Annual Report 2017

Human rights compliance

Daimler has been working on a company-specific approach to human rights since 2008. In 2011 we began developing a systematic due diligence approach for our company, initially on the basis of the Human Rights Compliance Assessments of the Danish Institute for Human Rights. Since 2015, we have been working with the Daimler Human Rights Respect System (HRRS), which we developed ourselves with the specific requirements of the company in mind.

The protection of human rights is also a key component of our Group-wide sustainability strategy. We are committed to proving to the greatest extent possible that these elementary rights are respected and upheld throughout our organization, our partners and by our suppliers as well. The UN Guiding Principles on Business and Human Rights and Germany’s National Action Plan on Business and Human Rights define the associated principles and due diligence obligations. It is our aim to fulfill these obligations and we are therefore gradually expanding our Human Rights Respect System (HRRS) as our Due Diligence Framework, including regular consultations with external stakeholders. As a proactive risk management system for human rights, the HRRS is designed with the aim to identify and avoid systemic risks and potential negative impacts of our business activities on human rights early on. The HRRS thus primarily protects third parties and is aimed at exerting its effect along at our supply chain as well. Along with relevant legislation, we also focus on multinational initiatives and frameworks, in particular the UN Guiding Principles on Business and Human Rights and the principles of the UN Global Compact. In line with the expectations regarding a human rights policy expressed in these documents, we have clearly defined what we expect from all of our employees and business partners. These expectations are formulated in our Integrity Code, our Supplier Sustainability Standards and our supplier agreements. The responsibility for human rights issues lies with the Integrity and Legal Affairs division.

The HRRS, which orientates itself on our Group-wide Compliance Management System (CMS), utilizes a risk-based approach in its focus on Daimler majority holdings (including production locations) and our supply chain. Also part of the HRRS is the consultation and exchange with rights holders, for example our employees and their representatives.

We continue to develop the HRRS and implement it step by step. In the last two years, for example, we conducted two HRRS pilot projects for Daimler majority-owned companies at our international locations and, where necessary, initiated improvements and also identified best practices for other locations. We were also able to further improve the system we use to classify all Daimler majority holdings in terms of human rights risks. We are working to firmly establish the HRRS for Daimler majority-owned companies by 2020 at all our locations thereby supplementing the already existing decentralized measures with a dedicatd system.

Due diligence with the Human Rights Respect System

The HRRS is designed to identify and avoid systemic risks and possible negative effects of our business activities on human rights early on. It consists of four steps that are to be applied to Daimler majority-owned companies and the supply chain:

1. Identification of potential human rights risks (risk assessment)

2. Definition, implementation and management of preventive measures and countermeasures (program implementation)

3. Monitoring of the effectiveness of the measures, in particular at high-risk units and in supply chains that are at a high risk of human rights violations (monitoring)

4. Periodic internal reporting on relevant issues, compliance with external reporting requirements (reporting)

Identification of human rights risks at Daimler majority holdings

The risk assessment is a two-step process. The first step involves a categorization of the majority holdings on the basis of predefined criteria, such as the risk situation in specific countries and risks associated with specific business operations. In the second step, units that display a heightened human rights risk are subject to an on-site assessment. To this end, a modular approach was developed that makes it possible to take into account fundamental human rights standards such as those defined in the Universal Declaration of Human Rights and the Core Labor Standards of the International Labor Organization (ILO).

In 2017 we used the experience gained with the pilot projects to make adjustments to our previous two-step risk assessment process. We also had external stakeholders verify the HRRS in general and our risk assessment methodology in particular. During this verification process, we were given valuable suggestions for further adapting and expanding the system. We are also currently developing an effective approach to program implementation, monitoring and reporting.

Identification of human rights risks in our supply chain

Since 2008 we have defined our expectations towards our suppliers regarding sustainability in our Supplier Sustainability Standards. Stipulations concerning working conditions and human rights are key components of these. In order to ensure that we can meet our human-rights due-diligence obligations even more systematically, we are gradually introducing the HRRS in our supply chain as well. To this end, clear risk classifications for Daimler supply chains were developed in line with specific product areas (e.g. production materials or services) in 2017. This also includes minerals commonly associated with conflicts. We are utilizing our risk-based approach in order to determine which supplier products and at which stages of our extensive supply chain we should take targeted and appropriate measures beyond our direct suppliers.

Involvement at the executive level

The member of the Board of Management responsible for Integrity and Legal Affairs is regularly informed on human rights activities at regular intervals. This is supplemented by regular reports submitted to the Board of Management and the Corporate Sustainability Board (CSB), as well as to the Procurement Council (PC) within the framework of our sustainability strategy.

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