The move away from fossil fuels is centered on lithium-ion batteries, but significant reforms to the battery supply chains are required to end widespread forced labour and child labour abuses.
According to research from AI supply chain risk platform Infyos, 75% of the company’s in the global battery market have ties to one or more supply chain participants accused of grave human rights violations, especially the battery supply chains.
Many of the biggest automobile, energy storage, and electronics brands in the world are among the majority of significant battery makers and end users that are exposed, affirms the latest report.
Through compiling thousands of government statistics, NGO reports, news stories, and social media sources, Infyos’ AI supply chain risk platform is used to build this new industry data through proof.
The AI solution from Infyos was created especially for the battery industry. It can now identify and give confidence ratings to allegations of human rights abuses, child labour with speed and precision that was previously impossible by automating the collection, cleaning, and classification of unstructured data.
In order to determine which companies a customer may be connected to throughout the supply chain and where there is exposure to or allegations of human rights abuses, the AI-driven platform is collaborating with some of the biggest renewable energy and automotive companies in the world. It does this by combining open-source data with additional proprietary data sources.
Child Labour in Lithium Refining Facilities
The extensive violations of human rights that have been discovered range from five-year-old children mining cobalt minerals in dangerous settings to people being compelled to labour in lithium refining facilities under the fear of receiving little or no compensation. Severe human rights incidents are happening all around the world, but they are particularly common in resource-rich nations like Madagascar and the Democratic Republic of the Congo which have unstable and dishonest regimes.
But the majority of the serious human rights abuse claims concern Chinese mining and refining companies that supply raw materials to batteries worldwide. This is especially the case in northwest China’s Xinjiang Uyghur Autonomous Region (XUAR), where journalists, government agencies, and non-profit organizations have already publicly accused the battery, automotive, and solar industries of using widespread forced labor.
Batteries and Electric Vehicle Industry
Manufacturers of batteries and electric vehicles have intricate supply chains that can include over 10,000 suppliers, ranging from chemical refineries and automotive manufacturers to mines. It is challenging for companies buying batteries to identify their supply chain risks because human rights violations commonly happen upstream in the supply chain, particularly at the raw material mining and refining stages.
The connection between the battery industry and these incidents is that manufacturers either enter into business relationships, such as joint ventures or equity investments concealed in intricate and shifting ownership structures, which conceal the reality of the unethical connections, or source materials or components from unethical companies in their supply chain network.
Growing emphasis is being placed on sourcing, especially in the US and Europe, where corporations risk breaking both present and future legislation if they don’t solve the problems. This is tarnishing the reputation of the battery sector and impeding investment in the worldwide battery market, which is expected to reach a value of around $500 billion by 2030.
More laws, including the US’s Uyghur Forced Labor Prevention respond (UFLPA) and the EU’s Battery Regulation, are being phased in; therefore, corporations need to respond quickly to keep their products on the market.
The UFLPA forbids the importation of products manufactured in China’s Xinjiang province using forced labor. The consequences of breaking the rules can be severe: early this year, inspectors blocked vehicles they discovered to be in violation of the regulations.
The chair of the US Senate Finance Committee has charged that automakers are “sticking their heads in the sand” regarding forced labour in their supply chains.
A follow-up report suggested that the Department of Homeland Security and Customs and Border Protection take additional steps to reinforce the prohibition on forced labour in automotive supply chains, such as adding CATL, the biggest battery cell manufacturer in the world, to a list of businesses that are prohibited for their involvement with forced labour.
While the UK’s Modern Slavery Act has proposed raising the sanctions for noncompliance to 4% of global annual turnover, Europe is following suit with its ban on forced labour.
European restrictions pertaining to batteries are also getting stricter. Beginning in 2025, more stricter supply chain visibility and risk management are required under new EU battery regulations that will take effect between 2024 and 2036. Failure to comply will result in items being removed from the European market.
These urgent supply chain regulations, which the industry is finding difficult to meet, are the cornerstone of the much-discussed battery passports in 2027. Due to their stringent criteria around supply chain visibility and due diligence, the EU Battery Regulation and UFLPA are widely regarded as the gold standards for the battery business. As a result, many companies that operate outside of these countries voluntarily strive to comply with these regulations.
In addition to maintaining their license to operate and avoiding expensive fines, businesses can actively expand by resolving challenges within their supply chain: According to a PwC study, 89% of institutional investors are either contemplating investing in companies with ESG flaws or have already decided against it.
Investor pressure on human rights is increasing as they demand greater supply chain transparency and risk management in exchange for loans or investments in order to reduce their own financial risk.
Human rights violations in battery supply chains are becoming more widely known due to financial and regulatory pressures, but more industry effort to address these violations is still required to advance battery applications and prevent the 2050 net-zero emissions targets from completely collapsing, stated its official report.
Key Comments
Sarah Montgomery, CEO & Co-Founder, Infyos, said: “The relative opaqueness of battery supply chains and the complexity of supply chain legal requirements means current approaches like ESG audits are out of date and don’t comply with new regulations. Most battery manufacturers and their customers, including automotive companies and grid-scale battery energy storage developers, still don’t have complete supply chain oversight.”
Tony To, Co-founder & CTO, said: “Our platform is designed to provide users with insights into the complexities of the battery supply chain so they can take proactive measures to identify and mitigate risks. By leveraging AI in our technology we’ve created a system that delivers accurate data despite the complexity of the battery industry and most importantly provides users with simple actionable mitigations to collaborate with their suppliers to address risks and improve the sustainability of the industry.”
Jeff Williamson, Head of Sustainability, Infyos, said: “Companies manufacturing or purchasing batteries are at risk of having their products blocked at the market, further delaying and increasing the costs of renewable energy projects or tarnishing their reputation because of human rights risks.”
Sarah Montgomery, CEO & Co-Founder, Infyos, said: “We have already seen how forced labour incidents in supply chains for the solar industry have blocked the largest solar suppliers from the US market and slowed down the transition to clean energy: as the battery industry faces the paradigm shift to electrification, the lessons learnt in solar must be applied to the battery industry if the energy transition is to stay on track.”
Following the success of Infyos’ research publications on supply chain risk, it will host a webinar on battery human rights risks on Thursday 3 October: click here
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