Ford Motor Company (Ford), Huayou Cobalt, IBM, LG Chem and RCS Global plan to use blockchain technology to trace and validate ethically sourced minerals. Their joint goal is to create an open, industrywide network to trace and validate minerals – and other materials – for the automotive and consumer electronics industry within their strategic supply chains. Initial work will focus on responsible sourcing of industrially-mined cobalt
“We remain committed to transparency across our global supply chain,” said Lisa Drake, Vice President, Global Purchasing and Powertrain Operations, Ford Motor Company. “By collaborating with other leading industries in this network, our intent is to use state-of-the-art technology to ensure materials produced for our vehicles will help meet our commitment to protecting human rights and the environment.”
Cobalt is in high demand for its use in lithium-ion batteries. These power a wide range of products, from laptops to mobile devices to electric vehicles. In a 2017 Report, Morgan Stanley, by 2026, expects demand to multiply eightfold, especially for its use those types of device. To give two examples:
- a typical electric car battery requires up to 10Kgs of cobalt
- a standard laptop requires around 30g of the same mineral.
Traditionally, miners, smelters and consumer brands rely on third-party audits to establish compliance with generally accepted industry standards. Coupled with these assessments, blockchain technology offers the prospect of a network of validated participants and immutable data visible by all permissioned network participants in real time. In addition this use of blockchain can aid network participants to address compliance requirements.
While the initial focus is on large-scale miners (LSMs), an important objective of the group is to help increase transparency in artisanal and small-scale mining (ASMs). The importance of the latter is that these operators:
- be able to sell their raw materials in the global market
- meet their internationally ratified responsibility requirements.
In effect the blockchain network can help ASM operators:
- partner with due diligence data providers
- then join a blockchain-based network of validated participants.
The pilot will also explore the use of incentives or financial benefits for ASMs and their local communities impacted by mining.
Chen Hongliang, CEO of Huayou Cobalt said: “As a leading global battery material provider, we are proud to have an OECD Due Diligence Program and active community support initiatives in place linked to our operations in the DRC. This is central to our proactive approach to delivering ethical cobalt. We also want to have strong, reliable information channels to prove and demonstrate this action to our customers.
“This blockchain pilot is an interesting and potentially important next step in these efforts. We believe in transparency and a collaborative approach to improving production conditions in the DRC cobalt sector, leveraging the project to this end has huge potential.”
Applying IBM blockchain technology
The group, which reflects participants at each major stage of the supply chain from mine to end-user, will:
- start with a pilot focused on cobalt
- explore the creation of an open, industry-wide blockchain platform that could ultimately be used to trace and validate a range of minerals used in consumer products.
The blockchain pilot is already underway. It will seek to demonstrate how materials in the supply chain are responsibly produced, traded and processed.
The pilot, based on a simulated sourcing scenario, envisages cobalt produced at Huayou’s industrial mine site in the Democratic Republic of Congo (DRC) proceeding through the supply chain:
- from mine to smelter
- to LG Chem’s cathode plant and battery plant in South Korea
- into a Ford plant in the United States.
This will see the creation of an immutable audit trail on the blockchain. Entries will include the data to provide evidence of the cobalt production from source to end manufacturer. Participants in the network will be validated against responsible sourcing standards developed by the Organization for Economic Cooperation and Development (OECD).
Built on the IBM Blockchain Platform and powered by the Linux Foundation’s Hyperledger Fabric, the participants are designing the platform for industry adoption. Their solution aims to allow interested parties of all sizes and roles in a supply chain to obtain easy access. Such participants will include original equipment manufacturers (OEMs) across many industries, including:
- supply chain partners (such as mining companies)
- battery manufacturers.
The hope is that supply chain networks will want to join an open, industrywide network which traces and validate minerals upon successful completion of the pilot which expects completion by mid-year 2019. There are plans for a governance board representing members across these industries, to help ensure the platform’s growth, functionality and commitment to democratic principles.
“With the growing demand for cobalt, this group has come together with clear objectives to illustrate how blockchain can be used for greater assurance around social responsibility in the mining supply chain,” said Manish Chawla, GM, Global Industrial Products Industry, IBM.
“The initial work by these organizations will be used as a precedent for the rest of the industry to be further extended to help ensure transparency around the minerals going into our consumer goods.”
Enterprise Times: what does this mean
If the pilot succeeds, the participants hope to extend beyond cobalt into other battery metals and raw materials, including other ‘conflict’ minerals such as:
- rare earths.
With this initiative IBM continues its move towards ‘trusting blockchain’ implementations. Though not in detail the same as the Food Trust, the underlying responsibility foundations are similar – and as valuable. In this, IBM is providing a social lead that other blockchain providers have (thus far) not sought.