In General Motors’ new sustainability report published this week, the automaker describes spending about $100 billion on approximately 200,000 items that include a variety of raw materials and parts.
A supply chain with such breadth, scope, and complexity requires building strong supplier relationships. And showing up to visit them.
“We need to ensure that we have traceable, transparent, and verifiable supply chains for all of our commodities,” says David Tulauskas, General Motors’ director of sustainability. “That takes a lot of people, effort, coordination, and collaboration.”
At the recent 2018 Environmental Leader & Energy Manager Conference in Denver, Tulauskas discussed procurement challenges during a plenary session. He urged attendees to pursue chain of custody certification within their supply chains.
We caught up with Tulauskas on the heels of GM’s 2017 sustainability report to find out how the automaker approaches procurement, especially for historically problematic commodities like cobalt and rubber.
What is GM’s approach to supply chain management and has it changed over time?
We’re looking at the business we do with our suppliers as a partnership, a long-term relationship that can drive strategic new business opportunities, features, services, and products for our customers. Having a set of clear expectations and being able to roll up your sleeves and work with them in a collaborative manner to solve big issues is important.
Our supply chain has changed over time. Some of the change is around communication of our expectations. Last year, for example, we came out with a supplier code of conduct. It aligns with GM’s internal code of conduct for our employees, Winning With Integrity.
It also aligns with an initiative that GM has played a large part in: developing a set of common expectations among automakers. Between the Automotive Industry Action Group and Drive Sustainability, we came up with guiding principles to drive sustainability into our supply chain. We don’t want 10 different automakers taking 10 different approaches of how to comply with, say, conflict mineral reporting requirements. Nor do our suppliers.
Over the last 18 months we’ve made tremendous progress in communicating consistent approaches and expectations around environmental performance, human rights, labor rights, and ethical business practices.
Automakers and tech giants are struggling to source ethically produced cobalt for lithium-ion batteries. What is GM’s strategy?
In the new guiding principles, we talk about responsible sourcing. Traditionally we looked at quality, service, technology, and price in making our decisions. Now we’re looking at environmental impacts, social impacts, and embedded risks.
Cobalt is used in many different applications across industries and in multiple parts within the automotive industry. A large part is used for the cathodes within the lithium-ion batteries. It’s going to require all industries that are using it and a number of institutions — including nonprofits and governments — around the world to improve transparency and traceability so we’ve got chains of custody that we can rely on.
We have been working with our key battery component suppliers, going into the second, third, and fourth tiers and looking at the chains of custody. We have confidence that the processes are working, but there are still human rights issues, unethical business practices, and environmental risks.
What will it take to address those risks?
It ultimately requires companies going beyond their Tier 1 and being a part of those boots on the ground, visiting the smelters, visiting the mines, understanding what the complexities are and committing to be part of the solution. That’s what we’re doing.
For cobalt, there has been cross-multi-sector collaboration. The International Automotive Task Force (IATF) came out with quality standards 16949 that replaced the old ISO 9000 standards. For the first time, the standards that all suppliers to all automotive OEMs need to eventually certify to include having an employee code of conduct, an anti-bribery policy, and an anti-retaliation whistleblowing policy. That’s one lever we’re pulling.
Another lever is risk management. We’re employing different tools to improve our visibility into our supply chain. One tool we use is lifecycle assessment, looking at the entire value chain all the way to the raw materials. You can imagine we’ve got a dozen levers that we need to be pulling on.
Last year GM committed to only sourcing sustainable natural rubber in tires. How is that going?
We’re at different places on each commodity. For rubber, it’s early. We had a team of General Motors folks between China, Thailand, and the US representing our purchasing organization, engineering group, and sustainability visit rubber plantations. We learned how to tap trees. We talked to tappers, farmers, and dealers to understand the value chain.
Michelin was our first supplier to come out with a policy on sustainable rubber procurement and establish procurement requirements. Then, in May of 2017, we made our commitment in partnership with four key tire suppliers. Bridgestone and Goodyear have since come out with policies and procurement requirements.
In addition, the Tire Industry Project (TIP) has 11 tire companies representing 60% of the world’s tire production as members. It operates out of the World Business Council for Sustainable Development (WBCSD) and provides secretariat-type support for the tire industry. They’ve committed to developing a platform from which we can all work on this in a collaborative way.
What are the biggest takeaways from diving deep into GM’s supply chains?
General Motors works with 20,000 suppliers that provide us parts that go onto our vehicles. We buy from them approximately 200,000 individual items, spending about $100 billion. We operate in 30 countries. We sell those products in 125 countries. We can use our scale for good and leverage it, adding significant business value and strengthening communities throughout the world.
What does the future look like for GM’s supply chain management?
What you’ll see from GM in the near future is further integration in every individual purchasing decision. We’ve been successful at having an impact on certain parts and materials, and in certain commodity value chains. We want to have that every single time we purchase something.
We’ve trained our supplier quality engineers who are visiting factories all over the world. Now we’re going to start developing training and capacity building for the people who make the purchasing decisions every day.
There’s always an issue to work on, an opportunity to seize, and we want to do that in the most efficient, systematic, and integrated way.
David Tulauskas spoke about sustainability’s role in strengthening business at the 2018 Environmental Leader Conference & Energy Manager Summit in Denver.
