Opposing Statement of the Board
The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders.
As we noted in response to the proposal requesting additional reporting regarding human rights that was presented by the same proponent at the 2021 annual meeting of stockholders, which was rejected by Tesla’s stockholders, Tesla’s annual Impact Report already describes how human rights values, including those related to child labor, are respected in our operations. The proponent’s justification for additional reporting on child labor appears to be based on legal proceedings that have been dismissed by the court, and the proponent uses the argument made by the defendants in their motion to dismiss to imply that Tesla, as a defendant, is not taking action to identify and eliminate child labor from its supply chain. In fact, protecting human rights is core to Tesla’s procurement strategy and the position taken in these proceedings that our actions could not have met the standard for legal causation does nothing to undermine that fact. Indeed, because Tesla recognizes the risk of human rights issues within global cobalt supply chains, we have established and implemented a supply chain due diligence management system aligned with the OECD Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected and High-Risk Countries. We are one of the few downstream companies that publicly report through our Impact Report on how we follow each of the five steps set out in the Guidance, including how we identify (including through audits) and mitigate risks (for its part, the OECD has identified reporting on risk mitigation as being very weak across the industry). As stated in the Impact Report, in the event that modern slavery, child labor or human trafficking is identified in our supply chain and has not been remediated by the supplier within a reasonable time frame, Tesla will transition away from that supplier.
Based on the risk identification procedures mentioned below and described more fully in our Impact Report, Tesla does in fact disclose in our Impact Report that we have found no evidence to date of Tesla causing, contributing to or being linked to child labor, modern slavery or human trafficking in our supply chain. In fact, we can be more confident of this than other OEMs due to our unique sourcing strategy: Rather than relying on companies that typically sit between OEMs and mining companies, we source our cobalt directly from mine sites. This means we can be more confident about where our cobalt comes from and can confirm, based on best practice risk identification, that we do not source from artisanal and small-scale mining (ASM), which is typically at risk of child labor. Rather, we source our cobalt from industrial mines, where no child labor has been identified to date.
In addition, we conduct our own audits of the mine sites and refiners in our cobalt supply chain and review results from third-party industry audit programs such as the Responsible Minerals Initiative (RMI)’s Responsible Minerals Assurance Process (RMAP). In 2021, 83% of refiners and mine sites in Tesla’s battery supply chain either underwent or committed to undergo independent external sustainability audits against RMAP and responsible mining standards. This was complemented by our own audits that assessed how specific cobalt and precursor suppliers conducted due diligence on their supply chain on OECD Annex II risks, which include child labor.
In 2021, a Tesla delegation conducted an on-the-ground assessment on environmental and social conditions in the DRC. While we do not source from ASM, the trip to the DRC helped us understand the importance of ASM for local livelihoods. This is why we fund and sit on the Steering Committee of the Fair Cobalt Alliance (FCA), a multi-stakeholder initiative to support the improvement of conditions in communities impacted by ASM. One of the achievements of the FCA is the development of referral system for children engaged in mining activities, including child labor notification protocol, remediation solution packages, and guidelines for case managers on remediation steps, and trainings related to child rights. One of the reasons for this support is to show that – despite not having identified it in our supply chain – we understand that child labor is an existing challenge in the DRC that requires structural solutions.
Tesla remains confident in our efforts and commitment to ensuring child labor is not part of our supply chain, and that our publicly available policies and disclosures already provide robust and transparent information on these matters.
The Board recommends a vote AGAINST the stockholder proposal regarding additional reporting on child labor.
