Blockchain for the mining industry: Ethical cobalt production

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From powering our smartphones, enabling electric vehicles to break into the mainstream, or massively improving renewable energy storage, lithium-ion battery technology is transforming consumers’ lives. Battery technology is making our cities greener while allowing the devices we rely on each moment of the day to operate more efficiently.

Yet there is a conundrum. How do we ensure these benefits are not offset by the ethical, social and environmental risks associated with the production, trade and transformation of materials critical to this battery technology?

At the heart of this challenge is cobalt. Cobalt was once seen as a by-product of the copper mining process but has seen its demand — and price — skyrocket in recent years due to its critical stabilizing role in lithium-ion batteries. Approximately two-thirds of global cobalt production happens in the Democratic Republic of Congo (DRC), which also has a significant part of global production in copper, as well as tin, tantalum, tungsten and gold (3TG or “conflict minerals”).

Add greater visibility and efficiency across supply chains

In the DRC’s industrial mining sector, environmental and social risks are a reality. The small-scale mining operations in cobalt, copper and 3TG that dot the vast country and sustain the livelihoods of approximately two million people, are often beset with profound challenges including human rights violations, as well as conflict-financing (in the case of 3TG in isolated parts of the country). How can battery makers, and the global brands that have to use these materials in their products, be sure that they source them responsibly and in a way that is aligned with NGO and consumer standards?

Starting with cobalt and the battery metals supply chain, this is the challenge we are trying to address in a new responsible sourcing blockchain pilot being delivered in collaboration among IBM, Ford, LG Chem, Huayou Cobalt and RCS Global. As a group we represent the major stages of a typical cobalt supply chain, from a mine in the DRC, refining and upgrading in Asia, and to an end user in the United States or Europe. Through this pilot of a simulated sourcing scenario, we will work to trace and validate ethically-sourced cobalt from mine to end-user on the blockchain. Cobalt produced at the Huayou Cobalt’s industrial mine in the Democratic Republic of Congo will be traced through the supply chain as it travels from mine and smelter to LG Chem’s cathode plant and battery plant in South Korea, and finally into a Ford plant. Each actor will be validated using responsible sourcing standards developed by the Organization for Economic Cooperation and Development (OECD) to assess and confirm that each participant meets the obligations outlined by the international governing body. An audit trail will thus be created on the blockchain, linking to immutable records with full details of the production characteristics of the cobalt in question at each stage of the supply chain.

In this application, blockchain will not replace real-world human-led auditing or due diligence obligations. Going to mine sites, refineries and downstream manufacturing entities to assess management systems and operations is still needed to validate responsible practices. But the data gathered during assessments will enable full traceability and transparency. For a validated participant, blockchain also offers a view into production and responsible sourcing data that can be seen by permissioned network participants, in near real time. This will make the process of building traceable and fully responsible material supply chains far more transparent and faster. New blockchain-enabled network of custody systems, including book and claim models, can be developed in ways that have the potential to revolutionize the responsible sourcing field.

Once we have completed the pilot with cobalt, our aim is to then create an open, industry-wide blockchain platform to validate the full range of raw materials used in consumer products and expand the network so that a wider range of participants can join to enable greater responsibility in commodities sourcing.

From time to time, we invite industry thought leaders, academic experts and partners, to share their opinions and insights on current trends in blockchain to the Blockchain Pulse blog. While the opinions in these blog posts are their own, and do not necessarily reflect the views of IBM, this blog strives to welcome all points of view to the conversation.

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