What to do about it. Options for risk management
Disengagement is no longer an option
As we have established, disengagement from specific battery metal supply chains is not an option given heightened demand and competition plus the comparatively concentrated supply. A company simply cannot redirect its supply chain away from high risk producers or regions in the upstream. Equally in the midstream, disengagement with China is also impossible given its dominance within battery metal processing.
Companies have to act.
Three options for response: baseline compliance, active engagement, industry leader
From an external stakeholder perspective, and that of a growing number of companies in the supply chain, basic “box ticking” and “just enough” approaches to compliance are no longer sufficient. There is also an increasing gap between this approach and the consensus forming around adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.
The completion of relevant supply chain audits and initial mapping exercises remain critical processes. Indeed, they are the tool to prove core due diligence has been undertaken and an excellent foundation for building a more comprehensive future due diligence program. For companies looking to begin participating in responsible sourcing – auditing and supply chain mapping is the gateway to doing so.
But market expectations are moving towards more active engagement in the supply chain as evidenced by the trend in cobalt over the last year. Equally, many companies are simply becoming jaded by due diligence processes that meet base-level compliance requirements but deliver little new information or structural improvement in the supply chain itself.
Having established compliance through industry audit programs and supply chain mapping, more and more companies are now looking to move beyond compliance, towards active participation. Given this context, three broad stages or “steps” are emerging for downstream businesses looking to establish responsible sourcing, not least in battery metals:
