Blockchain Paves Path for Ethical Cobalt Mining?

The Global Cobalt Sulphate Market which was valued at US$ 970.5 Bn in 2018 is expected to rise to US$ 1120.21 Bn by 2026 at a CAGR of 1.81 % during the forecast period, a report issued by Maximize Market Report on November 17, stated.

The rise and enhancement in hybrid and electric vehicles, and the growing popularity of the use of Li-ion batteries in vehicles and separating cobalt with restricted crude materials are the primary factors responsible for this demand. The report states that the battery segment accounted for the highest share of the cobalt market in 2016, owing to the highest consumption of batteries in passenger electric vehicles, consumer electronics, and stationary storage.

As the demand for Cobalt rises, so does slavery and child abuse in the mines where this metal is mined. According to studies by UNICEF and other humanitarian organizations, over 40,000 children are believed to be working in Cobalt mines in the Democratic Republic of Congo (DRC), which is a primary supplier of the metal. 

Children as young as four can be seen scurrying for the mines for the metal with their bare nimble fingers. Their childhood has been snatched from them as they toil for over 12 hours a day amidst toxic specks of dust rising from barren land, in the scorching hot sun. “ When I wake up every morning, I can feel a sharp pain in my shoulders, the dust burns my eyes and I have been coughing for over four weeks now,” says Richard, a child who was rescued from one such mine.

Children like Richard are at a very high risk of lung diseases and even blindness as they work long hard hours looking for the chocolate brown strip of metal used in our mobile phones, gadgets, and electric cars.

Understanding the problem

Human rights organizations like Amnesty Internation have long blamed electronic car companies and smartphone companies for their lack of concern for the growing child labor and slavery in cobalt mines in the DRC, especially in mines in conflict zones. Similarly in another report, ‘Is This What We Die for’, the organization blamed companies for not validating the upstream sources of cobalt.

“Out of all the cobalt mined in the DRC, roughly, 20% of it is “artisanally mined” (ASM) –it is mined by hand – and children do much of that mining,” says Ajay Serohi, Project Manager at TESLA and a former Indian Army officer who was stationed in DRC’s North Kivu region back in 2010. 

Reason for Increase in Demand for Cobalt

Source: Bloomberg New Energy Finance

Over the years China has evolved to become the leading Electric Vehicle manufacturer in the world with an average sales growth rate of 19.2 percent. According to reports, China’s electric vehicle industry has witnessed an annual growth of 124.6 percent between 2012-2017. “The EV battery is the single most expensive component, is already being produced at an accelerated rate. “Failing to produce the EV batteries in significant quantities and at a competitive cost will limit the EV country’s production capacity,” says Serohi who has led several critical supply chain projects in TESLA. 

 According to him, most EV models today use the (Nickle, Manganese and Cobalt) NMC cathodes that comprise roughly 52% nickel, 24% cobalt and 24% manganese, on top of the ever-present lithium (16%). “One key downside to NMC cathodes is their relatively high cobalt content, which exposes manufacturers to significant price risks and challenges relating to sustainable sourcing. Cobalt prices rose over 120% in 2017 due to a global supply shortage, while its prevalence in the DRC where the use of child labor is rampant, poses ethical concerns for battery suppliers,” he said.

The introduction of blockchain technology to monitor the supply chain could help in drastically reducing child labor in the cobalt mining industry. “Barricading of information in the incumbent institutions bound by political norms has mostly squandered transactional value to the middlemen and resulted in a skewed distribution of wealth, scarring whole generations of humanity. Blockchain is a technological institution that provides the shared reality to enable humans to lower the uncertainty about one another removes middlemen in the exchange of value and uplifts human values through inclusive growth.”

 How can blockchain technology help solve the problem?

Children at an artisan mine in Kialo, Congo.Photo By Julien Harneis – Flickr: Mining in Kailo, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=20396807

The main problem most companies face today is murky supply chains. It is a well-known fact that companies use cobalt from suppliers who are not concerned about where the mineral is coming from. 

 Blockchain technology can ensure a transparent flow of data along the supply chain. “The Merger of (Internet of Things) IoT with Blockchain would provide transparency on data points all along the supply chain in real-time in a peer to peer decentralized and crypto secure ledger, so that immutable records are created in the chain that can be shared and stored along the way. 

 Additionally, companies can examine sources, investigate industry certifications, track restricted or dangerous components, and discover storage condition anomalies. Serohi also believes that consumers are making more ethically right choices when buying products and using this buying power to force the suppliers to provide better visibility and validation of ethical as well as sustainable mining.

According to him, the Blockchain technology can also be used for:

Provenance Tracking: Big companies and organizations have many elements in their supply chains. Due to this, it becomes almost impossible to keep track of each record even for multinational corporations. The lack of transparency leads to cost and customer relations issues which ultimately dilute the brand name. Serohi added that blockchain technology companies should keep track of all relevant steps. 

Cost Reduction: The real-time tracking of a product in a supply chain with the help of a blockchain reduces the overall cost of moving items along the chain. According to a survey of supply chain workers, conducted by APQC, a firm dedicated to best practices,process and performance improvement and knowledge management, and the Digital Supply Chain Institute (DSCI), more than one-third of people cited reduction of costs as the topmost benefit of the application of blockchain in supply chain management.

 Blockchain provides consensus: There are no disputes in the chain regarding transactions because all entities on the chain have the same version of the ledger. Everyone on the blockchain can see the chain of ownership for an asset on the blockchain. Records on the blockchain cannot be erased, which is important for a transparent supply.” Supply chains contain complex networks of suppliers, manufacturers, distributors, retailers, auditors, and consumers. A block chain’s shared IT infrastructure would streamline workflows for all parties, no matter the size of the business network. Additionally, a shared infrastructure would provide auditors with greater visibility into participants’ activities along the value chain,” commented Serohi, who has led several projects for Tesla, which happens to be the only EV company to make efforts in using less cobalt and cobalt-free batteries in their upcoming cars. “We have started using nickel-cobalt-aluminum-based (NCA) battery cells, which uses very little cobalt as compared to batteries used by other car companies.” He further stated that Blockchain technology can contribute to ethical consumerism as it makes it possible to tag and track each bag of mined Cobalt for its ethical norms and the various other attributes assigned in the records. 

“Each bag of cobalt produced by the miner would then be sealed, tagged, and entered on the blockchain via a mobile device along with details such as weight, date, time, the miner’s name, and even photos. From there, each step in the supply chain would involve each person taking custody of the bag recording additional information on the blockchain. The result is an immutable record of every step that bag of cobalt took, from mine to smelter, that buyers or any other third party can view.”

No Easy solution

Although Blockchain may help ensure that the minerals used for EV batteries and Smartphones come from slavery and child abuse free mines. It does not really solve the issue of poverty in the conflict-ridden nations like DRC. According to Good Shepherd International Foundation, an international charity organization, which is actively working to help children get out of mines, states that– that companies cannot just walk away from the problem by imposing a de facto boycott on DRC’s cobalt. As this would be a terrible blow to the country’s economy and the people living in the mining regions.  

So What can we do?

Getting the children out of mines and into schools is not just the responsibility of the government of DRC but also a moral responsibility of all the stakeholders involved however this is easier said than done, as it requires a collaborative effort from all stakeholders.

“The Government of DRC, International Charities, Human Rights Organizations, businesses and consumers alike need to join hands in fostering a safe environment for children in the mining regions of DRC to ensure that they are not forced into mining and are kept away from any kind of harm,” says Serohi.