We consider our suppliers to be critical business partners who also are an important part of our commitment to corporate responsibility. We engage with our suppliers continuously as part of our daily business processes in order to maximize partnerships and to realize our mutual business goals.
Our institutional dialogue with suppliers occurs through two primary forums. The first is through the GM Supplier Council. This Council consists of 10 global suppliers who meet with our vice president of global purchasing and supply chain on a monthly basis to address broad, industry-wide topics. The second forum is a global webcast that we conduct with our suppliers each month to gain input and a consensus approach on GM-specific topics. Suppliers who participate in this webcast represent approximately 80 percent of the value of our vehicles.
General Motors has a strict "zero tolerance" policy against the use of child labor, abusive treatment of employees or corrupt business practice in the supply of goods and services to us. These and other prohibited activities are addressed in Paragraph 25, "Compliance with Laws; Employment/Business Practices," which is part of our purchase contract terms and conditions. Paragraph 25 reads as follows:
"25. COMPLIANCE WITH LAWS; EMPLOYMENT/BUSINESS PRACTICES: Seller, and any goods or services supplied by Seller, shall comply with all applicable laws, rules, regulations, orders, conventions, ordinances or standards of the country(ies) of destination or that relate to the manufacture, labeling, transportation, importation, exportation, licensing, approval or certification of the goods or services, including, but not limited to, those relating to environmental matters, data protection and privacy, wages, hours and conditions of employment, subcontractor selection, discrimination, occupational health/safety and motor vehicle safety. Seller further represents that neither it nor any of its subcontractors will utilize child, slave, prisoner or any other form of forced or involuntary labor, or engage in abusive employment or corrupt business practices, in the supply of goods or provisions of services under this Contract. Seller agrees to comply with all applicable anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, and that neither it nor any of its subcontractors will directly or indirectly provide or offer to provide, anything of value to or for the benefit of any official or employee of a governmental authority to obtain or retain any contract, business opportunity or other benefit, or to influence any act or decision of that person in his/her official capacity. At Buyer's request, Seller shall certify in writing its compliance with the foregoing. Seller shall indemnify and hold Buyer harmless from and against any liability claims, demands or expenses (including attorney's or other professional fees) arising from or relating to Seller's noncompliance."
Additionally, we support the Global Sullivan Principles, which are aspirational guidelines for responsible business conduct, including the treatment of workers and the role of companies in strengthening the local communities in which they work. The Global Sullivan Principles were developed by the late Rev. Leon Sullivan, a retired member of the General Motors Corporation Board of Directors, at the urging of Kofi Annan, former Secretary General of the United Nations. Furthermore, we encourage our suppliers (and their suppliers) to support the Global Sullivan Principles or similar guidelines, such as the European Principles of Social Responsibility and the European Employee Forum.
To help enhance supplier understanding of these and other principles, we have provided funding in recent years for 837 of our suppliers in Brazil, China, India, Mexico, Thailand and Turkey to attend the Supply Chain Responsibility Training conducted by the Automotive Industry Action Group (AIAG). We participated in developing the training that initially covered working conditions, including child labor, forced labor, health & safety, wages & benefits, freedom of association, harassment & discrimination and working hours. This training has recently expanded to also include business ethics and environmental responsibility. Plans call for supplier training in Russia and Argentina during the second half of this year.
In 2010, the U.S. Congress passed legislation requiring reporting to the Securities and Exchange Commission on the content and sources of four metals in companies' products: gold, tin, tantalum and tungsten. These raw materials are of concern because certain mines in the Democratic Republic of the Congo (DRC) and certain mines in countries that border the DRC are important sources of minerals used to produce these metals. These particular mines are controlled by armed groups that finance their armed conflicts through mining activities. The goal of the legislation is to identify and eliminate any content in companies' products that has been inadvertently derived from these mines.
On August 22, 2012, the U.S. Securities and Exchange Commission (SEC) approved a final regulation to implement the Conflict Minerals provisions of the 2010 Dodd-Frank Act. General Motors has been an active participant in the Conflict Minerals Working Group in the Automotive Industry Action Group (AIAG), and is currently going through the details of the new rule. We will report again on this topic in our next report.
Our policy is to generally build where we sell and buy where we build. This practice makes commercial sense, not only for our company, but also for the markets and communities in which we operate. A localized supply chain provides:
Though some areas of the world present challenges to implementing a localization policy, we are committed to working through these challenges, given the considerable benefits of a local supply chain. We are involved in a number of programs around the world to enhance supply chain sustainability in terms of environmental and economic performance. The following are just a few examples of these programs:
The Suppliers Partnership (SP) for the Environment is an innovative partnership between U.S. automobile manufacturers, their suppliers and the U.S. Environmental Protection Agency (EPA). The goal of SP is to improve environmental performance while providing value throughout the automotive supply chain. Membership is open to all automotive companies and provides a forum for suppliers of all sizes to work together, learn from each other and share environmental best practices.
We were instrumental in the formation of SP, following a successful pilot with the EPA. SP membership now includes other automobile companies and 35 supplier companies. SP has work groups concentrating on specific tools to help suppliers improve their environmental performance. The Energy Optimization work group, for example, develops recommendations on how to reduce energy consumption, as well as how to improve understanding of the possible long-term effects of economic growth and other human activities on the climate system.
We also actively participate with other automakers and automotive suppliers in the Automotive Industry Action Group (AIAG) Greenhouse Gas Work Group, which has developed a common method of reporting GHG emissions. Having a common system that is accepted by the automakers and the supply base will eliminate duplicate reporting requirements, support a common, comparable and compliant reporting process, and result in cost savings for the member companies.
In Australia, GM Holden is working through an Australian government program to assist supplier business development. The Automotive Supply Chain Development Program is one of a suite of programs under the Australian government's vision for the Australian automotive industry. This competitive grants-based program will provide A$20 million over four years to Australian automotive manufacturers, suppliers and auto industry research and development organizations to enable local automotive suppliers to compete more effectively in global and domestic markets.
In early 2010, Holden received a grant to expand its supplier development team, which has worked extensively to help improve the businesses of local suppliers. To date, this team has undertaken development work with 40 strategic local automotive suppliers to help develop their businesses in what is an increasingly global market for the auto industry. In the next two years, the team will extend its program scope to include 60 top strategic local suppliers. As a direct result, 14 Australian suppliers have secured increased local manufacturing work worth A$26 million per year in additional revenue from Holden and, in some cases, have secured opportunities to quote for new global supply contracts.
The local supply chain is a critical component of the Australian automotive industry and provides jobs for many of the more than 50,000 people who are directly employed in the Australian auto industry.
In China, we continue to promote the Green Supply Chain Initiative. This initiative is aimed at improving the performance of our joint ventures' suppliers in support of the Chinese government's goals of promoting energy efficiency and sustainable development. It was initiated in 2005 as a collaborative project between the World Environment Center, GM's 50/50 joint venture with Shanghai Automotive Industry Cooperation (SAIC) — Shanghai General Motors (SGM) — and eight suppliers.
Since its inception, this initiative has made significant measurable strides in sustainability. Terry F. Yosie, president and CEO, World Environment Center, observes, "Implementing sustainable development creates value for business and society. Through the Green Supply Chain Initiative, the first undertaken by any joint venture auto manufacturing initiative in China, Shanghai General Motors has demonstrated a far-reaching commitment to advancing sustainable development across its manufacturing operations. The results have strengthened the performance of GM's suppliers on a variety of indicators. Through this initiative, SGM and its suppliers have saved energy, improved environmental quality and saved large sums of money."
In 2011, the Greening the Supply Chain Initiative involved 70 Tier 1 SGM suppliers, who implemented 257 projects at a cost of 90,686,000 RMB and resulted in an annual benefit of 72,482,350 RMB. Reductions in energy and water use include:
In addition, the suppliers have reduced their annual waste generation by:
An important aspect of the initiative was the development of a "best practices" library that will be useful for existing and future participants in identifying additional opportunities for improvement.