The challenges of modern cobalt mining are a high-profile example of the ESG risks faced by supply chains.
The primary source of the metal used in electric vehicle batteries and other electronic products is the Democratic Republic of Congo. So-called “artisanal miners” use their bare hands to dig, wash and bag cobalt for meagre wages.
Unfortunately, ESG risks like this are not new. High-profile brands have faced reputational damage from their supply chains over the years.
As ESG regulations intensify, identifying and monitoring risks is essential. For example, impending EU Deforestation Regulation (EUDR) rules could hinder the toilet paper industry. Under the EUDR, products such as virgin wood pulp, coffee, soy, and cocoa, would be banned if not procured from sustainable sources. Buyers must ensure they have sources that meet the new standards, which could take time for agricultural and forestry products.
In the EV supply chain, alternative sources are challenging to find. Currently, the hand-mined cobalt winds its way through the supply chain into all sorts of products, the source deliberately hidden in some cases or just lost in the maze of steps to the final use. Many companies likely source products without knowing it was sourced from a complex web of suppliers.