How New Business Models Can Address Human Rights Risks in the Cobalt Supply Chain

Abstract

Cobalt is an essential component of the lithium-ion batteries that power our phones, laptops, and other portable consumer electronics.Its consumption is expected to multiply eightfold by 2026 and 14 times its current levels in the next decade. With no alternatives to the Democratic Republic of Congo's (DRC) production capacity, companies that manufacture batteries are dependent on Congolese cobalt. The so-called artisanal small-scale mining (ASM), a term that refers to mining without heavy machinery, accounts for 20% to 30% of the country’s total cobalt production. What is evident is that working in the Congolese mining sector is dangerous, with particularly high risks related to legal yet largely unregulated ASM. Human rights issues have been documented in many artisanal mines in the country, including child labor, serious health and safety risks, and fatal accidents.Considering the projected rise in cobalt demand, finding collective and permanent solutions to human rights issues in ASM is a timely and urgent quest. Companies sourcing from the DRC are under increasing pressure to address these human rights challenges. This paper analyzes the business solutions that companies are currently exploring to formalize ASM. Addressing human rights issues in ASM requires companies to reorganize core business processes in a way that systematically integrates respect for human rights in all supply chain links upstream. In our initial case study we are focusing on a Swiss commodity trading company that is driving an innovative project to regulate ASM at a mining site at Kolwezi, in Katanga, DRC. We see this case study as a preliminary research phase into a comparative project of business models of companies sourcing precious metals from the DRC. The goal is to distill the business factors that have a systemic positive impact on the workers and communities involved in ASM. This paper is structured in four parts. In the first part of the paper, we provide data to underpin the relevance of the DRC for the global cobalt supply chain. We also highlight the role of ASM in this supply chain and the impact that cobalt price fluctuations have on ASM. In the second part, we outline the pilot project that the commodity firm Trafigura has set up at the Mutoshi mine in the DRC to control for the human rights risks related to ASM. The case is considered as a model example for formalizing ASM. We describe our research plans to assess this project in the field in order to identify the business factors that need to be in place for such a project to be scalable and replicable by other companies, including companies in other sectors. The third part outlines other companies’ projects that attempt to control for human rights risks related to ASM. We hope to eventually to study them in greater detail in a comparative setting. Finally, in part four, we look at the specific role that commodity-trading companies play in the cobalt supply chain and the current drivers for the described pilot projects. We will also consider how multi-stakeholder initiatives in this industry can facilitate the development of standards for responsible ASM.