Blockchain could be the Answer for Lithium-Ion Battery Supply Chain Issues
With the increased demand by consumers for cleaner running products, the electric vehicle and tech industries have a major problem: ethically sourcing lithium-ion batteries. The problem? Cobalt.
Cobalt is currently essential to the production of lithium-ion batteries which power products such as electric vehicles, smartphones, and laptops. The element is usually a byproduct of copper and nickel mining,[1] with 50% of the world’s deposits located in the Democratic Republic of Congo[i].
The DRC, which supplies around two-thirds of the planet’s production of cobalt, has been flagged by several human rights groups, including Amnesty International, for their substandard cobalt mining conditions, where “miner deaths and child labor is prevalent”[ii] (see their full report “This is What we Die For”).
Although not yet part of the DRC specific “conflict minerals” list[2], which are regulated by the Securities and Exchange Commission (SEC) under Dodd-Frank 1502 (Conflict Minerals Rule), several institutions have started investigations into the source of the cobalt production in their supply chains. The London Metal Exchange (LME), for example, has now asked suppliers to detail their efforts in order to avoid risk to exposure of cobalt from mines that rely on child labor. This came after complaints that one or more companies may have been selling untraceable cobalt on the exchange.[iii]
Supply chains for lithium-ion batteries can be vast and are often difficult to trace – one such example, from a major cobalt mining company, is below. This supply chain was reported by Amnesty International for Huayou Cobalt, a Chinese company that both operates cobalt mines and purchases cobalt from “licensed traders”[3] in the DRC.
Source: Amnesty International [iv]
In addition to mining, Huayou Cobalt has been purchasing cobalt in the DRC for over a decade. This is where the supply chain gets a bit muddled. For example, Ningbo Shanshan – a lithium-ion battery components manufacturer and Huayou’s largest customer – lists major direct buyers of their products such as Sony, Samsung SDI, and Daimler, among others. However, several of these companies claim they either have no dealings with Ningbo Shanshan, could not confirm their cobalt wasn’t sourced from unsustainable practices from the DRC, or they confirm that none of their cobalt is sourced from the DRC – although this last scenario is highly unlikely, claims the human rights group.
Other companies, such as Microsoft and Apple were unable to confirm with absolute certainty where their cobalt supplies were sourced from. As a multi-billion-dollar tech company with vast resources, even Microsoft struggles with fully identifying its cobalt supply chain:
“Tracing metals such as cobalt up through multiple layers of our supply chain is extremely complex…Tracking the origin of the cobalt metal in [the different compounds used in Microsoft products] to the precise mining area is extremely challenging. Due to our supply chain complexity and the in-region co-mingling of materials, we are unable to say with absolute assurance that any or none of our cobalt sources can be traced to ore mined in the Katanga region. To create such a tracing mechanism would require a large degree of vertical and cross-industry collaboration.”[v]
Samsung SDI similarly noted:
“the company investigated the country of origin of cobalt which is not on the current list of conflict minerals. However, in reality, it is very hard to trace the source of the mineral due to suppliers’ nondisclosure of information and the complexity of supply chains.”[vi]
The diamond market example – a possible solution?
The electric vehicle and tech industries may be able to take a page out of the diamond market’s book.
Blood diamonds, or diamonds sourced through conflict and human rights abuses, have long plagued the precious gem industry. Nobel Peace Prize nominated NGO IMPACT, who recently left the Kimberly Process[4], citing its ineffectiveness, stated in January that:
“There’s no meaningful assurance that a diamond is conflict free. The public is under the wrong impression that the problem is solved. I think it’s time to challenge that narrative again.”[vii]
One company is test-piloting a blockchain program that may solve this issue. In response to a growing number of customer requests for conflict free gems and waning confidence in current legal framework, diamond giant De Beers is now testing blockchain to ensure the sustainability of sourcing their diamonds. Launched in January, the pilot blockchain program is able to track stones of 2 carats or more from the moment they are mined to their purchase by consumers. Spanning the entire value chain, the company is hoping the program (to launch fully later this year) will be adopted industry wide and has the potential to monitor every mined stone.[viii] Though in it’s infancy, this is a promising step in transparency for an industry often associated with corruption and smuggling.
The electric vehicle and tech industries dependent on cobalt should take note.
Is Blockchain the answer?
The essential components necessary for accountability and sustainability in the lithium-ion battery supply chain could be provided by blockchain. Because, by nature, it is a decentralized, distributed and public digital ledger – blockchain could potentially provide the transparency sorely needed to the supply of cobalt – assuming it was implemented from beginning (mining of cobalt) to the end of the value chain (product, i.e. laptop or smartphone battery). Starting with the initial extraction of cobalt as a record, companies throughout the supply chain can be sure as to the source of their material since all logged transactions are across many computers and cannot be tampered with or altered retroactively without the alteration of all ensuing blocks and the collusion of the entire network. Tracking and recording the raw materials throughout the chain to ensure responsible and sustainable practices is just what this industry needs.
As a major part of the future of clean energy, electric vehicles and tech companies can no longer turn a blind eye or claim ignorance as to the source of their raw materials, especially cobalt; where human rights violations through child labour and death due to substandard working conditions is widespread, and well documented (Amnesty International, pg. 53), when the technology to combat it is readily available.
Whether the push for new tighter regulations, more sustainable sourcing, and elimination of child labour in the DRC will ultimately come from NGOs, the mining companies, manufacturing companies, the exchanges that trade the resource, or the eventual consumer of an electric car or laptop remains to be seen, but blockchain could be a hopeful step in that direction.
Sources:
Lewis, Barbara (2018, January 16). De Beers turns to blockchain to guarantee diamond purity. Reuters. Available at: http://www.reuters.comAccessed: 30 April 2018
Marr, Bernard (2018, March 23). How Blockchain Will Transform The Supply Chain And Logistics Industry. Forbes. Available at: https://www.forbes.comAccessed: 30 April 2018
Burton, Mark (2017, December 18). How Batteries Sparked a Cobalt Frenzy and What Could Happen Next. Bloomberg. Available at: https://www.bloomberg.comAccessed: 1 May 2018
De Beers Group of Companies. (2018). Diamond Blockchain Initiative: Assurance Through Technology. Retrieved from: https://www.diamondblockchaininitiative.comAccessed: 1 May 2018
Amnesty International. (2016, January 19). Democratic Republic of Congo: “This is what we die for”: Human rights abuses in the Democratic Republic of the Congo power the global trade in cobalt. Available at: https://www.amnesty.orgAccessed: 29 April 2018
Sanderson, Henry (22 January 2018). ‘Blood diamond’ agreement fails consumers, says NGO. The Financial Times. Available at: https://ft.comAccessed: 1 May 2018
Sanderson, Henry (22 November 2017). LME probes cobalt supplies after complaints over child labour links. The Financial Times. Available at: https://ft.com
Accessed: 1 May 2018
Shedd, Karen (2017). Cobalt. U.S. Geological Survey Webpage. Available at: https://minerals.usgs.gov
Accessed: 30 April 2018
[1] “With the exception of production in Morocco and artisanally mined cobalt in Congo, most cobalt is mined as a byproduct of copper or nickel”. (U.S. Geological Survey Webpage, 2017)
[2] These include cassiterite (tin), coltan (tantalum), wolframite (tungsten), and gold, or their derivatives.
[3] According to the human rights watchdog: “the company does not explain how it selects its suppliers nor if it traces all actors in the supply chain up to the mining areas. The company did not provide any details of whether it tries to ensure that its upstream suppliers conduct meaningful checks to identify the precise source of the minerals that they buy (e.g. where they come from and who was involved in the extraction) or the conditions under which they are mined.” (Amnesty International, pg. 54)
[4] Founded in 2000 and underpinned by a UN Mandate, the Kimberly Process “unites administrations, civil societies, and industry in reducing the flow of conflict diamonds – ‘rough diamonds used to finance wars against governments’ – around the world”.
[i] Shedd, Karen (2017). Cobalt. U.S. Geological Survey Webpage. Available at: https://minerals.usgs.gov
Accessed: 30 April 2018
[ii] Amnesty International. (2016, January 19). Democratic Republic of Congo: “This is what we die for”: Human rights abuses in the Democratic Republic of the Congo power the global trade in cobalt. Retrieved from: https://www.amnesty.org
[iii] Sanderson, Henry (22 November 2017). LME probes cobalt supplies after complaints over child labour links. The Financial Times. Available at: https://ft.com
Accessed: 1 May 2018
[iv] Amnesty International. (2016, January 19). Democratic Republic of Congo: “This is what we die for”: Human rights abuses in the Democratic Republic of the Congo power the global trade in cobalt. (pg. 47) Retrieved from: https://www.amnesty.org
[v] Microsoft’s response to Amnesty International’s query “Does cobalt in the company’s products originate in the DRC?” published in “This is what we die for”.
[vi] Samsung SDI’s response to Amnesty International’s query “Does cobalt in the company’s products originate in the DRC?” published in “This is what we die for”.
[vii] Sanderson, Henry (22 January 2018). ‘Blood diamond’ agreement fails consumers, says NGO. The Financial Times. Available at: https://ft.comAccessed: 1 May 2018
[viii] De Beers Group of Companies. (2018). Diamond Blockchain Initiative: Assurance Through Technology. Retrieved from: https://www.diamondblockchaininitiative.com
