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 sustainable extraction of raw materials.
Creating transparency around dynamic, and often sprawling, supply chains and making goods flows traceable is the most important requirement for this. To this end, we are constantly expanding our close cooperation with our partners in the supplier network.
We source components, materials and other services from more than 32,000 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.
We counter known risks at our direct suppliers with preventive and corrective measures, combined with enabling activities, that we have systematically anchored in our processes. We do the same for our indirect suppliers on an ad-hoc basis.
In parallel, we are also working to reduce consumption of raw materials by establishing alternatives that make it possible to reduce, substitute or even eliminate raw materials in our vehicles.
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, commodity-group strategies and the target system, as a decision criterion in the tendering process and in supplier development. All BMW Group supplier contracts contain specific clauses in the purchasing terms and conditions that are based on the following external frameworks and guidelines:
- UN Guiding Principles on Business and Human Rights
- Principles of the UN Global Compact
- Principles of the International Labour Organisation (ILO)
- OECD Due Diligence Guidance for Responsible Business Conduct
- German government’s National Action Plan and the Supply Chain Due Diligence Law derived from it
The associated demands on us and our suppliers are anchored in the company through the following internal standards:
The strategy is based on the Sustainable Development Goals (SDGs), which it integrates into the internal organisation and its processes. The main focal points are compliance with environmental and social standards – and, specifically, human rights – as well as lowering supply chain CO2 emissions and protecting natural resources.
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 Code outlines how we promote human rights and good working conditions and implement the Core Labour Standards of the International Labour Organisation (ILO). The central themes of the Code are: equal treatment of all employees, the right to health and safety at work, and protection of personal data. The Code applies to employees, suppliers and authorised sales partner.
Our Sustainability Standard for the Supplier Network summarises the BMW Group’s guiding principles for the global supplier network in accordance with internationally recognised standards and guidelines for ESG topics. Known risks in our supplier network are updated on an ad-hoc basis. We require our business partners to comply with all legal requirements, protect the environment and respect human rights. These requirements are clarified in offer-solicitation documents and purchasing terms and conditions for our supplier contracts, for example, and apply to all BMW Group suppliers.
Overview of key raw materials.
We analyse and prioritise raw materials for violations of environmental and social standards on a continuous basis as part of our materials strategy. Potential risks arise for us mainly from the extraction and processing of 37 raw materials and relevant raw material groups. The BMW Group counters these risks with both specific and standardised preventive and reactive measures tailored to each raw material.
Creating transparency and traceability within the complex and dynamic supplier network is a particular challenge. One of the ways we are responding to this is through our involvement with Catena-X, an alliance for secure and standardised data exchange. The following raw material profiles provide information on our measures and are expanded on an ongoing basis.
Risk assessment and avoidance.
Compliance with our defined sustainability requirements is a prerequisite for any contract. 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 evaluate sustainability risks and impacts in its supplier network on a continuous basis.
All commissioned and potential BMW Group supplier locations are evaluated using our risk filter, which has access to various national and commodity-group-specific risk databases. This risk perspective is supplemented by commodity-group-specific assessments conducted by our internal purchasing experts.
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.
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. The results of our risk assessments can be viewed online.
We also use artificial intelligence methods to identify potential and actual risks at our direct (Tier 1) and indirect (n-tier) suppliers – for example, to analyse and evaluate media reports.
The BMW Group has defined minimum requirements for supplier locations throughout its global value chain. For example, these minimum requirements include implementation of preventive measures to minimise potential negative impact for the parties involved, such as supplier employees. Compliance with these requirements is verified using the Drive Sustainability questionnaire.
Direct suppliers and indirect suppliers commissioned on an ad-hoc basis are required to provide information on their sustainability performance and the preventive and corrective measures they have implemented. 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 especially high-risk, our own assessors or external auditors conduct additional audits at the supplier location. We are working with the Responsible Business Alliance (RBA) and the German Association of the Automotive Industry (VDA) to achieve this. In the VDA, together with other automotive manufacturers and suppliers, we helped develop an assessment programme specifically for the mid-sized companies that dominate the automotive industry, which we will implement from 2022 onwards through 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 will be shared between the participating companies via corresponding platforms. This avoids conducting multiple audits, which increases acceptance among the companies audited.
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 full 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. We have, for instance, reduced the use of cobalt in cathode material in our current generation of battery cells to less than 10%, while the electric motor of the same generation no longer requires the use of rare earths. We set the benchmark with the BMW i3, back in 2013, when we began using leather tanned with olive-leaf extract for seat covers. This allows us to avoid 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) and 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.
By signing a contract with the BMW Group, the supplier 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 they will also require and track compliance with these agreements by their subcontractors. At the start of production, we measure the implementation status of the externally validated preventive measures in a PSC target. 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.
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.
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.
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.
Communications and raising awareness.
Direct suppliers with more than 500 employees must publish a sustainability report and a legal compliance code. Employees must also be trained on sustainability – especially the environment, working conditions and human rights.
Indirect suppliers operate in the downstream value chain between Tier 1 suppliers and suppliers of raw materials. We reach these indirect suppliers through commitments by our direct suppliers.
We require direct suppliers with more than 100 employees to implement preventive measures to manage indirect suppliers. These include sustainability requirements for suppliers – for example, for the known risks of child and youth labour, wages and social benefits, working hours, freedom of association and occupational safety.
Direct suppliers with more than 100 employees must require their suppliers to manage the environmental protection issues of air and water quality, as well as chemicals and waste management, with 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). This is also designed to raise awareness of the BMW Group’s sustainability requirements among our indirect suppliers.
Implementation of measures.
Since 2014, we have integrated the identification of possible environmental and human rights risks into our procurement process at potential supplier location level. We agree on corrective preventive measures to minimise these risks with the suppliers concerned at the time the contract is awarded. For instance, in 2021, we identified risks that included a lack of preventive measures in the areas of occupational safety, reporting and environmental management at the time of the contract award at 196 supplier locations. 97% of these supplier locations went on to implement 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 internal purchasers and external 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 that will enable us to be active from the beginning of the supply chain.
- We hold both mandatory and voluntary training sessions on this subject to train at least 80% of the more than 800 purchasers at the BMW Group. Since In 2014, more than 96% of purchasers have completed this basic training.
- 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 Ttraining 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 Dialogue 2021, for instance, we were able to discuss key aspects of environmental and social sustainability with more than 350 suppliers.
- Other BMW-specific training sessions will be rolled out in 2022 for employees and suppliers through the RE:DRIVE SUSTAINABLE SUPPLY CHAINS enabling programme.
- As part of the cross-sector initiative Cobalt for Development, the BMW Group has launched training programmes for 12 14 artisanal mining cooperatives together with partners. The training covers 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 infringements of sustainability standards, we use this effectiveness check to ascertain whether preventive and corrective measures have been implemented. We also conduct interviews 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.
Since 2020, we have been actively involved in a working group of the Automotive Industry Dialogue, focused on developing an industry-wide complaints mechanism.
Information relating to possible infringements of BMW Group sustainability policies for the supplier network is processed by our Human Rights Contact Supply Chain. Information can also be provided anonymously here.
The BMW Group Compliance Contact answers questions relating to the BMW Group Code on Human Rights and Working Conditions and advises on how to assess possible infringements and next steps. The helpline is open to all employees, customers, suppliers and others outside the company. The same applies if vulnerabilities or other circumstances are identified that could lead to non-compliance with the law. If preferred, this information can also be provided anonymously.
The BMW Group assures those providing information that no attempt will be made to determine their identify should they choose to make a report anonymously. Unauthorised use of the BMW Group Compliance Contact is excluded from this.
The BMW Group Compliance Contact is available in German and English.
The BMW Group also gives its employees the opportunity to report information relating to possible human rights abuses at the company anonymously and confidentially via the BMW Group SpeakUP Line. The BMW Group SpeakUP Line is available in all countries where BMW Group employees work in a total of 34 languages via local, toll-free numbers. Employees also have the option of submitting a report online.
A Human Rights Response Team, including an employee representative for the location involved, is responsible for processing incoming questions and concerns. At international locations, a representative of the European Works Council is also brought in. Relevant specialist departments or external stakeholders are consulted in certain cases. The team verifies the substance of the case and initiates the necessary steps.
If the investigation finds that the BMW Group directly or indirectly caused or contributed to an infringement, appropriate corrective measures are taken. Employee infringements of the human rights principles set out in the BMW Group Code on Human Rights and Working Conditions may result in disciplinary action in accordance with local legislation.
BMW GROUP REPORT 2021.
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.