Ford and IBM pilot blockchain for ethical mineral supply chains
February 6, 2019
Ford Motor and IBM are leading a blockchain pilot to address ethical concerns in strategic mineral supply chains with the goal is to create an open, industry-wide network to trace and validate minerals and other materials for the automotive and consumer electronics industry.
Initial work will focus on responsible sourcing of industrially mined cobalt.
Committed to supporting human rights and environmental protection while helping infuse more transparency into global mineral supply chains, Ford Motor, Huayou Cobalt, IBM, LG Chem and RCS Global have announced plans to use blockchain technology to trace and validate ethically sourced minerals.
The group, which includes participants at each major stage of the supply chain from mine to end user, will begin with a pilot focused on cobalt and 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.
Cobalt is in high demand for its use in lithium-ion batteries, which power a wide range of products such as laptops, mobile devices and electric vehicles. According to a report from Morgan Stanley, by 2026 demand is expected to multiply eightfold, especially for its use in electric vehicles and consumer devices. The typical electric car battery requires up to 9kg of cobalt and a standard laptop requires around 0.03kg of the mineral.
The blockchain pilot is already underway and seeks to demonstrate how materials in the supply chain are responsibly produced, traded and processed. For this pilot based on a simulated sourcing scenario, cobalt produced at Huayou's industrial mine site in the Democratic Republic of Congo 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 USA. An immutable audit trail will be created on the blockchain, which will include corresponding data to provide evidence of the cobalt production from mine to end manufacturer.
"We remain committed to transparency across our global supply chain," said Lisa Drake, vice president at Ford Motor. "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."
Participants in the network will be validated against responsible sourcing standards developed by the Organization for Economic Cooperation and Development (OECD).
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 a network of validated participants and immutable data that can be seen by all permissioned network participants in real time. Blockchain can also be used to help network participants address their compliance requirements.
While the initial focus is on large-scale miners, an important objective of the group is to help increase transparency in artisanal and small-scale mining (ASM) and enable these operators to sell their raw materials in the global market, while they meet their internationally ratified responsibility requirements.
The network can help ASM operators partner with due diligence data providers and, ultimately, 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.
Built on IBM’s blockchain platform and powered by the Linux Foundation's Hyperledger Fabric, the platform is designed to be adopted across industry.
"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, a general manager at IBM. "The initial work by these organisations 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."
The platform is built to allow interested parties of all sizes and roles in the supply chain easy access, including original equipment manufacturers across the automotive, electronics, aerospace and defence industries and their supply chain partners such as mining companies and battery manufacturers.
Supply chain networks will be encouraged to join this open, industry-wide network to trace and validate minerals upon successful completion of the pilot.
Work is expected to be extended beyond cobalt into other battery metals and raw materials, including minerals such as tantalum, tin, tungsten and gold, which are sometimes called conflict minerals, as well as rare earths. Focus industries include automotive, aerospace and defence, and consumer electronics. There are plans for a governance board representing members across these industries, to help further ensure the platform's growth, functionality and commitment to democratic principles.
The pilot is expected to be completed mid-2019.
"As a leading global battery supplier, LG Chem will be participating in this pilot to support our sustainable growth systems and corporate social responsibility efforts to enhance not only our product quality and performance, but also to improve processes for the procurement of raw material," said Jong-Hyun Kim from LG Chem.