By on April 26, 2022

On Monday, General Motors publicly asked its suppliers to pledge themselves toward adherence to carbon neutrality. But the vow actually goes quite a bit further, incorporating numerous Environmental, Social, and Governance (ESG) scoring aspects we’ve seen being advanced by some of the world’s most powerful corporations, financial institutions, and world leaders.

In fact, the official name for the oath is the “Environmental, Social and Governance Partnership Pledge” and it’s already been associated with metrics defined by EcoVadis — a third-party assessor that focused on evaluating how individual companies integrate its preferred principles of sustainability, corporate responsibility, social cohesion into their business and management systems. 

“There are economic and social imperatives in lowering emissions and addressing climate change while cultivating a just transition,” Jeff Morrison, GM vice president of Global Purchasing and Supply Chain, stated. “As we accelerate toward our vision of an all-electric future, our commitment to bringing everybody along includes our global suppliers whose collaboration is critical to promoting a sustainable, safe and better world.”

We’ve been tracking the progress of ESG scoring for a while (it even came up yesterday) and have grown increasingly suspicious that it serves to advantage large multi-national organizations with the kind of capital necessary to make the outlined changes. While plenty of companies have jumped onto the eco-bandwagon for the cultural cachet that’s associated with going green, arguments have been made that the scheme doesn’t necessarily support the concept of sustainability. Critics believe that ESG has effectively become a tool for large organizations to give themselves a squeaky clean, greener image that might woo potential investors. But it is in no way attached to a business’s profitability — which one could argue represents an organization’s true sustainability.

Additional criticism has been leveled at the “social” aspects of ESG scoring, as such a metric would hinge largely on qualitative data. This is made worse by the fact that most schemes utilize differing (often shifting) targets. This phenomenon was explored in a 2019 paper from the MIT Sloan School of Management exploring the differences between the ESG ratings issued to six separate companies. The resulting data suggested that not all businesses are measured in the same way and that the system allotted for some companies to engage in truly abominable behavior while still getting a high ESG score — provided they made up for it elsewhere.

Those makeup points could stem from something like spending more money buying up carbon credits or vowing to hire women to executive positions while the company is simultaneously utilizing forced labor or engaged in untechnical medical testing. The issue is that it gives a simplistic and often rose-tinted picture of a business that could also be engaged in unsavory acts, even though human rights are supposed to be an essential component of ESG schemes. This could explain why so many large companies are interested. By nature of having deeper pockets, they’re afforded more opportunities to raise their ESG score and garner a good investment rating during a period where Wall Street seems to glom onto every green stock that emerges, regardless of the business model of the relevant companies.

Considering General Motors’ stock has been on the decline since January of 2022 and is now confronting worsening supply chain issues, running with ESG scores could be a good way to pump the stock. After years of seeing Tesla’s exceptional market performance and lofty IPOs from numerous tech companies that were effectively selling the concept of environmentalism with no tangible products, it’s not unimaginable to assume legacy automakers want a piece of that action.

Here’s what GM is asking suppliers to do as part of its Environmental, Social, and Governance Partnership Pledge:

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.

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.

The irony is that one could argue that ESG scoring is anti-competitive in itself since these metrics are ultimately tied to swaying where investors put their money based on the EcoVadis score, rather than their actual financial performance. We’ve already seen problems emerge, too. In 2021, DSW Group (owned by Deutsche Bank) got into trouble after its former head of sustainability, alleged the firm had grossly misrepresented its ESG capabilities in the 2020 annual report — calling it propaganda. Her actions triggered investigations by the U.S. Securities and Exchange Commission and German regulator BaFin.

It’ll be difficult to say whether or not GM’s initiative amounts to little more than greenwashing without more data. But the company has said that suppliers, representing 53 percent of its $76 billion in direct material annual purchase value last year, have already signed onto the pledge. It also vowed that it would continue supporting environmental efforts 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.”

“GM’s ESG Supplier Pledge is a best practice example of how to work with suppliers and turn their ‘Everybody In’ vision into action,” said Pierre-Francois Thaler, Co-CEO of EcoVadis. “These specific and actionable targets are exactly the kind of engagement needed to accelerate their value chain towards positive impact, and to make business a force for creating a more sustainable world.”

Note that none of the above actually serves to improve the abysmal state that global supply chains are presently in and instead focuses primarily on changing the cooperate culture and messaging in a manner that would raise a company’s market valuation.

[Images: Linda Parton/Shutterstock]

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30 Comments on “GM Asks Suppliers to Sign Environmental Pledge, ESG Scoring...”

  • avatar
    SCE to AUX

    Reminds me of ISO 9001 (but with soft items added), and easily gamed.

    “one could argue that ESG scoring is anti-competitive in itself since these metrics are ultimately tied to swaying where investors put their money based on the EcoVadis score, rather than their actual financial performance”

    Perhaps temporarily, but actual financial performance is all that really matters, long term. Promises don’t result in dividends.

  • avatar

    My guess is that this has more to do with access to capital markets than it does with GM’s own internal desires. We’ve been seeing very long lists of E.S.G. criteria from major investment banks requiring borrowers certify compliance in order to be able to borrow. If GM wanted to do a bond offering with a major bank, it’s very likely that this topic would come up, and they’d get better pricing etc. if they had robust (i.e. look-through) E.S.G. criteria at least to show to investors.

    • 0 avatar

      Pretty much this. ESG is the “fair trade” of the investment world. Most of those investment firms won’t even be bothered to check what GM (or any other company) means by “ESG”, much less if it’s actually followed through, but it makes themselves look good to the naive virtue-signalling demographic that makes up part of their customer base (much like “fair trade” does for Starbucks).

  • avatar

    sounds like a sure fire way to produce quality cars at value prices…..s/

  • avatar

    Suppliers to GM: Sign a pledge to not screw us on pricing at every turn and we’ll think about it.

    There is something very Demolition Man or Robocop-esque about that ridiculous logo on the RenCen. Perhaps it could be the official logo of Clown World™?

  • avatar
    Master Baiter

    This is how the global elites plan to cram unpopular policies on the unwashed masses, while making themselves rich.

    Most Americans reject climate change hysteria, but American companies will be forced to comply if they want to get financing from the big banks.

    I don’t see Musk / Tesla going along with this BS.

    • 0 avatar

      “but American companies will be forced to comply if they want to get financing from the big banks.”

      Simple, hang the banksters.

      “I don’t see Musk / Tesla going along with this BS.”

      Oh I do, Musk is bought and paid for.

  • avatar

    What a bunch of virtue-signaling claptrap. Somehow GM keeps finding new ways to convince me not to want to buy a car from them.

  • avatar

    Gotta love the virtue signaling.

    If GM truly cared about the environment they would not produce EVs.

    But, muck like EVs, this is just an attempt to pander to the rabid (and amazingly misguided and dishonest) environmental movement afoot.

    • 0 avatar
      Matt Posky

      After seeing the World Economic Forum championing ESG scoring for years, I became pretty skeptical. But actually digging into what they entail is what turned me off for good. It’s all rather arbitrary and seems to be little more than an opportunity for giant corporations to frame themselves as kindly even when that’s not the case. It’s also creepy that there’s a movement to have all businesses effectively adopt the same corporate culture. Though the financing aspect is what makes ESG scoring the most troubling.

  • avatar

    All this circus in USA starts reminding me USSR. Lot of documents and articles in news media were produced but in reality nothing material was accomplished. Paper tiger we used to say. Simulated activity and brainwashing that sucked all resources and then the whole building just crashed down.

  • avatar

    Needless to say that I never even considered GM cars even European ones.

  • avatar
    Jeff S

    gm could always renew their Saturn slogan “A different kind of car company.” Remember how long that lasted. Instead of slogans and talk how about producing some good and desirable vehicles that people will line up to buy. Not saying Ford is perfect but they seem to be coming out with some products that actually get buyers excited and willing to get on waiting lists to order and buy. Instead of a small crossover Blazer why don’t they make a Jeep Wrangler and Ford Bronco competitor and how about a Maverick and Santa Cruz competitor. How about a Camaro that you can see out of and that is a real competitor to the Mustang and Challenger. Except for the new Corvette gm does not offer much to get excited about. The once great GM is now reduced to the has been gm. Maybe gm could bring Maximum Bob out of retirement he could get them on the right path.

    • 0 avatar

      Oh, please, Maximum Bob was in charge when GM quit competing with the Japanese and went with the idea they could make money from loans and insurance instead (and maybe from profitable niches such as SUVs and muscle cars).

      As Jeremy Clarkson eloquently said: “General Motors seems to concentrate mainly on pensions and healthcare and for as long as I can remember has seen the car making side of the business as an expensive loss-making nuisance”.

      Indeed, back then, GM was making money from GMAC while the car making side of the business was losing money. That’s the Bob Lutz era summed up right there.

      • 0 avatar
        Jeff S

        Maximum Bob at least did something besides changing logos. He rebuilt Opel in the 70s and was responsible for many of BMWs successful cars when he was at BMW in the early 70s. Lutz made his fair share of mistakes but overall he had more successes than failures.

  • avatar

    GM’s market share is at an all-time low of 13%. If they are not careful they will slip to third place behind Ford. GM can pretty much count out ever catching Toyota.

  • avatar

    GM Death Watch 2?

  • avatar

    Despite the new logo, it’s still the same old GM.

  • avatar

    You are bang on correct .

  • avatar

    More bureaucracy and more useless headcount at GM headquarters. This increases costs while adding no value to customers. Looks like GM still stands for Governement Motors.

  • avatar
    Jeff S

    Its shameful what has happened to GM. This the first time in 47 years that I have not owned at least one GM vehicle and its likely I will never own another one. GM’s market share in 1976 was over 46% in 2021 it was 15%. With current supply chain issues GM could end 2022 with about 13% of the market. In 1962 GM had a market share of 50.7%. How soon will it be for GM to reach a single digit market share?

  • avatar

    As long as we are piling onto GM, here is The Truth About Why Some Of You Are So Stupid. I Mean, Some Of Us:

  • avatar

    Lmao!!! So they are introducing another layer of make work on the industries’, already a joke like this, rfp requests. If it costs too much all they will accomplish is limiting their vendor selection. No one outside of the rfp process will ever even hear about this, thats how empty gestures like this are.

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