New research compiled from AI-powered supply chain risk platform Infyos has revealed that 75 per cent of the lithium-ion battery supply chain may be linked to severe human rights abuses.
Human Rights Abuses – Forced (and Child) Labour
Infyos’s analysis, which drew on government datasets, NGO reports, news articles, social media, and proprietary data, has revealed widespread human rights abuses in resource-rich countries where raw materials such as lithium and cobalt are mined and refined for lithium-ion batteries. These abuses, particularly involving forced and child labour, were found to be most prevalent in the early stages of the supply chain, notably during the extraction and processing of these critical materials.
Where?
According to the analysis, much of this abuse appears to be concentrated in regions like Xinjiang, China, and countries with fragile governance, such as the Democratic Republic of Congo. In Xinjiang, allegations of forced labour are particularly severe, with accusations that many companies operating in the region are complicit. For example, it’s been suggested that companies that mine and refine lithium and cobalt in these regions may be involved in labour abuses, including instances where children as young as five are engaged in dangerous mining activities.
Link To The Battery Industry
The demand for lithium-ion batteries has surged in recent years primarily due to the increased production of electric vehicles (EVs), the growth of renewable energy storage systems, and the expansion of portable electronic devices like smartphones and laptops. Governments and industries pushing for decarbonisation and net-zero emissions targets have also further driven this demand.
The battery industry’s connection to the alleged human rights abuses highlighted by Infyos stems from manufacturers sourcing components or materials from potentially unethical companies within their supply chain. These unethical practices are further obscured by complex business relationships, such as joint ventures or equity investments, where shifting ownership structures make it difficult to uncover the true extent of the exploitation.
As highlighted by Sarah Montgomery, CEO & Co-Founder, Infyos: “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supply chains and the complexity of supply chain legal requirements means current approaches like ESG audits are out of date and don’t comply with new regulations”. Sarah Montgomery added: “Most battery manufacturers and their customers, including automotive companies and grid-scale battery energy storage developers, still don’t have complete supply chain oversight.”
So Many Suppliers
One of the challenges that electric vehicle and battery manufacturers may have in identifying their supply chain risks is that they often have very complex supply chains, perhaps as many as 10,000 suppliers across their network, from mines to chemical refineries and automotive manufacturers. Human rights abuses upstream, e.g. at the raw materials stage (as identified by Infosys) may therefore be difficult to spot.
Not Just Infyos
Infyos isn’t alone in suggesting human rights abuses in the lithium-ion battery supply chain. For example:
– Back in 2016, Amnesty International exposed child labour and hazardous working conditions in cobalt mining in the DRC, showing that some of the world’s largest electronics and automotive companies have not adequately addressed these risks.
– In 2023, the Business & Human Rights Resource Centre reported human rights violations and environmental damage related to lithium and cobalt mining in China, South America, and the DRC, with forced (and child) labour commonly involved.
– Also in 2023, Radio Free Asia reported uncovering human rights abuses and ecological damage in nickel mining in Indonesia and the Philippines, which provide critical materials for lithium-ion batteries, impacting local communities’ health and livelihoods.
Scrutiny
However, the global battery supply chain is now under increasing scrutiny, particularly from regulators in Europe and the US. This is primarily due to growing concerns about human rights abuses such as forced (and child) labour in countries like the Democratic Republic of Congo (DRC) and China’s Xinjiang region. Legislation such as the EU Battery Regulation and the US Uyghur Forced Labour Prevention Act (UFLPA) are pushing companies to improve supply chain transparency and accountability. Non-compliance with these laws can result in products being blocked from key markets and heavy penalties, which could damage the reputation of the battery industry and slow down the energy transition. For example, companies are now at risk of losing investor confidence and facing financial penalties if they fail to manage these risks, with many already struggling to meet these stringent regulatory requirements.
What Can Be Done?
To tackle these challenges, companies must adopt proactive measures to ensure ethical sourcing throughout their supply chains. This could include enhanced due diligence, where firms closely monitor their suppliers and implement robust Environmental, Social, and Governance (ESG) policies. Collaborating with independent auditors, utilising AI-based supply chain risk management tools like those provided by Infyos, and fostering stronger partnerships with suppliers may also be essential strategies. Also, companies must comply with emerging regulations, such as the battery passport system in the EU, which mandates rigorous supply chain traceability by 2027. By doing so, firms can not only avoid penalties but also align with investor expectations and contribute to a more sustainable future.
What Does This Mean For Your Business?
With alternative battery types still some way off, as the demand for lithium-ion batteries continues to grow, so too does the urgency to address the human rights abuses linked to their supply chains. The findings from Infyos, alongside investigations by organisations like Amnesty International and the Business & Human Rights Resource Centre, serve as shocking reminders of the ethical complexities and the suffering behind these critical technologies. The global shift towards electric vehicles and renewable energy solutions must not be built on exploitation.
However, regulatory pressure is mounting, and companies that fail to ensure transparency and ethical sourcing will face significant reputational and financial risks. The path forward therefore does appear to be clear. By embracing stringent due diligence practices, enhancing supply chain visibility through AI-powered tools, and adhering to emerging regulations like the EU Battery Regulation, the industry can foster a more responsible and sustainable future. That said, in the real world, many companies may be deterred by the high costs of implementing such measures, especially in complex global supply chains. The vastness and opacity of these networks, coupled with competitive pressures to keep costs low, may make ethical sourcing less of a priority. Also, inconsistent enforcement of regulations and varying levels of consumer concern about supply chain ethics could further reduce the incentive for businesses to fully embrace transparency and accountability that’s needed.
Ultimately, the energy transition depends not only on technological innovation but also on a commitment to human rights and ethical practices. For the battery industry to truly support a greener future, it must first ensure that its foundations are just and free from exploitation.