Bringing together the E and S of ESG in solar power & electric vehicles

Over the last two decades, ‘ESG’– Environmental, Social and Governance – has proved a useful framing to support responsible business practice.  However, conversations with businesses reveal that these three pillars are often considered separately, with for example, environmental policies and plans developed in isolation from their social equivalents. 

At the same time, the urgency of the climate crisis, high profile international climate events such as annual COP conferences, and the energy behind numerous business and investor initiatives, has propelled the E in ESG forward with much needed momentum.  And this is to be celebrated.  But what happens when we explore the E in ESG together with its counterpart S – the social? 

Top of the E agenda is net zero: reducing greenhouse gas emissions to as close to zero as possible and sequestering any remaining emissions.  The scope 1, 2, 3 framework is helpful for agreeing net zero targets and action plans.  Often scopes 1 and 2 represent low-hanging fruit. Improving energy efficiency, switching to clean energy tariffs, or investing in long-term renewable energy contracts play key roles here.  In addition, many businesses, ETI members included, are decarbonising distribution fleets by investing in electric vehicles (scope 1) and installing photovoltaic solar panels on premises to generate their own green electricity (scope 2).  Exciting stuff.  But what are the social impacts of these environmental strides? Who are the workers behind essential transition technologies such as EVs and solar panels, and what do we know about their working conditions?

Mapping EV and solar supply chains

ETI NGO member, Anti-Slavery International is the world’s oldest human rights organisation.  In recent years Anti-Slavery International has collaborated with leading researchers, including at Sheffield Hallam University, to understand the risks of forced labour in supply chains of essential transition technologies, such as solar and EVs.  Research shows that 32% of the world’s metallurgical grade silicon and 35% of the world’s polysilicon, key materials in the majority of solar panels, come from the Uyghur Region of Western China, also known as the Xinjiang Uyghur Autonomous Region.  In this region, a well-documented campaign of state-imposed forced labour is being deployed as part of a broader set of objectives that the UN High Commissioner for Human Rights has described as potentially constituting crimes against humanity. 

The region is home to mines, processing facilities and manufacturing units that are integral to the world’s solar and, increasingly EV, supply chains.  Over the last two decades China has risen to become a major player in the automotive industry.  As well as auto-parts manufacturing and assembly, China is a leading producer and processor of essential base metals such as steel, aluminium, and copper, with government policy ensuring that the Uyghur Region plays a central role in these industries.  Research from Sheffield Hallam found, for example, “96 mining, processing, or manufacturing companies relevant to the automotive sector operating in the Uyghur Region.”  And more specific to EVs, China is estimated to process 44% of the world’s chemical lithium and 70% of lithium-ion battery cells – with the Uyghur Region’s role growing in these supply chains that are at the heart of the EV revolution. 

State imposed forced labour

State-imposed forced labour plays a central role in government policy in the Uyghur Region, such that any workplace in the region represents a high risk for forced labour.  State imposed forced labour presents a unique set of challenges for human rights due diligence.  In contrast to privately imposed forced labour, buyers and lead firms have little to no leverage.  In addition, and as is the case in the Uyghur Region, attempts to engage with suppliers on state-imposed forced labour directly can worsen risks for workers and management – including potential detention and imprisonment.  Disengagement is the only option, as ETI’s position statement on this issue makes clear.  This is consistent with the call to action made by the Coalition to End Uyghur Forced Labour, whose members include Uyghur organisations, trade unions and leading NGOs such as Anti-Slavery International.

However, the risk of state-imposed forced labour extends beyond the Uyghur Region to other parts of China.  Labour transfer schemes are moving Uyghur forced labourers to workplaces elsewhere in the country.  This further complicates the situation for responsible businesses seeking to ensure supply chains are free from the risk of forced labour and modern slavery. However, outside the Uyghur Region, there is some – not much, but some – scope for buyers and lead firms to influence suppliers to disengage from these schemes. Guidance is available to support both supply chain mapping and on how to discuss these issues with suppliers (outside the Uyghur Region).

But what about the green transition?

But won’t disengaging from suppliers of essential technologies such as solar panels and EVs slow down the transition to net zero?  The Uyghur Region’s leading role in these supply chains is hugely dependent on burning coal – the world’s most polluting fossil fuel.  The dependence on coal as the primary energy source severely compromises the industry’s green credentials.  Researchers found that every polysilicon plant in the region is powered exclusively by coal. 

A transition to net zero that is both deficit with respect to the E of ESG, and not only overlooks the S in ESG, but is in fact complicit in forced labour, modern slavery and crimes against humanity, is no way to safeguard the planet for current and future generations.  It is completely at odds with responsible business.

Indeed, this is increasingly reflected in national and supranational policy.  The Uyghur Forced Labour Prevention Act in the USA sets a rebuttable presumption of forced labour for all goods imported from the Uyghur Region and prevents their entry into the US market.  The recently adopted Forced Labour Regulation in the EU, which came into force in 2024, is likely to include state-imposed forced labour in its risk database.  And the EU’s CSDDD recognises that in situations of state-imposed forced labour companies should terminate their business relationships.  These regulations mean that businesses in scope and procuring solar and EVs in order to achieve net zero targets must disengage from supply chains linked to the Uyghur Region. For businesses out of scope, the regulations may help emphasise the severity of the human rights abuses and the necessity of disengagement from the region and supplier withdrawal from labour transfer schemes.

Combining E and S for a just transition

Given the predominance of the Uyghur Region in solar supply chains and to a lesser, but growing extent, EV supply chains, there’s no underestimating the enormity of the challenge here.  But the ESG framework was not designed for these three pillars to be treated separately, or worse still played off against each other.  Human rights cannot be sacrificed in a rush to achieve net zero, no matter how urgent the climate crisis.  The transition to net zero must be a just transition – with respect for human rights at its centre.  State imposed forced labour in the supply chains of essential transition technologies, such as EVs and solar, is perhaps one of the starkest challenges for the just transitions agenda.  But the good news is that excellent resources already exist, and expert organisations are already working on this issue, not least ETI’s member NGO Anti-Slavery International.  Action on this issue is both imperative and achievable.  Please do reach out to them for further support.