Mining cobalt, an essential raw material for lithium-ion batteries, is associated with high human costs. More than 60 percent of the global supply comes from the Democratic Republic of the Congo (DRC), around 45 percent from large mining operations. The remaining 15 percent comes from small mines in the Democratic Republic of the Congo, where children and adults work in harsh and dangerous conditions to mine ore by hand.
It is these working conditions as well as environmental damage to the mined areas that have turned the eyes of the world to the high-profile automotive and electronics industries. Their products – smartphones and laptops for electric vehicles – are dependent on lithium-ion batteries and thus on cobalt.
What drives sustainable procurement initiatives?
Companies that promote sustainability and social justice work seriously to keep cobalt, which is mined by hand, out of their supply chains. Similar concerns apply to other minerals that pose a responsible sourcing risk, including lithium, nickel, copper and the 3TG group (tin, tantalum, tungsten and gold), as well as materials that, if improperly disposed of, pose a hazard to the environment.
The drivers for responsible sourcing of raw materials are strong and range from corporate governance to consumer, shareholder and other stakeholder requirements to auditing Governments, Supervisory authorities, Financial markets and NGOs. Until recently, however, demonstrating responsible sourcing to all these interested parties was an elusive goal, which posed significant reputational, legal and commercial risks.
The benefits of blockchain for responsible sourcing networks
Today the Responsible Sourcing Blockchain Network (RSBN) is building up Blockchain platform and assured by the RCS Global Group, it provides the transparency, confidence, and security necessary to demonstrate responsible sourcing for cobalt. In addition, the underlying infrastructure that we built for RSBN can be used to launch a sustainable procurement initiative.
The proven benefits of using Blockchain Technologies for sustainable procurement networks include:
- An immutable audit trail that documents evidence of the initial ethical manufacture of a raw material and its maintenance at every step of the transfer from mine to the final manufacturer
- Secure, tamper-proof storage of origin information and certificates of responsible production
- The ability to share evidence while protecting confidential or competitive information
- Decentralized control so that no single unit can damage the process and promote trust
- Lower costs through digitizing a paper process, potential reduction in audits and lower transaction costs
- Scalability for new and new participants Industry sectors
Blockchain and RSBN: How It Works
Traditionally, miners, smelters, traders and manufacturers rely on third-party audits to determine compliance with generally accepted industry standards. For RSBN, the RCS Global Group offers this security through its mineral Supply chain Practice mapping and testing, evaluating network participants against standards and best practices established by the Organization for Economic Co-operation and Development (OECD) and the Responsible Minerals Initiative (RMI).
RSBN uses the blockchain’s shared, distributed ledger to track production from mine to battery to final product and to capture information about the level of responsible sourcing at every level of the supply chain. Downstream businesses can access verified evidence that they support and contribute to responsible sourcing practices, which they can then share with auditors, corporate governance bodies, and even consumers.
At every step, the participants control who can see which information. Once added to the general ledger, certifications and other documents cannot be edited, changed or deleted. These properties make blockchain a trustworthy platform for exchanging data between different companies and at the same time prevent fraud.
Delivering business value across the supply chain
Networks such as RSBN encourage and enable collaboration between suppliers and customers across complex supply chains of minerals and other sources of conflict, creating business value for all involved. Here are, for example, advantages that RSBN participants realize.
Automobile manufacturer are preparing to bring much more electric vehicles to market in 2021 and 2022, creating new demand for Li-ion batteries and the cobalt they need. Through responsible procurement initiatives like RSBN, they can market their products as sustainably produced as well as sustainably on the street. Responsible sourcing of cobalt also contributes to corporate citizenship efforts related to fighting poverty, supporting human rights and preventing environmental degradation.
Mines and smelters Put yourself at the top of the supply chain where responsible sourcing efforts begin and where the real challenges lie. Keeping hand-mined cobalt out of batches of product requires process changes, financial investment, and a commitment to fight corruption. By demonstrating their results through audits and certifications, these companies are positioned for preferred status as suppliers to battery manufacturers.
Consumers have spoken. In a recent study, 77 percent of consumers surveyed said that buying from sustainable or environmentally conscious brands is important. Electric vehicles, smartphones and laptops are high visibility products whose value is closely linked to their rechargeable, long-life Li-ion batteries. Being able to demonstrate responsible sourcing can help attract customers, establish reputational value, and prevent setbacks such as legal action.
Get started quickly with your responsible sourcing solution
RSBN is a ready-to-use network based on the blockchain platform and secured by RSC Global. The founding members of RSBN include the Ford Motor Company, the Volkswagen Group, the global battery manufacturer LG Chem and the cobalt supplier Huayou Cobalt. Also members are Volvo Cars, Fiat Chrysler Automobiles, and other companies involved in supply chains for minerals with “sources of conflict”.
Companies who want to ensure that the raw materials they use have verified and documented standards for responsible sourcing can join RSBN either as an individual company or with their entire supply chain and begin realizing value quickly. Alternative, Blockchain services can leverage RSBN’s assets and infrastructure to jointly create a responsible sourcing network for other industries and raw materials. Talk to us today about how you can demonstrate your company’s Responsible Sourcing Policy compliance.
These Use case Following the story of sustainability through blockchain, further examples will follow of how blockchain services are used in various industries to solve real-world problems. Be sure to read our latest articles about Invoice comparison, Digital ticketing, Financial nettingand upcoming articles or schedule a free private lesson consultation to find out how you can benefit from this solution.