Each year the electric vehicle (EV) market share grows as government incentives and improved technology make fully electric or hybrid vehicles more attractive to consumers. Almost every original equipment manufacturer (OEM) in the automotive industry has changed gears to increase EV production and innovation, positioning EV suppliers to benefit from the emerging trend. The benefits must be balanced with the risk, however, as increased production has led to more awareness of the materials used in EV production, and the processes used to extract them.
Cobalt is an essential component of the lithium-ion batteries used to power most EVs. The Democratic Republic of the Congo (DRC) is the world’s largest producer of mined material containing cobalt, and the region is considered a high-risk area for miners due to armed group activity and poor government oversight. In recent years, mining operations producing cobalt have been the target of non-governmental organization (NGO) investigations to determine the prevalence of child labor. The ensuing reports have helped spur a global shift toward responsible cobalt sourcing in corporate supply chains.
Learn about best practices for incorporating cobalt into your responsible minerals program in our ebook, Cobalt: Responsible Sourcing in Your Supply Chain.
An incentive for Electric Vehicle Suppliers to Source Responsibly
The automotive industry is leading the voluntary adoption of cobalt reporting, adding the mineral to existing conflict minerals programs. These new initiatives from OEMs put upstream pressure on EV suppliers to perform due diligence activities, and provide country of origin information and chain of custody assurances. Through levers such as the Production Part Approval Process (PPAP), OEMs are able to pressure suppliers to meet specific conditions. This is one tool OEMs may use in order to ensure responsible processes are being followed throughout the supply chain.
There is ample indication that such processes would be worthwhile for EV suppliers. In Deloitte’s 2019 Global Automotive Supplier Study, by 2025, electric drivetrain and battery/fuel cell suppliers were projected to increase their market share by 306 percent and 266 percent respectively. More traditional automotive suppliers, like those manufacturing exhaust systems, were projected to lose 10 percent market size.
The Automotive Industry Action Group (AIAG) signaled the industry-wide shift toward responsible cobalt sourcing when it renamed its AIAG Conflict Minerals Work Group the Responsible Materials Work Group.
Global Regulations
The Dodd-Frank Wall Street Reform & Consumer Protection Act has led to increased corporate due diligence surrounding conflict minerals originating in the DRC and surrounding countries. In 2021, the European Union Conflict Minerals Regulation will come into effect, expanding the list of regions of concern and possibly leading to the inclusion of additional minerals mined in conflict-affected and high-risk areas (CAHRAs). Cobalt was not named in either legislation, but industry practices that resulted from the Dodd-Frank Act have led to more effective cobalt reporting tools that electric vehicle suppliers may leverage.
The Cobalt Reporting Template (CRT) was created by the Responsible Minerals Initiative (RMI) to encourage greater supply chain transparency for cobalt sourcing. Similar to the Conflict Minerals Reporting Template (CMRT), the CRT is a free, standardized reporting template to help track the use of cobalt and provide effective due diligence based on the Organisation for Economic Co-Operation and Development (OECD) guidance.
How Assent Can Help
Assent Compliance provides companies with a supply chain data management solution to realize responsible minerals goals through automation, centralized risk identification and analysis. Leveraging industry-standard templates like the CRT, the Assent Compliance Platform enables the efficient survey of a supply chain for greater transparency. To learn more, contact us today.
