Can Blockchain Improve Sustainability in Cobalt Mining?
Cobalt consumers in the automotive, consumer electronics, and stationary energy storage sectors face a major challenge: the traceability of the material. One example of this challenge is that 40,000 children are estimated to be employed in artisanal mines (ASM) in the Democratic Republic of the Congo (DRC), where nearly half of the world’s cobalt reserves are located. Once mined, the mineral navigates a complex supply chain. This can include the smelting together of cobalt extracted from both ASM and industrial mines, which is then exported overseas. The refined material is sold on to battery manufacturers, which then sell their products to multinational brands. With limited laws or initiatives to support traceability for the metal, the lack of visibility down the supply chain leaves many companies exposed to the breadth of ethical concerns tied to cobalt production.
Can Blockchain Solve Child Labor in the Cobalt Industry?
In January 2019, Ford Motor Company, Huayou Cobalt, IBM, LG Chem, and RCS Global announced plans to use blockchain technology to demonstrate how materials in the supply chain can be responsibly produced, traded, and processed. For this pilot, cobalt produced at Huayou's industrial mine site in the DRC 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 in the US. The group claims that the immutable identity of the information uploaded on to the blockchain will allow it to monitor and assess every step of production from mine to end manufacturer.
What Are the Challenges?
Despite blockchain’s potential to revolutionize the transparency of mining and trade, significant challenges remain. The inherent challenge is finding a way to ensure that the data uploaded accurately reflects realities on the ground. While RCS Global—a London-based organization for responsible supply chains—will serve as the blockchain oracle for this pilot, it is not yet clear how this technology would resolve the issue of validating information that is fraudulent from the outset.
There is also the issue of whether to use public or private blockchains for supply chain management. While public blockchains are generally safer because they are decentralized, the data stored on them is public. This can deter companies that do not want to share supply chain information with competitors, regulators, or customers. As a result, most supply chain pilots are based on private, permissioned blockchains.
Lastly, there are challenges of scalability and speed that make it difficult for blockchain technology to work in the context of supply chain management. Supply chains are moving billions of transactions and large amounts of data, often in real time. By design, blockchain transactions take time to verify, which has become the focus of debates regarding the technology's ability to be scaled to increase throughput. While blockchain developers are testing several solutions (including sidechains) to resolve this issue, it remains to be seen if the technology can work in the context of supply chain management.
What Are the Risks?
In the end, the stakes for fixing the human rights violations in cobalt production are high as consumers become increasingly concerned with how goods are produced. Labor and environmental violations at first- and second-tier vendors can embroil brands in lingering controversies that can permanently damage a firm’s reputation. It is unsurprising that this group of companies are vested in finding a solution. While challenges exist, this initiative should be lauded and supported. I look forward to following this pilot project and other solutions that aim to eliminate labor and environmental abuses in the production of cobalt.