A Turning Point Demonstrated by the Assessment of 2,086 Suppliers The Reality of Hyundai Motor's Supply Chain ESG Innovation Seen Through the 2026 Sustainability Report and July Mutual Growth Agreement — Examining the Response Strategy of South Korea's Representative Automaker in the Era of 'Risk-Based Due Diligence' Following the Implementation of the EU Omnibus Directive
As global supply chain ESG regulations entered a dual phase of 'easing and refinement' in 2026, Hyundai Motor's supply chain management strategy has passed a distinct inflection point. Published on June 30, the '2026 Hyundai Motor Sustainability Report (based on FY2025)' and the group-level mutual growth agreement signed with the Korea Fair Trade Commission on July 7 serve as two pillars demonstrating that Hyundai Motor's supply chain ESG has progressed from document-centric management to an execution phase reaching down to raw material extraction sites. From 2,086 supplier written assessments and 127 on-site audits disclosed by Hyundai Motor to inspections of mines and smelters in the Democratic Republic of Congo and Indonesia through an independent third-party institution—while these are figures disclosed by the company itself, the magnitude of the shift is not minor.
Written Assessments for 2,086 Companies, On-Site Audits for 127 Companies… The 'Scale' of Due Diligence Has Changed
According to the 2026 Sustainability Report, Hyundai Motor conducted ESG written assessments targeting a total of 2,086 domestic and overseas suppliers throughout 2025, and performed on-site audits on 127 of these suppliers. While written assessments serve as a primary gateway to screen environmental, human rights, labor, health, and safety risks based on data submitted by suppliers, on-site audits are secondary verification procedures visiting actual business sites to verify the gap between documents and reality. The report stated that for 25 suppliers identified during this process as having potential regulatory violations, the establishment and implementation of corrective action plans have been completed.
A notable aspect is the methodology for selecting audit targets. According to Hyundai Motor's revised Responsible Minerals Policy in August 2025, on-site audit targets are selected through a risk-based approach that comprehensively considers the supplier's country of origin, industry sector, product type, and preliminary evaluation results. Rather than a formal audit distributing identical questionnaires to all suppliers, this method concentrates resources on high-risk areas. This points in the same direction as the latest trends in EU regulations, which will be examined later.
From Cobalt Mines to Nickel Smelters… 58 Improvement Tasks Identified by a Third-Party Institution
The most prominent progress in this reporting season is the in-depth verification of the battery raw material supply chain. In its '2026 Responsible Minerals Report' published in May, Hyundai Motor stated that it conducted on-site audits of a total of 3 mines and smelters located in the Democratic Republic of Congo and Indonesia in 2025 via RCS Global, an independent third-party auditing institution. The targets include one integrated cobalt and copper mine and smelter in the Democratic Republic of Congo, one nickel smelter in Indonesia, and one nickel mine in Indonesia. Hyundai Motor's responsible minerals officers also accompanied the audits to identify on-site risks, the report explains. The audits were conducted across all areas of human rights, labor, environment, and governance, applying the OECD Due Diligence Guidance, the EU Battery Regulation (EUBR), and IRMA, a core standard of the responsible mineral sourcing industry initiative. While describing Indonesia as a region not officially designated as a CAHRA (Conflict-Affected and High-Risk Area), Hyundai Motor's report noted that it preemptively included the nickel mining process in the audit targets in consideration of environmental pollution issues raised during extraction.
As a result of the audits, a total of 58 non-conformities were identified across the 3 sites. Broken down by severity, no critical non-conformities were identified, while 47 major non-conformities and 11 minor non-conformities were found. By category, audit management systems and social responsibility (health, safety, and labor conditions) received the most citations with 18 each, followed by environmental responsibility (14) and governance (8). Examining by site, the cobalt and copper facility in the Democratic Republic of Congo showed no major human rights violations such as forced labor, child labor, or involvement with armed groups, but was cited for leaving large-scale erosion of tailings facilities unaddressed, the temporary suspension of ISO 14001 environmental management system certification, and the absence of a dedicated safety engineer. The Indonesian nickel mine maintained a good level of on-site management, retaining ISO 14001 and 45001 certifications and the local Ministry of Environment PROPER 'Green' rating, but lacked upstream supply chain governance systems such as a responsible mineral sourcing policy and procedures for identifying high-risk areas. The Indonesian nickel smelter possessed a mineral tracking system and sourcing policy, but excessive disciplinary deduction clauses in foreign worker contracts and a lack of hazardous material storage and emergency evacuation facilities were identified as areas for improvement.
Hyundai Motor stated that it is establishing corrective action plans for each business site in cooperation with the independent third-party institution regarding the 58 non-conformities and is managing implementation status. Specifically, installation of secondary storage containers for hazardous chemicals, supplementation of emergency exit signs and lighting, and introduction of automated patrol systems for tailings facilities utilizing drones are underway. The company added that it plans to expand audit targets to 8 mines and smelters in 2026.
Forced Labor Risks and Global Initiatives… UFLPA and CSDDDD Response Systems
The company explains that this strengthened due diligence is a preemptive measure to respond to global supply chain regulations such as the U.S. Uyghur Forced Labor Prevention Act (UFLPA) and the EU Corporate Sustainability Due Diligence Directive (CSDDD). The 2026 Sustainability Report also includes content stating that penalties for suppliers falling short of sustainability standards have been tightened and that a real-time forced labor risk screening system has been introduced across the supply chain. In addition, human rights due diligence was conducted for 47 global subsidiaries and business sites. Through the Supplier Code of Conduct and Responsible Minerals Policy, the company manages 22 types of responsible minerals, including conflict minerals (tin, tantalum, tungsten, and gold) as well as battery minerals such as cobalt, lithium, nickel, and natural graphite. Approximately 93% of suppliers responded to the 2025 mineral usage survey (CMRT, EMRT, AMRT). The company also explained that starting in 2026, it is requesting tier-1 suppliers to sign 'RMAP-conformant Smelter Use Pledge Forms,' inducing this principle to be applied step-by-step down to tier-2, tier-3, and lower-tier supply chains. Hyundai Motor also participates in global industrial associations such as the Responsible Business Alliance (RBA), the automotive supply chain initiative Drive Sustainability, and the Responsible Minerals Initiative (RMI).
Changes in the Regulatory Landscape: Implementation of the EU Omnibus and the Rise of 'Risk-Based Due Diligence'
Hyundai Motor's actions are intertwined with the realignment of the global regulatory environment. Omnibus Directive I (Directive (EU) 2026/470), which streamlines EU sustainability regulations, was officially adopted by the EU Council on February 24, 2026, published in the Official Journal on February 26, and took effect on March 18. Related reports cite the reduction of applicable targets and the postponement of implementation as core features of the amendment.
Legal experts view that the revised CSDDD has further clarified a risk-based approach that prioritizes the identification and assessment of high-risk areas. Accordingly, some opinions note that relying solely on the method of uniformly distributing identical questionnaires to all tier-1 suppliers to substitute for due diligence may present limitations. However, aspects regarding domestic legal transposition methods by member states and detailed implementation standards following the Omnibus amendment still remain undetermined, requiring continuous monitoring from the perspective of domestic exporting companies.
The center of gravity for regulatory response is not limited to Europe. Hyundai Motor is simultaneously exposed to a multi-layered regulatory environment, including import regulations targeting forced labor linked to specific regions—such as the U.S. Uyghur Forced Labor Prevention Act—and ongoing discussions on institutionalizing sustainability disclosures domestically. The company stated that it operates supply chain mapping and risk screening programs on an ongoing basis.
Payment Conditions 'from 60 Days to 10 Days'… What the July Mutual Growth Agreement Targets
Another pillar of supply chain ESG is the social (S) area, namely the mutual growth structure with suppliers. On July 7, Hyundai Motor Group signed the 'Hyundai Motor Group Mutual Growth Agreement' with the Korea Fair Trade Commission as well as tier-1 and tier-2 suppliers in Pangyo, Seongnam-si, Gyeonggi-do. Attendees at the agreement ceremony included Fair Trade Commission Chairperson Joo Byung-ki, Hyundai Motor Group Planning and Coordination Division President Seo Gang-hyun, representatives from 12 affiliates including Hyundai Motor, Kia, Hyundai Mobis, Hyundai Steel, Hyundai Engineering & Construction, and Hyundai Rotem, alongside officials from approximately 150 suppliers.
The core of the agreement is a dramatic improvement in payment terms. Hyundai Motor Group decided to pay delivery prices for tier-1 suppliers within an average of 10 days after closing, significantly shorter than the statutory payment deadline of 60 days. For tier-2 and tier-3 suppliers, rather than a structure of directly shortening payments, support is provided through training, monitoring, incentives, and the expansion of the shared growth payment system to induce tier-1 suppliers to shorten payment deadlines for tier-2 suppliers. Shared growth payment is a system that supports tier-1, tier-2, and tier-3 suppliers in encashing delivery prices early and procuring funds at low interest rates based on the credit of the top-tier purchasing company. Hyundai Motor Group plans to reflect tier-1 suppliers' shared growth payment usage performance in evaluations and incentives to promote the adoption of the system down to tier-2 and tier-3 suppliers. The Fair Trade Commission estimated that approximately 5,500 suppliers belonging to Hyundai Motor Group's supply chain will directly benefit from this agreement.
While payment condition improvements appear to be a financial issue, they are connected to supply chain sustainability in that suppliers' cash flow stability serves as a prerequisite for safety investments, expansion of carbon reduction facilities, and securing ESG personnel.
AI and SDV Transition Period: Infrastructure for Supplier Training and Technical Support
What distinguishes this mutual growth agreement from past win-win growth agreements is that support for future technology transitions has been placed at the forefront. Hyundai Motor Group operates a group-level system supporting suppliers during the transition process to future businesses such as AI, Software-Defined Vehicles (SDVs), autonomous driving, robotics, Advanced Air Mobility (AAM), and hydrogen energy. Hyundai Motor and Kia operate training in SDVs, electrification, and autonomous driving alongside training in AI, software, ESG, carbon neutrality, and cybersecurity, while Hyundai Mobis supports suppliers of robot component technology. Hyundai AutoEver is in charge of AI training and certification acquisition, Hyundai Steel of operating mutual growth funds and unit price linkage training, and Hyundai Transys of ESG response consulting.
At the agreement ceremony, President Seo Gang-hyun stated that suppliers' competitiveness is Hyundai Motor Group's competitiveness and that the group will pool its entire capabilities to prevent suppliers from falling behind during the future mobility transition. Meanwhile, Hyundai Motor Group has previously announced plans to invest 125.2 trillion won domestically from 2026 to 2030 to strengthen competitiveness in electrification, SDVs, robotics, and hydrogen fields, and support for supply chain transition is expected to proceed in tandem with this massive investment.
Supply Chain ESG Spreading to Affiliates… Mobis Purchases Totaling 157 Trillion Won Over 3 Years
The entry of supply chain ESG into the execution phase is spreading beyond finished vehicles to affiliates across the group. In its Sustainability Report 2026 published at the end of June, Hyundai Mobis disclosed that purchase payments made to suppliers over the past three years amounted to approximately 157 trillion won. The company stated that it is upgrading greenhouse gas emission (Scope 3) management systems across the entire supply chain, including tier-2 and tier-3 suppliers, and will fully drive supply chain ESG into the 'execution phase' through consulting and facility support for suppliers. Research and development investments related to sustainable management have also exceeded 5 trillion won over three years.
Hyundai Wia also placed sustainable supply chain management at the very top of its three major material issues in its 2026 Sustainability Report. The company is pursuing carbon neutrality and RE100 achievement by 2045, and the RE100 implementation rate across all business sites as of 2025 was tallied at 14.9%. The Slovakian subsidiary has already achieved RE100 through the purchase of renewable energy certificates. In the vertically integrated structure extending from automakers to component makers and material producers, the fact that each stage has begun to possess its own supply chain ESG system means that the risk management density of the group's entire value chain is increasing.
Decarbonized Supply Chain: RE100 Achievement in 3 Regions and 2045 Carbon Neutrality
Progress is also confirmed from the environmental (E) perspective. Hyundai Motor stated in its report that it achieved regional RE100 by covering electricity usage with renewable energy or offsetting it through renewable power certifications across all business sites in Europe, North America, and India. HMGMA (Hyundai Motor Group Metaplant America), Hyundai Motor Group's new manufacturing plant in Georgia, USA, signed a 147MW solar Power Purchase Agreement (PPA) at the group level. The company has presented a goal to achieve RE100 and carbon neutrality across all business sites by 2045, and plans to induce carbon neutrality by the same year in the supply chain sector through energy transition cooperation with major suppliers and carbon reduction in core raw material supply chains.
Methodologies for supply chain carbon management are also becoming more concrete. Hyundai Motor has stated that it reviews the carbon emission status of major suppliers, selects key management suppliers to provide guidelines, and pursues joint responses linked to design technologies such as material recycling and expanded utilization of new materials for raw material companies with high carbon emission shares. Added to this are biodiversity risk management reflecting the Taskforce on Nature-related Financial Disclosures (TNFD) guidelines and the upgrading of waste battery recycling systems, expanding the scope of supply chain environmental management beyond climate to encompass natural capital as a whole.
Remaining Tasks: Depth of Verification and Beyond Tier-2 Suppliers
Challenges naturally remain. First is the issue of audit depth and verification. Out of 2,086 written assessments, on-site audits stood at 127, of which in-depth audits of the mineral supply chain through third-party institutions were limited to 3 cases. Even considering the intent of the risk-based approach, how to guarantee the reliability of written responses and the objectivity of criteria for selecting audit targets remains an area requiring continuous verification. Second is supply chain visibility beyond tier-2 and tier-3 suppliers. Despite the symbolic progress of mine and smelter audits, grasping risks across the multi-layered subcontracting structure in real time remains an unsolved task for the automotive industry as a whole. Third is the consistency of performance disclosures. As global disclosure standards converge on the ISSB and KSSB systems, demands for third-party verification regarding supply chain audit results and Scope 3 data calculation methods and boundaries are bound to grow stronger.
KBR Insight
It is our publication's judgment that what should be read in Hyundai Motor's 2026 supply chain ESG moves is not a mere listing of individual achievements, but a realignment of strategy. Even amid a phase of regulatory easing, in-depth verification was rather strengthened for the highest-risk segment of the mineral supply chain, while human rights and environmental due diligence, payment improvements, and technical transition support were bundled into a single supply chain strategy. This can be read as an approach redefining ESG not as a compliance cost, but as a matter of supply chain competitiveness. Choosing the risk-based approach also aligns in practice with the direction required by EU regulations, but it is more reasonable to view it as a strategy to preemptively secure a common denominator capable of responding wherever the regulatory landscape converges. The education and technical support contained in the mutual growth agreement can also be interpreted as a kind of 'just transition' device for the supply chain to prevent suppliers from falling behind during the electrification transition.
However, the real test begins now. Whether corrective actions for the 58 non-conformities identified across the 3 sites in Congo and Indonesia are actually completed, whether the audits expanding to 8 sites in 2026 settle into a repeatable system rather than a one-off event, and whether the effects of the mutual growth agreement—claimed to reach some 5,500 suppliers—are proven by data are the key points to watch over the next 1 to 2 years. Supply chain ESG credibility stems not from declarations, but from repeated verification.