The German family-owned company Haas & Co. Magnettechnik (Haas & Co. for short) from the city of Wiesbaden in Hessen started dealing with human rights due diligence in global supply chains systematically in 2011. The company became aware of the issue when a major customer made reporting on corporate social responsibility (CSR) activities a criterion for selecting business partners. Before that, Managing Director Christopher Haas concedes, there had been no clear understanding in the company of what CSR or human rights due diligence meant.
The first step was to identify risks to human rights
Haas & Co. began by mapping out its magnet value chain. Then the company identified human rights risks in its own business activities and quickly discovered that these were mainly in its supply chain. The company produces and sells magnetic foils, technical magnets and custom-made magnetic products, for example. Most of the raw materials come from Asian countries, where they are mined and processed into intermediate products that Haas & Co. adapts to the specific product requirements in Germany.
Available information pointed to significant human rights risks
According to Christopher Haas, the supply chain in the magnet industry was a “black hole” when Haas & Co. first began to look at the issue closely. There were hardly any reliable studies on the conditions of production and mining of the raw materials. The little information available on the working conditions in the raw material mines pointed to considerable human rights risks, for example in the areas of health protection and adequate wages. Haas & Co. identified the mining conditions of in particular the raw material neodymium, which belongs to the category of rare earths and is found almost exclusively in China, as problematic. At the same time, demand is high: currently the strongest permanent magnets are made from the raw material neodymium and are used, for example, in smartphones, loudspeakers and wind turbines.
A new approach to human rights for suppliers
Working with its direct suppliers and business partners in China who process the raw materials, Haas & Co. has established requirements in its purchasing conditions to ensure human rights are respected. Christopher Haas has visited the production facilities regularly for several years. He says that having longstanding business relationships with his suppliers has helped to develop a relationship of trust. It has also led to a new way of thinking among suppliers regarding measures to ensure respect for human rights.
Together with our business partner in China, we were able to develop preventative measures on site to address the human rights risks we identified. We ourselves were surprised by what we were able to achieve with our suppliers.
Christopher Haas, Managing Director Haas & Co. Magnettechnik
Chinese New Year’s celebrations and non-returning employees
One starting point was the Chinese New Year, the most important Chinese holiday. Chinese people who work away from their home areas usually save up their entire annual holiday time and then spend several weeks with their family. In the past, many workers – sometimes up to 50 per cent of the workforce – did not return afterwards, so the company had to employ many untrained workers in the weeks after the holiday. This had a negative effect on the quality of the goods. To increase the return rate of employees and thus prevent possible customer complaints, the supplier agreed to take measures to increase the safety of employees in the workplace.
Work safety measures proved cost-effective
For example, protective clothing was made available for the first time and adapted to meet the needs of the workforce. Previously, measures for greater safety at work had been regarded as a mere “cost without return”, and the workers did not think they were in a position to demand them. The Chinese supplier saw that such measures, which hardly cost the company anything, had a great effect. The employee return rate after the New Year’s holiday rose to about 85 per cent.
Partnerships and networks as the key to human rights strategy
In order to prevent potentially adverse effects on human rights in the supply chain, the company is also cooperating on a research project with the Fraunhofer Project Group for material recycling. The aim of the research project is to use neodymium, which releases radioactive material when it decomposes, several times in the production cycle through recycling. Christopher Haas reports that there is hardly any awareness in the industry of the requirements that companies have to meet in terms of human rights due diligence. It is thus difficult to find others willing to participate in a test of neodymium recycling. In order to draw attention to the human rights risks in the metal supply chain and to further raise awareness, Christopher Haas co-founded the industry initiative Fair Magnet. The aim is to introduce a label for the fair production of magnets. The criteria for certification are currently being developed in cooperation with a Chinese university.
Under the patronage of the Federal Minister of Labour and Social Affairs Hubertus Heil, the CSR Award of Germany’s Federal Government will be awarded for the fourth time in 2020. The award honours responsible corporate conduct. Companies in three size categories could apply, and there are also two special awards. The jury makes its decisions on the basis of a scientifically sound, three-stage analysis. Haas & Co. Magnettechnik is nominated for the special award “Responsible Supply Chain Management”.
Communicating expectations and values clearly
Since 2018, Haas & Co. has reported its compliance with Germany’s Sustainability Code in a declaration on the Code’s 20 criteria. In addition to the values and principles to which the company is committed, it also contains a policy statement on respect for human rights. The Sustainability Code declaration contains voluntary commitments on the part of the company and requirements for its business partners, which among other things follow from its conditions for suppliers and from the guidelines of the Chamber of Commerce and Industry in Wiesbaden (Leitbild Ehrbarer Kaufleute) which Haas & Co. first signed in 2017 and then in revised form in 2019. Apart from the uniform consolidation of corporate obligations, Christopher Haas sees the advantage of a Sustainability Code declaration in the fact that expectations and values can be clearly communicated – both internally and also externally to suppliers and customers.
Implementation of systematic measures feasible even for smaller companies
As a medium-sized family business with about 25 employees, Haas & Co. wants to show that the implementation of systematic procedures and measures to ensure respect for human rights is also feasible for smaller companies. Christopher Haas emphasises that cooperation and the development of partnerships and networks – with both suppliers and also research institutions and like-minded companies – is crucial for the systematic implementation of human rights measures.
Engagement along the supply chain is part of the company’s future strategy
Its employees fully support the company’s commitment: for them it is a unique selling proposition for the company. By doing so, Haas & Co. has been able to mitigate the lack of skilled workers to a certain extent, says the Managing Director, adding that for employees and applicants, identification with the company values is becoming increasingly important. Christopher Haas says that relationships with suppliers have also changed, with joint development of solutions increasing the reliability of business partners and significantly improving the quality of the product. He also sees his company’s commitment as part of its strategy for the future. Haas is certain that to be successful in the long term, companies processing raw materials must focus more on measures to ensure that human rights are respected – in Germany and worldwide.