation directly from raw material suppliers and make them available to producers of our current generation of battery cells. In this way, we can ensure traceability (mass balance) with regard to origins, as well as transparency around extraction methods.
The quantitative reduction, substitution and elimination of high-risk primary raw materials are important levers for reducing risks and improving environmental and social sustainability in our supplier network. For instance, we have reduced the use of cobalt in our current generation of battery cells to less than 10 percent. The electric motor of the same generation no longer requires the use of rare earths. We set the standard with the BMW i3, back in 2013, when we began using leather tanned with olive-leaf extract for seat covers. The seat covers in the current BMW iX are also treated with the same process. This allows us to avoid using chrome tanning, which is potentially harmful to the environment and to health.
Conflict minerals are a particular focus of the BMW Group. The company uses standardised applications like the Conflict Minerals Reporting Template (CMRT) of the Responsible Minerals Initiative (RMI) to ensure traceability of the raw materials from Tier 1 suppliers all the way to the audited smelting plant. Working with its suppliers, the BMW Group has achieved almost complete traceability for the 3TG minerals in components and tools, for instance.
Preventive and corrective measures.
When a supplier signs a contract with the BMW Group, it undertakes to implement necessary preventive or corrective measures no later than the start of production or by an agreed target date. The supplier confirms that it will also require and track compliance with these agreements by its subcontractors. At the start of production, we assess the implementation status of the externally validated preventive measures as part of an internal target management system.
We also offer a comprehensive training programme to raise supplier awareness of due diligence obligations and enable them to implement corresponding measures.
Important preventive and corrective measures.
Direct suppliers are Tier 1 BMW Group suppliers.
Human rights.
A policy on working conditions and human rights, covering topics including the known core issues of child and youth labour, wages and social benefits, working hours and modern slavery, is mandatory for all our direct suppliers with more than 50 employees. These employees must also be trained in all core topics.
We only commission suppliers with over 500 employees if they can present a certified occupational health and safety management system in accordance with ISO 45001.
Environmental protection.
Direct suppliers with more than 50 employees must have established an environmental policy, for example, as well as control mechanisms for environmental aspects, such as a certified environmental management system. These employees must also be trained on the content of the policy.
Communications and raising awareness.
Direct suppliers with more than 500 employees must publish a sustainability report and a legal compliance code.
A full list of requirements can be found here.
Indirect suppliers operate in the downstream value chain and are not in a direct contractual agreement with the BMW Group. We reach these indirect suppliers through commitments by our direct suppliers.
Human rights.
We require direct suppliers with more than 100 employees to implement preventive measures to manage indirect suppliers. These include, for example, the existence of sustainability requirements for suppliers with known risks pertaining to human rights and working conditions, child and youth labour, wages and social benefits, working hours, modern slavery (i.e. slavery, servitude, coerced labour and human trafficking), freedom of association and collective bargaining, rights of minorities and indigenous peoples, as well as risks in the area of occupational safety.
Environmental protection.
Direct suppliers with more than 100 employees must require their suppliers to manage the environmental protection issues of air and water quality, chemical management, waste prevention, biodiversity, land use and deforestation, and implement control mechanisms for environmental protection.
Communications and raising awareness.
We require direct suppliers with more than 100 employees to pass on our sustainability requirements to their own suppliers (tier 2) through their General Terms and Conditions of Business, supplier training, code of conduct and/or other sustainability policies, as well as through their company website. This is designed to raise awareness of the BMW Group’s sustainability requirements among our indirect suppliers.
Implementation of measures.
Since 2014, we have identified possible environmental and human rights risks at potential supplier locations and integrated this into our procurement process. We agree on corrective preventive measures with these suppliers to minimise these risks at the time the contract is awarded. In this way, e.g. in 2021, we were able to identify risks at 196 supplier locations before the contract was awarded. These included a lack of preventive measures in the areas of occupational safety, reporting and environmental management. 97 percent of these supplier locations had implemented the preventive measures by the start of production or were able to demonstrate why the measures could not reasonably be introduced by this deadline. Any outstanding preventive measures must be implemented as soon as possible.
Training for suppliers and employees.
In addition to requiring preventive measures, the BMW Group also offers a wide range of training opportunities geared towards staff in the Purchasing division, internal process partners and suppliers. To raise awareness of social and environmental standards, we explain causalities and clarify our expectations. We are also exploring new approaches with partner companies, with the aim of being active from the very beginning of the supply chain.
- We provide all BMW Group purchasing staff with mandatory as well as optional training on the basics of sustainability.
- Across the industry, we offer standardised training for suppliers who require a deeper knowledge of sustainability through the Drive Sustainability initiative. Between 2013 and 2022, the BMW Group trained more than 400 sustainability officers in the supplier network on topics such as freedom of association and discrimination in this way. The training also covers occupational safety, wages and working hours.
- BMW Group-specific training formats for suppliers are also offered during events we organise for suppliers. At the BMW Group Supplier Event 2022, for instance, we were able to discuss key aspects of environmental and social sustainability with more than 230 suppliers.
- We have offered further BMW-specific training courses for employees and suppliers through the extensive RE:DRIVE SUSTAINABLE SUPPLY CHAINS enabling programme since 2022. In 2022, a total of 553 suppliers and 563 internal purchasers completed this training.
- As part of the cross-sector Cobalt for Development initiative, the BMW Group has launched training programmes with its partners for 14 artisanal mining cooperatives, covering important environmental, social and governance aspects of responsible mining practices.
Effectiveness and complaints mechanisms.
The BMW Group reviews the effectiveness of its preventive and corrective measures on a continuous basis. Since 2021, it has also used a standardised application from the Responsible Business Alliance (RBA) for this purpose. The application is for high-risk suppliers who are part of the RBA’s audit programme, but do not yet have their own complaints mechanism. We conduct risk-based audits of environmental and social standards, using various risk tools and assessments, to validate the impact of our measures. In the case of suppliers known to have committed serious violations of sustainability standards, we require final audits to determine whether preventive and corrective measures have been implemented. Interviews are conducted with the parties involved to find out whether measures are actually applied.
In addition to this, we have established our own separate complaints mechanism that suppliers and employees can also use. Reports of possible violations of BMW Group sustainability policies for the supplier network and our due diligence obligations are handled by the internal Human Rights Contact Supply Chain. Reports may be submitted anonymously by telephone or via email. Suppliers and their employees may also contact our compliance ombudsperson for the supplier network. Notification systems and compliance checks also help detect possible non-compliance with the law. Our Human Rights Officer is responsible for monitoring our due diligence processes.
With the aim of establishing an industry-wide complaints mechanism, we have been actively involved in a working group of the Automotive Industry Dialogue since 2020. Together with other automotive manufacturers and suppliers in the German Association of the Automotive Industry (VDA), we helped develop an assessment programme, which we have implemented through the newly formed Responsible Supply Chain Initiative (RSCI) since 2022.
Complaints mechanisms.
BMW Group employees and external informants can report possible violations of human rights and corresponding environmental standards within the company anonymously and confidentially via the BMW Group SpeakUP Line. The BMW Group SpeakUP Line is available throughout the day in a total of 34 languages in all countries in which the BMW Group operates via local, toll-free numbers [BMW GROUP SPEAKUP LINE ACCESS DATA]. Concerns may also be reported online.
Our Human Rights Contact Supply Chain handles reports of possible violations of BMW Group sustainability policies in the supplier network. Information can also be provided anonymously here.
Telephone: +49 89 382-71230
E-Mail: humanrights.sscm@bmwgroup.com
The BMW Group has appointed an ombudsperson who advises on the whistleblower system and ensures that reports from whistleblowers are forwarded to the BMW Group Compliance department. If desired, this can also be done anonymously.
Our ombudsperson can be reached as follows:
Dr. Sybille von Coelln
Telephone: +49 211 44 03 57 72
Fax: +49 211 44 03 57 77
E-Mail: BMW-Ombudsperson@hvc-strafrecht.de
Postal address:
HEUKING · VON COELLN
Rechtsanwälte PartG mbB
Prinz-Georg-Str. 104
40479 Düsseldorf
Additional information.
BMW GROUP REPORT.
Your contact persons.
The BMW Group is facing up to the most pressing challenges of our time – and social and environmental due diligence in our supplier network plays a key role in this. We respond to questions – even difficult ones – in a diligent manner and provide transparent answers. If you have any further questions or input relating to the supplier network, we would be happy to provide you with information on our approaches and goals.