ESG -AUTOMOTIVE INDUSTRY AND SUPPLY CHAIN.

Mexico City January 24th, 2023.

The automotive industry is undergoing a generational transition where ESG criteria are beginning to play an increasingly relevant role in the design of strategies and in corporate, organizational and operative decisions, The above is not only about its interest in environmental care and carbon emissions, but also addresses the need to have experts within its corporate governance that understand ESG criteria in order to be in a position to develop plans and policies in which the positive and negative externalities generated and risks faced by their companies are duly identified and therefore such externalities may be addressed and the social needs that arise within the industry, both internally and with its supply chain are considered and covered.

In this regard, compliance with ESG and sustainability reporting has become a powerful tool that allows companies to ascertain its current ESG integration status within it practices, as well as to set specific goals and the metrics under which its compliance will be measured and as the case may be manage and establish the required remediations in order to make their operations more sustainable and in alignment with the  best international practices and the values of their stakeholders.

Due to the importance that the ESG trend has taken, consumers, governments, investors and stakeholders have pressured suppliers and original equipment manufacturers (OEMs) to join this transition and take actions to reduce their emission by becoming aware of environmental, social and governance (ESG) metrics.

In this order of ideas, automotive and taking into account that within the ESG criteria, the responsibilities of a company are not limited to their own activities, but also include the actions of those in their supply chain, OEMs have started to issue guidelines for suppliers to undergo an ESG self-assessment questionnaire, and take relevant actions for its compliance. In view of this, it is highly important for those companies part of the OEMs supply chain to become familiarized with the ESG criteria for them to be able to meet the increasing demands from the OEMs.

On the other hand, at the international level, the governments of various countries have increasingly chosen to incorporate ESG compliance obligations into their legislation, which translates into greater attention to human rights, corporate governance and environmental changes.

As an example of this, the European community has strongly joined the ESG movement, and among the most relevant legislations and regulations they have issued in such matter we find the German Supply Chain Due Diligence Act (2022), and the Dutch Child Labor Due Diligence Act (2019), both of which have extended the verification of these parameters to foreign supply chains and internalize obligations for companies with global production chains to duly monitor, prevent and mitigate risks.

The lawyers of the firm’s ESG and Automotive practice remain at your disposal for any questions in this regard.

Sincerely:

Gerson Vaca

gvaca@basham.com.mx

 

Luis Luján

lujan@basham.com.mx

 

Moisés Flores

mflores@basham.com.mx