Automotive suppliers’ performance on ESG (environmental, social and governance) issues is coming under increasing scrutiny from the OEMs they do business with, a consultant says.
General Motors, for example, is applying ESG-related standards on emissions and workplace diversity even to small, privately held companies, says Beth Saunders, ESG practice lead with Riveron Consulting, a national business advisory firm with a large presence in the Detroit area.
Saunders (pictured, below left) spoke during a recent Society of Automotive Analysts panel discussion exploring how ESG will have a growing impact on business in general and the auto industry specifically in 2023.
The impetus to apply ESG standards comes from investment firms with huge asset bases such as Black Rock, which are reacting to concerns about climate change and other issues.
The Republican Attorneys General Assn. has fought back with threats to pull assets from Black Rock and other huge funds maintaining ESG standards as a measuring stick for corporate performance and behavior. However, the 19 states pulling or threatening to pull money from Black Rock represent only “one quarter of 1%” of the investment firm’s assets, Saunders adds.
In addition, President Joe Biden has proposed new rules specifying that any firm doing $10.5 million or more worth of business annually with the federal government will have to account for their CO2 emissions, Saunders notes.
“There is big, big money behind this,” she adds.
Some of the pressure to meet ESG standards is coming from younger people, Saunders says, while calls for better tools to evaluate the ESG of individual companies or groups of companies are coming from “high net worth individuals.”
Within the auto industry, the Detroit Three automakers – General Motors, Ford and Stellantis – have made commitments on emissions and are evaluating suppliers on broader ESG issues, she says.
ESG goes beyond emissions, Saunders says: Automakers are questioning suppliers about employee turnover and other issues on the detailed questionaries now being used by many corporate purchasing departments.
She says external stakeholders, including investors and regulators such as the Securities Exchange Commission, are making new demands in terms of ESG, and the disclosure requirements will only increase in the future.