Episode 3: Material concerns about batteries

with Gillian Davidson 29 July 2022 | Podcast
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Welcome to the third episode in our podcast series on the responsible sourcing of minerals. We have made our way to the battery producers. Can they reconcile the increasing social appetite for both cobalt and responsible mining? We are joined by Gillian Davidson, Chair of the Global Battery Alliance.

Åsa Borssén:
What goes into your car? As new minerals are rapidly making their way into our everyday life, we’re increasingly concerned about the footprint of the materials that underpin our modern lifestyles. The fungibility of natural resources has helped some business players hide behind the complexity of global supply chains. To shed light on one of the most obscure commodities, join me as I pull back the curtain on the supply chain of cobalt – from deep underground, all the way to your driveway. I’m your host Åsa Borssén, and this is Highgrade.

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Åsa Borssén:
Welcome to Highgrade and this podcast series on the responsible sourcing of minerals. Our ability to store electricity is central to the ongoing energy transition, and cobalt is a critical input into high performing batteries. As the global demand for batteries continues its spiralling ascend, so does the demand for cobalt, a metal tainted with a reputation of human and environmental damage? Can battery producers reconcile the increasing social appetite for both cobalt and responsible mining? I’m here with Gillian Davidson, Chair of the Global Battery Alliance.

Gillian, welcome to the Natural Resources podcast.

Gillian Davidson:
Thank you. It’s great to be here.

Åsa Borssén:
The ability to store energy is key to a low-carbon world, placing battery technology at centre stage. How is the global market for batteries coping with this?

Gillian Davidson:
Great question. And it’s a big question mark. As you said, batteries are going to be absolutely critical to enable the Paris Agreement. We’ve seen that 30% reduction in power and transport sector emissions, which are the key sectors, is going to be required and batteries is what’s going to enable that. But to put that in context and the scale of mining that we will then need to deliver the commodities for the electric vehicles that have been committed, we’re seeing that it’s going to be more than the totality of all mining to date. So it’s the biggest purchase order ever in history. You know, we’re going to see a 19 fold increase between now and 2030 in the demand for electric vehicles and batteries. So the extremity of the supply-demand issue is going to be absolutely enormous. In very basic terms, most mineral supplies, they’re not going to keep pace with that demand. And at the same time, we’re going to see prices probably increasing, cobalt prices more than doubled in 2021. We’re going to see the total demand for copper rise by 40%. So it’s a big question mark.

Åsa Borssén:
And is this a threat to the battery producers, would you say?

Gillian Davidson:
It is a big complexity in the supply chain to manage, of course, and we’re seeing that already in terms of battery producers looking for where they can source commodities from, taking much more direct arrangements with mining companies. We’re seeing them maybe play in the space of do they enter the mining space themselves. But it really is probably one of the biggest threats to our transition, to a low energy economy. And the battery producers are really the ones who are having to unlock that dilemma.

“If we're going to have a green transition, we also have to have a just transition.”

- Gillian Davidson

Åsa Borssén:
And we’re going to be talking about how these minerals and metals are produced. Because consumers around the world are increasingly concerned with how the products they buy are made. And so the concept of responsible sourcing has gained prominence. Are battery producers feeling this heightened social scrutiny?

Gillian Davidson:
Absolutely, absolutely. And this was a huge impetus for the creation of the Global Battery Alliance, which I Chair, in 2017. At that time was the real focus in on issues of human rights and especially child labour in the cobalt supply chain. But there’s been this realisation that there are big issues and it’s very complex and it’s very urgent across the sector. And it’s being felt in a number of different ways. And I think in addition to NGOs and civil society really bringing increased attention to some of those, especially human rights, corruption, environmental risks, we’re also seeing the downstream buyers, the large OEMs, really looking at their supply chains and how they apply their own due diligence and their own responsible sourcing standards and pushing that requirement upstream. And then at the same time, we’re seeing that the investors are really scrutinising, you know, the risks in their investments and in the supply chain. And finally, governments are very much looking at the space in terms of how can the support, how can they regulate? In the EU, we’re seeing the adoption of the sustainable due diligence directive, which is really pushing due diligence requirements across the supply chain, a new battery legislation, increased policy attention from countries such as Germany. So, we’re really feeling you know, that that heightened scrutiny from all sides, not just from consumers.

Åsa Borssén:
How do you define responsible sourcing?

Gillian Davidson:
Yeah, I mean, responsible sourcing for us is very much about how we manage that full spectrum of social, ethical, environmental and human rights impacts that a supply chain can have. But beyond that, how do we embed it into our business and how we can build capacity of the supply chain itself. And at the GBA, we very much see that can only be done as a collaborative effort. These issues are way beyond the scale of any one part of the sector or any one organisation. And so the ability to collaborate, to work together in partnership really will help us get to more responsible supply chains.

Åsa Borssén:
And speaking of the battery supply chain, cobalt is a key input into battery production. It’s a rather controversial supply chain, cobalt has even been called a ‘blood mineral’. But what is your experience here, Gillian, what is life like in a cobalt mine?

Gillian Davidson:
Yeah, as you said, cobalt is critical to the decarbonisation narrative and batteries and the role of cobalt actually play quite a unique opportunity in addressing that nexus between what are the risks to people, the environment and the energy transition. And you may have seen, there was a recent Vanity Fair article, which actually captured sort of two ends of the cobalt narrative. One of that being the image that you talk to, often associated with artisanal and small-scale mining in the DRC; images of child labour, poor working conditions, environmental degradation. And in this Vanity Fair article actually went to the other end of the spectrum, which was looking at an artificial intelligence enabled and exploration for cobalt in Greenland, funded by Breakthrough Energy, which is an entity funded by people such as Bill Gates and Jeff Bezos. So, you’re seeing extreme ends of that that cobalt narrative. But we have to remember that two thirds of the world’s cobalt reserves are in the Democratic Republic of the Congo. 80% of that approximately from industrial and large-scale mining, but 20% of that from artisanal and small-scale miners. So there’s no one story in cobalt. But the story around human rights and livelihoods in the DRC is the urgent one. And there are huge concerns but increasing efforts around how do we start to address some of these unsafe working conditions, issues of corruption, child labour and environmental damage. I think one of the most important shifts in the narrative that we’ve seen, is the recognition of the importance of ASM as a vital lifeline and livelihood for hundreds of 1000s of people in the DRC. And how do we recognise and support that so that those members of the supply chain can also benefit from this huge growth and the numbers that we’ve just been talking about, and that’s something that also the Global Battery Alliance we think a lot about and how can we support especially the DRC Government efforts to formalise ASM so that they can be part of this energy transition.

Åsa Borssén:
I want to take a step back and talk about where battery producers are in the supply chain. Who do battery producers source their cobalt from? Do they buy from, for example, individual refineries? Or is it commodity traders?

Gillian Davidson:
When there’s such huge demand for a commodity there’s a lot of effort to source. And what we’re seeing is maybe some more innovative approaches emerging in terms of, as I said, working more directly with mining companies strategically themselves. But you know, 60% of cobalt refining or 65% is in is in China. And so a lot of the effort is around working with the refiners themselves, who obviously source the primary product, and in many cases, blend that product. And that’s where we see a lot of the challenges with regards to assuring responsible supply chains and sourcing when you do have that that blending aspect, at a refinery level.

Åsa Borssén:
So you’re saying that is the biggest obstacle to traceability?

Gillian Davidson:
Yeah, I mean, I think that’s part of the complexity of any commodity, when you when you have a blending perspective. What we’re seeing is a lot of effort, I would say, coming at the opposite ends of the supply chain, one from downstream players, especially the large auto and electronics companies, who are really trying to map all the way up their supply chain to the mine site. And so trying to unravel at the refinery level. And at the same time, especially the mining companies, really trying to enhance transparency around their own product, and how that then flows downstream. So really it’s taking an effort from all aspects of the supply chain to unravel that.

Åsa Borssén:
There is definitely an effort that you have to put into this. Would you say that responsible supply chains are more expensive?

Gillian Davidson:
That’s a really interesting question. And there’s enormous resources going into securing the supply of commodities for batteries, whether it’s from industry, also from governments and from investors. So, yes, there is effort that is required. But frankly, it really needs to be part of doing business. It’s no longer a nice to have. I would argue that the financial cost of responsible supply chains, you know, in no way can be compared to what can be the human environmental costs when they’re not responsible.

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Åsa Borssén:
As we buy products, we are often unaware of the human and environmental cost of producing them. You are listening to a Highgrade podcast series on responsible sourcing, diving deep into the supply chain of cobalt, a most controversial metal. In this episode, I’m talking with Gillian Davidson, Chair of the Global Battery Alliance. We discuss how battery producers are responding to the increased societal scrutiny of their supply chains.

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Åsa Borssén:
You make the point that responsible sourcing should be internalised in the cost of doing business. Let me ask you, though, do you think consumers would be prepared to pay more for responsibly sourced products?

Gillian Davidson:
Well, in a recent consumer survey, 78% of consumers said that they would prioritise buying where there was a clear ethical sourcing. So you’re obviously seeing that there’s a willingness, but what we’re not seeing is a willingness to pay more. I think that the consumer expects that their iPhone and their Tesla should already be child labour free and on track for the Paris goals and respecting human rights. So there’s an absolute priority to buy, but not willingness to pay more.

Åsa Borssén:
We’re going to move on and look at solutions. And here is a question I’ve asked in this series to all the guests. One can think of two opposite approaches to the problem, either to completely shut out irresponsible producers or to engage them to try and improve production standards. Where would you say battery producer stand on this?

Gillian Davidson:
Yeah, that’s definitely been something that’s we’ve seen a significant shift on and there’s this growing consensus that actually it’s important not to be thinking about eradicating, but really focusing on developing and supporting and formalising around ASM. Prior strategies of many of the downstream players was around de-risking to ensure that their supply chain was clear of ASM. But you know, in reducing their own company risk, we’re actually seeing that it can increase risks in those communities and in those economies by attaching stigma to the product. And really, if we’re going to have a green transition, we also have to have a just transition. And that really is about how do we bring people along with us? How do we support livelihoods and improvements in human rights and quality of life, especially for the most impacted who are marginalised and areas who have been most negatively impacted for decades by commodity production? So, the narrative has definitely shifted from de-risking and eradication to how do we support formalisation and legitimate participation?

Åsa Borssén:
Another approach would be perhaps to substitute cobalt with other minerals, so a cobalt-free battery. And is that a feasible scenario?

“It's the biggest purchase order ever in history.”

- Gillian Davidson

Gillian Davidson:
Yeah, I mean, we’re seeing a lot of desire, and some bold statements from companies about reducing or eliminating cobalt from batteries. And seeing an acceleration of the kind of no-nickel no-cobalt battery, much more towards what would be a lithium-iron-phosphate type of batteries. But at the same time, you know, we’re also seeing that a lot of this comes down to costs. And what we have in the cobalt and nickel space, in terms of the batteries, are proven efficiencies. A lot of governments are starting to indicate that recycling of batteries may become mandatory, and commodities, like cobalt are completely recyclable. And there’s a broader kind of conversation there about one, again, removing cobalt around those commodities, you’re then shutting out huge parts of the economy to access the benefits of that, for example, in the DRC. But also, if we think about the environmental consequences and life of the battery, and creating a second life and recycling, commodities such as cobalt are still in a better position for that.

Åsa Borssén:
We’ve talked now about how responsible sourcing is gaining prominence. And so manufacturers may be tempted to secure access to critical minerals from their own mines?

Gillian Davidson:
Well, yeah, I think we’ve already seen some examples of battery producers investing in cobalt mines. The main one for example, in May last year, CATL invested a quarter of China Molybdenum Kisanfu copper cobalt mine in the DRC. And I also saw that the CEO of Wheaton Precious Metals just earlier this year was talking about EV makers pushing for their own intermediary role in mining. So I think that’s a really interesting trend for us to watch. But I would say that the main trend that we’re seeing is actually where producers are sourcing cobalt much more directly from mines themselves, rather from suppliers or intermediaries, really, given the potential for supply shortages, you know, going direct to source. Tesla, for example, they’ve just released their recent impact report indicating that they sourced 50% of their cobalt directly from mines in 2021.

Åsa Borssén:
So that would kind of kill two birds in one stone, you know where you’re sourcing from, but you’re also avoiding security of supply issues.

Gillian Davidson:
Exactly. You get full transparency over your supply chain, ability to trace and track that, and you’re securing your own supply.

Åsa Borssén:
Looking forward, do you see the battery industry adopting a responsible sourcing certification?

Gillian Davidson:
Absolutely. And I think in many ways this already exists. What we’re seeing is the uptake of standards and guidance, such as the OECD due diligence guidance, and also the responsible mineral assurance programme of the Responsible Mineral Initiative. But we’re also seeing shift with regulations. As I mentioned, for example, the EU Directive on Due Diligence, we’re going to start to see this much more as a compliance requirement rather than just a buyer requirement. But I think at the same time, though, the space is still fragmented. And to your question on adopting a certificate, I think that that fragmentation, it makes it difficult to compare and so there’s growing calls for alignment between many of these requirements and regulation frameworks along with the downstream approaches. But beyond sourcing, though, and the flagship initiative that we have the Global Battery Alliance is really trying to think about the battery as a whole and the entire value chain, right through to second life and the circular economy. And so a lot of the work that we’ve been doing is looking at the concept of a ‘Battery Passport’, which would be a digital quality seal for a battery. And that contains the appropriate information that you would need to understand the environment, social and governance qualities of that battery. And that will be agreed through multi-stakeholders, and then would have the ability to be traced through the lifecycle. And so it’s not just about sourcing, are the commodities in this battery meeting certain requirements, but it’s also through the production and through the use of that battery right through to its second life.

Åsa Borssén:
Does that technology already exist?

Gillian Davidson:
It’s interesting, because it’s not actually about technology, it’s actually about setting the benchmark for a good battery. So what are the indicators that help us and help all stakeholders, whether it be consumers or investors or the buyers themselves to understand the qualities of that battery, we then have the ability to work with a lot of technology that’s really taken off in the last the last few years around traceability, especially using Blockchain and we’re seeing a lot of initiatives, a great one, for example, is Re-source in the cobalt space, which is bringing together the main industrial cobalt miners in the DRC. Working together increasingly with the supply chain to enable full transparency, or traceability using a blockchain.

Åsa Borssén:
The final question: 10 years from now, what is your vision for battery producers and responsible sourcing?

Gillian Davidson:
The vision, especially from the GBA is that we actually do have this ‘Battery Passport’ concept. And it means that we take away the guessing and we take away the concerns because we will know that for each of our batteries, we’ll know their provenance and where they’re from, we’ll know that they’ve been responsibly sourced and produced and that we know that the battery will actually have a continuing life and therefore enable a circular economy and that’s what will start to get us towards our Paris targets for 2050.

Åsa Borssén:
Thank you so much for joining us today.

Gillian Davidson:
Thank you. It’s been great conversation.

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Åsa Borssén:
And thank you for tuning in to this Natural Resources Podcast series as we continue our journey along the cobalt supply chain. In this episode, we have considered the manufacturing of batteries. Battery producers are under pressure from consumers and investors to clean up their supply chains. But ultimately, their products rely heavily on small artisanal cobalt miners. Efforts to formalise their operations need to ramp up.

Thank you to our sponsor, the German Federal Ministry for Economic Cooperation and Development through BGR.

Our next stop in this journey will be the car manufacturers. When a product requires contributions from 60,000 suppliers, how can you be sure of the legacy from your supply chains? Join me to find out. Until then, so long!