Handling risk raw materials.

In addition to an initial review of the situation, important elements of our assessments include the intensive analysis of our supply chains and the involvement of our direct suppliers and further stakeholders from science, industry, and civil society.

Our raw materials assessments consist of three steps:

1. We create transparency along the respective raw material supply chains.
2. We identify risk hot spots in these supply chains.
3. We define and implement risk mitigating measures and make sure that they are effective.

By the end of 2025, we plan to review 70 percent of all high-risk raw materials. By 2028, we intend to define appropriate measures for 100 percent of our raw materials that pose an increased risk of human rights violations.

The raw materials assessments of the battery raw materials named above have all at least started in the year 2021.

We identify and prioritise risks in our raw material supply chains in line with the United Nations (UN)  Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidelines  for Minerals from Conflict and High-Risk Areas¹.

We use different criteria for the analysis like the number of processing steps within our supply chains as well as the technical methods of raw material extraction and the origin of raw materials. Another criterion is the future relevance of a raw material for our products with regard to the transition to electric mobility. Because raw material and service supply chains are very different we look at them separately.

In 2024, the existing risk areas were expanded to include five additional environmental risk fields. These are in line with the OECD Handbook for Environmental Due Diligence and the EU Battery Regulation. The assessment of the 24 critical raw materials is carried out step by step, starting with the battery raw materials lithium, cobalt, nickel, and graphite.

A detailed list of the general risks of relevant raw materials as well as a supply chain-specific analysis is currently under development and will be published in the Mercedes-Benz Raw Materials Report on our website.

Evaluation of the risk fields

For the assessment of risk fields, we put the logic of the UN Guiding Principles on Business and Human Rights into practice and analyse the extent of a risk ("scale") as well as the number of people affected ("scope").

For this purpose, we take into account relevant reports, studies, expert interviews as well as collaborative work. One example is the Raw Materials Outlook  platform, which we developed jointly with other automotive manufacturers and their suppliers as part of the "Drive Sustainability" initiative. The aim of the collaboration was to create a cross-industry online portal that helps automotive manufacturers identify their human rights and environmental risks in the supply chain.

With the assessment, we identify and prioritise the most salient risks and adjust our measures accordingly. We reflect on the result of our assessment and the risk reduction measures with external stakeholders who have special expertise in the individual raw materials as well as with potentially affected persons and their representatives.

With the assessment, we identify and prioritise the risks with the highest relevance and adjust our measures accordingly. The risks are assessed based on a four-level scale from 0 = minor to 3 = critical Risk.

¹ OECD Due Diligence Guidance to Promote Responsible Supply Chains for Minerals from Conflict and High-Risk Areas.

Industrial mining is always linked with interventions in the environment and thus also with potential effects on the living conditions of the local population. The risks identified in the context of previous raw materials assessments include, for example:

• risks to the health of employees and the local population around the mine sites, e.g. through emissions of dust due to the large-scale transfer of materials and transport operations,
• effects on the surrounding agriculture due to changes in or pollution of groundwater and open water,
• effects on the way of life of the local population, including indigenous communities, in individual cases including resettlement, e.g. due to the land requirements of large mines.

In addition to our own raw material assessments, from which we derive material-specific measures, the use of recognized external standards is a central instrument in order to meet our own due diligence responsibilities. The Standard for Responsible Mining of the Initiative for Responsible Mining Assurance (IRMA)  is of particular importance for us here. The IRMA standard is currently the widest-ranging standard and comprehensively covers the risks associated with the extraction of raw materials. The fact that the results of the audits are published transparently and in full enables the subsequent participation of all the relevant stakeholders in the continuous improvement of the sustainability performance of the audited mining sites.

Since 2021, we have specified the IRMA standard as a precondition for all battery-related contracts, and we require our suppliers to use cobalt, lithium, nickel, graphite, manganese, and copper exclusively from IRMA-audited mines in newly awarded projects. Because the industry-wide application of the IRMA standard is still in its early stages, we are making use of transition periods. With our clear requirement, we accelerate the establishment of the standard in the market under realistic conditions: We are gradually moving towards increasingly responsible practices, with the medium-term objective of a robust certification. We thus expect the supplier to provide at least proof of “IRMA Transparency ” at the respective start of production of the respective procured part and of the achievement of “IRMA 50” or higher three years later.