New General Motors ESG pledge has a sharp focus on supply chain operations

Late last month, Detroit-based General Motors (GM) heralded a new Environmental, Social and Governance (ESG) pledge, inviting its global suppliers to join the company in a “commitment to carbon neutrality, the development of social responsibility programs, and implementation of sustainable procurement practice in their supply chain operations.”

GM said that suppliers that sign the pledge commit to various efforts, including:

• achieving carbon neutrality for their Scope 1 and Scope 2 emissions by dates based on their respective industry. These are 2025 or earlier for Professional Services, 2035 or earlier for Manufacturing and 2038 or earlier for Raw Materials and Logistics;
• by 2025, achieving a minimum score of 50 in the EcoVadis Labor & Human Rights and Ethics pillars, which demonstrates a mature sustainability management system that covers employee health and safety, social dialogue, diversity/nondiscrimination, child and forced labor, and avoids corruption and anticompetitive practices; and
• by 2025, achieving a minimum score of 50 in the EcoVadis Sustainable Procurement pillar, which covers how GM's suppliers understand and govern the social and environmental practices of their own suppliers and use their purchasing influence to advance sustainability (EcoVadis is a third-party assessor that evaluates how well a company integrates the principles of sustainability and corporate social responsibility into their business and management system)

At the time of the release of this pledge, GM said that of its roughly $76 billion direct material annual purchase value in 2021, GM suppliers representing more than 53% of that figure have already signed the pledge. GM has 18,936 suppliers.

What’s more, GM said that its supplier pledge expands on GM’s goal to bring “Everybody In” for the all-electric future with a commitment to establishing a collaborative supply chain that endeavors to minimize environmental impact and enhance long-term sustainability. And it said the company will also provide support as it identifies opportunities for significant reductions in greenhouse gas emissions and energy use, provide educational webinars and resources, and develop tools to help remove barriers in the transition to renewable energy.

“Working with suppliers to reduce their greenhouse gas emissions is part of GM’s strategy to reduce its own overall carbon footprint and accelerate toward an all-electric future,” GM officials said. “In early 2021, GM set targets to become carbon neutral in its global products and operations by 2040. The company is working toward a transition to 100% zero tailpipe emissions for new light-duty vehicles by 2035. GM also announced the acceleration of its renewable energy goal to 2025 in the U.S. — 25 years ahead of the original target. GM further announced in June 2021 that it would prioritize equitable climate action to help ensure its all-electric future is inclusive for its current and future workforce, customers and communities that may be disproportionately impacted by climate change.”

LM Group News Editor Jeff Berman spoke with Fred Gersdorff, GM's Senior Manager of Socially Responsible and Sustainable Supply Chains, about the pledge and what it means going forward. Their conversation follows below.

Logistics Management (LM): How long had this ESG pledge initiative been planned or in the works? What drove it?

Fred Gersdorff: This really got going late in the third quarter and into the fourth quarter of last year. I have a supplier sub-consignment group I meet with every two weeks, and we have great conversations around sustainability. We started talking about a pledge and started talking internally about it. I am proud to say that during those discussions the pledge was enhanced, improved, and refined, through those discussions with suppliers. We were having great discussions late last year over what this should look like. A key element I am going to share over and over is the relationships we have with suppliers and how we want to support suppliers. We want to challenge and set bold goals and we want to set aggressive timelines, but we also want to support suppliers on the journey, and we offer education and tools to help them.

As for what drove it, it goes back to our “000 vision,” with zero crashes, zero emissions, and zero congestion future vision for GM. Suppliers, from an emissions perspective, play a role in our 000 future. And, in our sustainability report, which recently came out, we have roughly 15% of our emissions coming from what we buy and coming from our suppliers. They have a role to play and just like everything else in our business, suppliers are key to it all, and our key to GM success. Sustainability is no different.

LM: What are the main benefits of the ESG pledge, as it relates to the implementation of sustainable procurement practices in their supply chain operations, for its global suppliers?

Gersdorff: We are very excited about this and see a lot of benefits. It is for all of our global suppliers. This pledge drives the conversation about ESG forward. It does not stop there, and it shows the shared commitment that GM and our suppliers have in addressing issues in the ESG space. I think what is really special and turns into a benefit of this pledge is that we are touching on environmental, societal, and governance topics. This pledge really is, I think, innovative, in that way, where the environmental is playing with carbon neutrality. Depending on what industry a supplier is in, we have different carbon neutrality dates for their Scope 1 and Scope 2 emissions. But it goes beyond that, too.

LM: How so?

Gersdorff: For social sustainability, we are talking about having minimal scores. And we have partnered with EcoVadis and its platform for the labor and human rights side of our supply chain, as well as the ethics. Those are key themes in the social space and in having a measurement system that we can use objectively to measure suppliers is key there. It does not stop, as we have the governance piece as well, and that is about suppliers having their own sustainable procurement programs, so they can replicate to their suppliers and then this effect just grows all those benefits.

LM: What does this ESG pledge mean for GM’s customers and also from a service perspective?

Gersdorff: For what it means to our customers, I would say we understand our role in this discussion, and GM is a large player, and we recognize the role that we play. Our stakeholders are looking to see if we are living into that 000 vision and looking to see if we are taking concrete action and developing plans for that future. It is critical we are showing that and doing that for our customers. They are still going to get great products from GM, and they get a chance to see that we are living into our values and get sustainable product offerings from GM. It is pretty well known that shareholders look at this, too. What they are looking for is if the ambition is big enough and then if the actions are addressing that. When we bring in our entire Tier 1 suppliers into this discussion, it really sends a signal about our intentions. It is about people ultimately. I think there is a well-understood need for corporations to play a role in ESG matters. And when we partner on this collaboration and this pledge, it shows that GM and our suppliers are committed to moving this forward.

LM: What about from a service perspective?

Gersdorff: From a service perspective, I would say I am part of an organization within our purchasing and supply chain. We have the title of central resiliency, sustainability, and partnerships. When you talk about service level, you are talking about resiliency, and it really goes hand in hand with sustainability. I don’t know that you can have one without the other. Our leadership talks about a sustainable and resilient supply chain often in the same breath.

LM: With more than 53% of GM’s suppliers having already signed on, how much does the company want/expect that figure to rise by in the coming years?

Gersdorff: This is very important to us. It is about the conversation and collaboration. It is important that we are working with our suppliers. We are encouraged by the 53% and when you look at 53% of that direct material spend, it is a big number. It shows our suppliers’ commitment. We cannot be successful without them. It is our aim to work collaboratively with them to build this future together. We already have more than half of that direct materials spend raising their hand so not only raising their hand—but also signing the pledge. It is a big signal, and where we want to go in the coming years…we want to make this happen and strive for the highest percentage figures possible and just keep driving ESG into the discussion.

LM: What are the key aspects of the three pillars the suppliers sign onto, in terms of achieving carbon neutrality for the Scope 1 and Scope 2 emissions?

Gersdorff: The environmental part is about carbon neutrality. Carbon is critical to greenhouse gas emissions and climate change, and the focus there is on Scope 1 and Scope 2 emissions. We know that message gets pretty technical into the scopes and that sort of thing, but it is important that our suppliers get that conversation, and it is important that we are very clear on that. We want it to be as detailed as possible. I had somebody say “do we really want to have these many details?” Yes, we do, because when you have got the details, then you have the roadmap and the plan for suppliers to be able to act. When we started to look at the supply base, it is not a monolith. So, for professional services, they have a goal for carbon neutrality by 2025. When you talk about manufacturing, it jumps to 2035, and it can be a more difficult journey. For logistics and raw material suppliers, it is 2038. This is inclusive of the whole supply base but recognizing they are going to have their own journey to get there.

LM: What are some other things GM is doing to help its suppliers make sure they are on point and on track and don’t get bogged down and are able to keep moving forward?

Gersdorff: That is where the heart of our program is, and it has been seen with suppliers telling us we are doing it right. That is about the education and collaboration. We have had virtual conferences where we will bring in more than 1,500 participants, where people come in to learn about sustainability and cover all kinds of topics. We even had one with suppliers teaching other suppliers. It is non-competitive and all about how we build this community together. And we have had energy experts come in at talk about energy reduction. There is a lot to be gained by looking at your existing assets and footprint and what we can do with what we have around behavior and enhancements for energy efficiency. There are lots of plays in sustainability, where you can be more sustainable and save money, too, which is important in the supply chain. I think it is important we have clear goals and priorities for suppliers, because they want to know where GM is at on those things along with the education, and providing things like this pledge, which clearly outlines what is important.

LM: What type of progress would you like to report on, regarding the pledge, one year from now?

Gersdorff: I would like to see even greater participation towards it, and I want our suppliers to be sharing their supply chain stories and wins. We are real and rooted in real action.