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A kilogram of cobalt mined by professionals earning an honest wage looks exactly the same as a kilogram of cobalt mined by child labour — and that’s a huge problem for honest operators.

In 2016 Amnesty International parted a warning shot across the bow of major tech companies.

It issued a report on the growing issue of human rights abuses in the cobalt mines of the Democratic Republic of Congo [PDF], saying as many as 40,000 children were working in cobalt mines in the south of the country.

The cobalt mined from these mines found its way to wholesale suppliers, which then shipped cobalt off downstream processors, which in turn sold the finished product to manufacturers of electric goods.

Cobalt is a key ingredient in lithium-ion batteries, which are underpinning the electric vehicle revolution and allowing electricity grids to go 100 percent renewable by adding battery storage.

It’s driving demand of cobalt through the roof, and given roughly 60 percent of the world’s cobalt comes from the DRC, questions are being asked about whether the clean energy revolution is being paid for by unethical mining practices such as the use of child labour.

Amnesty has repeatedly called on tech companies such as Apple, BMW, and Samsung SDI to publish information on their supply chains to make sure unethical mining practices aren’t present — which they have.

But many still don’t, and the issue is showing no signs of going away — and not only is tech companies’ inaction leading to unethical mining practices continuing, but it could slow the adoption of green energy solutions.

“Every stage of the battery lifecycle, from mineral extraction to disposal, carries human rights and environmental risks,” Amnesty’s International Secretary General Kumi Naidoo said earlier this year.

“Without radical changes, the batteries which power green vehicles will continue to be tainted by human rights abuses.”

In an age where consumers are increasingly socially-conscious, that’s a huge point.

“With a climate crisis looming, consumers have the right to demand that products marketed as the ethical choice really stand up to scrutiny,” Khoo said.

READ: Why blockchain will be vital to Australian agriculture’s fortunes

“We need to change course now, or those least responsible for climate change – indigenous communities and children – will pay the price for the shift away from fossil fuels.”

But increasingly, the problem isn’t getting tech manufacturing companies to acknowledge the problem of unethical mining — it’s finding a solution.

Security Matters (ASX:SMX) CEO Haggai Alon know this better than most.

“Being ethical and moral is part of their brand”

While Security Matters is providing a blockchain ‘track and trace’ solution to a variety of verticals such as agriculture, chemicals, medical cannabis, and technology manufacture he told Star Investing that the part of the initial spark for the technology came from the tech sector.

“I remember a few years ago we were talking with technology companies, and they were talking about the need to ethically soruce raw materials for their products,” he said.

“Ethical issues relate to reliability of demand…they go together, because they were seeing customers start to demand companies have high ethical standards.

“If customers stop buying, then manufacturers will look for other sources of supply — cutting out a stable source of cobalt.”

Security Matters’ technology can ‘mark’ and object with a chemical barcode which doesn’t alter the object’s physical state.

A unique reader can then detect whether that barcode has been applied to the object — providing the end user visibility over where that object came from.

“It’s the next generation of IOT, because it provides the ability to create a ‘digital twin’ to the physical good along the whole supply chain,” Alon said.

Verification then takes place using a blockchain ledger, meaning a potential end-to-end solution — all from the single provider.

“The ability to provide visibility across the whole supply chain will make the difference — and for the first time create transparency and trust among all stakeholders,” Alon said.

It’s the sort of blockchain-backed circuit-breaker solution that tech companies and honest miners have been crying out for — as not only are customers demanding greater visibility over the supply chain, those working for the tech manufacturing companies are too.

“Without being cynical, tech companies have their own self-esteem and being ethical and moral is part of their brand,” Alon said.

But looming on the horizon, beyond customer and internal demand for ethical sourcing of cobalt, is the spectre of regulation — and the risk of being cut off from key markets because of it.

Miners want a solution before lawmakers force them into it

While moves to increase ethical sourcing are being made by market forces such as customer demand, if manufacturers and miners aren’t able to come up with a solution — regulators will start to clamp down.

For example, already Australia and the UK have modern slavery bills — which require large companies to outline the risks of slavery within their supply chains — signalling that governments in wealthy jurisdictions won’t just ‘look the other way’.

The conversation is starting to turn to raw materials supply to electric vehicle manufacturing as well.

The European Union has been trying to work out how it can secure a sustainable and plentiful supply of the minerals needed to become an EV powerhouse.

As part of this, it’s been doing a whole bunch of regulatory work, and in October 2017 the European Commission what it called the ‘European Battery Alliance’ between itself, key industry players, member states and the European Investment Bank.

It thinks Europe will be able to create 10 to 20 gigafactories’ (the places that make the batteries from raw materials such as cobalt) worth of demand — and it doesn’t want others to take that market.

But a ‘strategic action plan’ to make Europe a centre of production doesn’t just want a ‘sustainable’ source of raw materials — but one untainted by unethical mining.

One of the main action points in its plan is to “promote ethical sourcing of raw materials for the batteries industry”.If it can’t rely on industry to use ethical sourcing, then the spectre of regulation looms.

The message is clear:

If you can’t prove the raw materials have been mined ethically, you don’t get access to the massive European market.

But Alon says the industry should work to prove an ethical supply chain before that happens — not just because it will help avoid the use of child labour, but because it will be good for themselves.

“Mining and mineral mining is a big industry with a lot of people involved…and I think pushing the bar of how this industry operates will do a huge contribution to economics and many people and companies,” he said.

“It will do no good for the economy and no good for sustainability if people stop buying those minerals because they’re worried those minerals have been sourced in an unethical manner.

“The solution therefore is to drive standards in mining of those minerals as a first step — but that only works if you can show people that you’re acting, and I think we can play a role in that.”


This content is produced by Star Investing in commercial partnership with Security Matters.  This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.