Ford, IBM and a number of other firms have begun testing a new blockchain-based platform to trace and validate ethically sourced minerals.
The aim is to create an industry-wide network that can drive transparency in the supply chains of minerals and other materials for the automotive and consumer electronics industries.
With Huayou Cobalt and LG Chemical also involved in the project, the pilot group includes participants at each major stage of the supply chain, from mine to end-user.
The parties say in a statement that testing is now underway and is expected to be completed by the middle of 2019.
They will first track cobalt, a mineral used in items such as phones, laptops and electric vehicles. According to a report from Morgan Stanley, demand for cobalt is expected to multiply eightfold by 2026, especially for its use in electric vehicles and consumer devices. The typical electric car battery requires up to 20 pounds of cobalt, and a standard laptop around one ounce of the mineral.
The pilot is based on a simulated sourcing scenario, where cobalt produced at Huayou’s industrial mine site in DR Congo will be traced through the supply chain as it travels to LG Chemical’s cathode and battery plant in South Korea, and finally into a Ford plant in the US.
Data will be recorded in an audit trail created on the blockchain, providing evidence of the cobalt production from mine to end-manufacturer. As previously reported by GTR, this technology is particularly ideal for tracking and tracing the physical supply chain, because it ensures that records cannot be duplicated or manipulated. As it allows data to be entered and viewed across the supply chain, the goods’ journey from mine to manufacturer to customer is immediately visible to all parties.
The use of blockchain could bring significant changes to the minerals industry, where traditionally, miners, smelters and consumer brands have relied on third-party audits to establish compliance with generally accepted industry standards.
Such a platform could help firms demonstrate that the minerals are responsibly produced, traded and processed, while mitigating any risks of human rights abuses, regional conflict and environmental exploitation in their supply chains. For many companies this is not only a question of doing the right thing: being associated with such issues is simply bad for business and could have huge legal, reputational and financial repercussions.
More transparent minerals supply chains could also give more comfort to trade financiers, who, because of high due diligence requirements and scrutiny, are increasingly risk-averse when it comes to financing minerals from countries like DR Congo.
Other fascinating blockchain projects are already underway in this space: Everledger, for one, has created a global blockchain-powered registry for diamonds. Dorae, meanwhile, is piloting what it calls “the blockchain for raw materials”, also working with governments to empower them to combat issues such as child labour and tax evasion by using the information recorded on the blockchain.
As for the new IBM project, the group expects to extend its work beyond cobalt into other battery metals and raw materials, including tantalum, tin, tungsten and gold – often referred to as ‘conflict minerals’, because they have been linked to armed conflicts and human rights abuses, particularly in DR Congo.
“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 and environmental sustainability in the mining supply chain,” says Manish Chawla, IBM’s general manager for global industrial products. “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 materials going into our consumer goods.”
Powered by the Linux Foundation’s Hyperledger Fabric, the new platform is designed to be adopted across industries. It will target mainly automotive, aerospace and defense and consumer electronics sectors. While the initial focus is on large-scale miners, the group says an “important objective” is to “help increase transparency in artisanal and small-scale mining and enable these operators to sell their raw materials in the global market”.
IBM is already running a number of other projects in which it is using blockchain to track goods in the supply chain. Its Food Trust blockchain programme, for example, has seen it work with leading retailers, suppliers and growers to track individual food products.