Published: 29/11/2018

Increasing innovation across technology such as smart phones, hybrid vehicles and battery storage for renewable energy is fuelling rising demand for lithium-ion batteries. While these technologies are positively contributing to society and the environment, the sourcing of materials that go into the production of these technologies, such as lithium and cobalt, have exposed a range of ethical issues such as child labour, modern slavery and militia financing, as well as poor environmental and ecological practices. Given these problems, technology manufacturers need to be aware of where and how their raw materials are sourced, particularly in key lithium and cobalt producing countries such as Argentina and the Democratic Republic of the Congo.

The current major producers of lithium are Australia, Chile, Argentina and China, although Chile in particular is thought to have more than 50% of known economic reserves (mines that are expected to be profitable, making them more attractive to prospectors). Meanwhile, over 50% of the world’s cobalt is mined in the Democratic Republic of Congo, where over 40,000 children are estimated to be employed in artisanal mines which are unregulated and operate illegally. Despite this concentration of lithium and cobalt producers, a key challenge for companies remains traceability.

Despite this concentration of lithium and cobalt producers, a key challenge for companies remains traceability.

Once mined, the materials traverse a complex supply chain, which can involve the smelting of cobalt sourced from both conflicted and non-conflicted areas, before again being transported to be refined. One example is China, which produces 40% of the world’s refined cobalt, and imports over 75% of the raw cobalt from Democratic Republic of the Congo. The refined metal is sold to battery manufacturers, who then on-sell their products to multinational brands.

Regardless of the complexities, end buyers need to put the onus on manufacturers to be aware of their supply chain and transparent in their dealings or face reputational damage from association with human rights violations. In the US, the Dodd Frank law enforces companies to carry out due diligence on their supply chain to ensure they do not come from conflict zones, while Europe has also adopted a similar directive. Just last year, the London Metal Exchange launched an inquiry into cobalt companies listed on its exchange to identify if any are involved with child labour. Australia is only now starting to take initiatives to address this and is currently at the consultative stage.

Apart from labour rights, there have also been reports of environmental issues with lithium production in South America where the water stress index has been classified as being at ‘extreme risk’. As demand for rechargeable batteries grow, companies have a responsibility to prove that their environmentally-friendly products are not profiting from human rights abuses.

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