By RCS Global Group
Ever since the launch of the OECD Forum on Responsible Mineral Supply Chains thirteen years ago, April has been a critical month in the field of responsible sourcing, and battery minerals have been at the centre of this focus. From copper to cobalt, but also lithium and nickel, this month has proved that downstream awareness of responsible sourcing risks beyond cobalt and 3TG is increasing while impacting the upstream sector and supporting the development of enhanced due diligence programs.
Copper has for long been outside of the core focus of due diligence and responsible sourcing requirements, but this changed last month. Adopting a proactive stance, the International Copper Association (ICA) announced the launch of its new responsible copper initiative, the Copper Mark, at the OECD Forum. As an assurance system and voluntary program, the initiative will be open to all industry members and cover mine sites, smelters and refiners.
Just as the Cobalt Industry Responsible Assessment Framework (CIRAF), the Mark does not create a new standard but bases its requirements on existing tools, including the Responsible Minerals Initiative (RMI)’s Risk Readiness Assessment (RRA) and the Sustainable Development Goals (SDGs), combined with third party assurance. This new development will strengthen the ability of downstream users to assess upstream producers and better understand midstream and upstream risks in copper.
However, as for the past few years, cobalt remains high on the agenda and multiple sessions at the OECD Forum were devoted to cobalt responsible sourcing efforts both downstream and upstream. Bringing greater awareness to corruption risks in cobalt sourcing, the Brussels-based non-profit, Resource Matters highlighted the presence of corruption risks in the sector and the lack of focus of downstream players regarding this issue through the publication of a new report. Also worth noting is the London Metal Exchange (LME)’s opening of a public consultation period on its new sourcing rules that require all brands, including cobalt, listed on the LME to undertake a red flag assessment in line with the OECD Due Diligence Guidance by the end of 2020 and perform audits by the end of 2022 if red flags are raised.
Addressing non-profits and consumers concerns, the LME will also require this risk assessment to be publicly accessible two years later, by 2024. The pressure on upstream players appears to bear fruit as increased awareness of sourcing issues motivated the Eurasian Resource Group (ERG), one of the world’s largest cobalt producer, to join the United Nations (UN) Global Compact, covering risks from human rights to corruption and environment. Similarly, the RCS Global Group-implemented Responsible Sourcing Blockchain Network (RSBN) welcomed a new member with Volkswagen Group joining Huayou, LG Chem and Ford Motors on a responsible cobalt sourcing blockchain platform powered by IBM. This decision will allow the German car manufacturer to ensure that part of its supply complies with internationally-recognised sourcing standards, including the OECD Due Diligence Guidance.
Volkswagen appears to be at the forefront of efforts for battery minerals sourcing and particularly responsible sourcing. Illustrating the increasing pressure on non-cobalt metals, the company signed a long-term memorandum of understanding with Ganfeng Lithium for the supply of lithium materials and highlighted its medium-term strategy to source from European deposits, decreasing its exposure to supply chain risks.
It will however be interesting to assess the ability of the company to control the incoming material flows in its supply chain, as major risks from South American lithium sources will likely be investigated by non-profits in the near future. More generally, the report published by the University of Technology Sydney (UTS) on behalf of Earthworks is the first in-depth analysis of the risks of increasing demand for 14 minerals, including battery minerals, and the potential mitigation measures.
Finally, the Democratic Republic of the Congo (DRC) keeps the attention of the responsible sourcing community and new developments will profoundly impact the sourcing of minerals from the country. While cobalt producers, including Glencore, MMG and ERG are still considering legal action against the new mining code and the imposition of a 10% tax on cobalt, other miners, including Barrick and Ivanhoe have met with President Tshisekedi and reaffirmed their commitment to the Congolese mining industry. The government is also adopting a position of strength and will require companies to adopt mandatory due diligence systems in two new decrees to be published and just released a rule forcing miners to sub-contract with domestically-owned companies.
The RCS Global Group provide intelligence, advisory and auditing in minerals responsible sourcing with a focus on battery metals, including cobalt and 3TG.