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Alexander Machkevitch, Eurasian Resources Group

Responsible business is good business: the ESG route to cobalt

Dr Alexander Machkevitch (pictured), Chairman, Eurasian Resources Group, writes on the rising importance of cobalt and calls for sustainable supply and responsible practices in meeting demand.

Global trade has done wonders for consumer purchasing power.  By opening up labour markets thousands of miles from the buyer, prices have fallen and jobs have been created in poorer nations where employment costs are lower.  By and large this is a positive trend.  Richer nations can no longer hog the production chain.  Elsewhere, workers who wish to price themselves into jobs have been welcomed and their lives have improved as a result.

But in the headlong pursuit of lower costs some things should never be overlooked by investors, managers or consumers.  Child labour is one.  In some regions there is no compulsion or even facility for children to attend formal schooling.  Yet that is no excuse for others to turn a blind eye to child labour in the inexorable pursuit of lower costs.

Take cobalt. Many people know this is a key metal in lithium ion batteries, powering our beloved smartphones, electric cars and other devices. What fewer people know is that many of these devices are tainted with cobalt produced by child labour. Some 60 per cent of the world’s cobalt reserves are found in the Democratic Republic of Congo (DRC).  While mainstream mining groups there adhere to the normal safeguards expected by consumers, so-called ‘artisanal’ small scale producers mine cobalt using children as young as four.

Analysts expect a 12-fold increase in lithium ion battery capacity is needed to meet consumer demands and the promise of a low-carbon economy. The market is likely to reach USD100 billion by 2025. Batteries installed in homes and businesses will account for 57 per cent of the world’s energy storage capacity by 2040.   

Those of us at the sharp end, operating mines in some of the toughest regions of the world, in places where if you get bitten by the wrong insect you die, have a big role to play.
Amnesty International’s recent demand for transparency on cobalt sourcing is a step in making corporations accountable for their suppliers’ behaviour and the impact this can have on entire generations. Taken together with the pressure asset managers face from their customers to invest responsibly and the G20’s commitment to eliminate child labour by 2025 and we can see how fast momentum is building.
The same pressures that have brought us globalisation can also help bear down on the use of child labour – in this case the internationalisation of media, and consumer power.  As big-brand apparel producers have discovered, once consumers realise how their pound, dollar or euro is being used they rapidly start to vote with their wallets.  No consumer brand wants to suffer the financial and reputational impact of a buyer’s strike be it Apple, Zara or Japan Tobacco.  The moment they realise the risk they are running they will spend the money to take back control of their supply chain.
As a global industry we should agree how to operate using a responsible value chain to supply the fast-growing battery market powering the technology and clean energy revolution. In recent months ERG and other established mining groups, with the support of UNICEF, Volkswagen, BASF and others set up the Global Battery Alliance to ensure a sustainable supply of raw materials and responsible practices.

Operating in this way has a short-term cost impact but it will also give our customers reassurance about the provenance of our products and investors reassurance about the sustainability of our business.  As a society we are becoming more socially and environmentally conscious, as an industry, the natural resources sector must set our sights and standards accordingly.

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