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Sourcing minerals responsibly with blockchain technology
Sourcing minerals responsibly with blockchain technology
From smartphones, tablets and laptop computers to fleets of electric vehicles, the world increasingly relies on lightweight, powerful and compact lithium-ion (Li-ion) batteries to communicate, work and move. To meet the need for portable power, global Li-ion battery production is projected to double in five years. This will increase demand for the raw materials used to make Li-ion batteries, such as cobalt, nickel, lithium and copper.
The mining sectors producing these minerals are beset with challenges, ranging from risks to environmental health and safety to human rights. They are evident in industrial mining and artisanal and small-scale mining (ASM), where the extraction of cobalt and copper ore often occurs. The ASM sector is known for harsh and hazardous working conditions, including the worst forms of child labor.
Impacts resulting from malpractices in the industrial and ASM mining sectors have not escaped the eyes of non-governmental organizations (NGOs) and regulators. In addition, more conscientious companies from all tiers of the value chain are banding together and pivoting to more responsible sourcing and production practices.
Corporate action to improve conditions in battery materials supply chains is being driven by financial markets, NGOs and consumer preferences. Legislation, such as the European Union Battery regulation, is also becoming a factor.
After conducting a study in the Democratic Republic of the Congo (DRC) that revealed how warlords fund conflict by selling natural resources to Western companies, Dr. Nicholas Garrett, along with his colleague Harrison Mitchell, founded RCS Global Group in 2008. Dr. Garrett became the Group’s CEO. “We proved that we could trace those resources through the supply chain from mine to end product,” says Garrett. “Companies saw that it was possible to get this information and they knew they needed to tackle the problem of how to keep these resources out of their supply chain.”
RCS Global became a leader in collecting and verifying data and providing assurance over the responsibility of practices in supply chains. On any given day, its auditors visit mine sites, smelters, refineries and manufacturing sites. “We apply standards set by international government organizations like the Organization for Economic Cooperation and Development (OECD) as well as key responsible mining standards set by industry or multi-stakeholder initiatives,” says Garrett. “For the past 14 years, RCS Global has built up trust at every tier in these supply chains.”
Increased demand
Global demand for Li-ion batteries is projected to grow at an annual rate of 19% to become a USD 216.5 billion market by 2027
High market size
The market for raw materials used to make batteries is projected to exceed USD 52B by 2027 through growth of EVs and 5G technology
To offer its clients a battery passport, RCS Global partnered with IBM to layer blockchain-based physical commodity tracking technology and complement RCS Global’s world-class assurance data in the industrial sector.
“The core challenge that RCS Global solves is that of visibility of supplier ecosystems and transparency around the level of good practice conformance of each participant in the value chain,” says Garrett. “The partnership with IBM complements RCS Global’s existing capabilities with physical product tracking capacity, enabling our clients to have a real-time view of responsible practice conformance at the product level.”
In 2018, RCS Global started working with IBM to develop and pilot-test the Responsible Sourcing Blockchain Network (RSBN). Now fully deployed, RSBN is gathering more participants as it continues to grow and demonstrate its value. “We use the IBM Blockchain Platform as the foundation for a network of validated companies that can exchange information directly with each other on the blockchain,” says Garrett. “These companies have been audited and found conformant with responsible practices.”
From the time raw materials for batteries are produced at a participating industrial mine site in the DRC, RSBN relies on the IBM® Blockchain Platform to trace the material to a smelter, a cathode plant, a Li-ion battery plant and, finally, to an automobile or electronics manufacturing plant. In addition to providing end-to-end traceability, the blockchain-enabled RSBN platform benefits from RCS Global’s provision of responsibility scores for each participant, based on audits that are conducted.
“RCS Global brings our vast experience working on responsible sourcing at all stages of the supply chain at all times,” says Garrett. “Our collective effort allows participating companies to gain greater efficiency in risk management by combining necessary human-led assurance efforts with technology-led efficiency improvements, particularly in data exchange. This is a demonstration of technology for good, enabling a more effective risk management approach which can have greater impact on conditions in the worldwide minerals sector.”
Documenting proof of initial responsible production of raw materials with an immutable audit trail that is maintained from mining to manufactured end product.
The demonstrated benefits of using the RSBN solution for responsible sourcing includes:
- Viewing product traceability and responsible sourcing data in near real-time by permissioned network participants
- Storing provenance information and certificates of responsible production in a security-rich environment that cannot be tampered with without alerting all participants
- Protecting confidential or competitive information while still sharing proofs of facts
- Promoting trust through decentralized control because no single entity can corrupt the process
- Potentially lowering costs through digitization of paper processes
- Scaling rapidly to accommodate new participants and industries
“Blockchain provides a trusted and secure environment that leads to greater data exchange efficiency, which reduces costs and increases the chance for more positive impact,” says Garrett. “The implementation of blockchain and responsible sourcing is a potential game-changer. It can help build more trust among companies, which can yield greater collaboration for good.”
The focus of RSBN is on large-scale mining operations across a range of raw materials used for batteries. A complementary objective is to link into successful processes, such as Better Mining, which focus on advancing good practices in the ASM sector. In cobalt alone, ASM produces around 15–30% of all the cobalt produced in the DRC. Mineral agnostically, Better Mining operates on over 40 ASM mine sites. “Existing digital traceability and assurance data packages under Better Mining can be connected to blockchains,” says Garrett. This ensures that smaller operators adhering to international standards are not excluded from technology advancements and verified responsible networks.”
Powered by the Linux® Foundation’s Hyperledger Fabric, a modular blockchain framework designed for enterprise blockchain platforms, the IBM Blockchain Platform will enable RCS Global to expand RSBN beyond battery metals into other raw materials that serve corporations in value chains in any global industry.
“We are constantly incorporating the lessons from our work with IBM Blockchain technology,” says Garrett. “Our next evolutionary step will be to look at how we can effectively incorporate AI into our processes, specifically looking at the potential value it can add in the context of more informal economies.”
RCS Global Group (link resides outside of ibm.com) is the leading Supply Chain Mapping, Responsible Sourcing, Responsible Mining, ESG Performance and Traceability services provider. With a core focus on natural resources value chains at all tiers of the supply chain, RCS Global advances its clients’ and partners’ continuous improvement goals through data-generating assurance efforts and data-driven technical solutions.
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