Infyos, an AI supply chain risk platform, has analysed thousands of data sources revealing many of the world’s largest automotive, energy storage, consumer electronics, and heavy industry companies are using lithium-ion batteries that have human rights abuses in part of the supply chain.
Alleged severe human rights abuses tend involve companies who are mining and refining raw materials in China that end up in batteries around the world, particularly material mined from the Xinjiang Uyghur Autonomous Region (XUAR) in northwest China
These human rights abuses and lack of supply chain visibility are likely leading to breaches in the United States’ Uyghur Forced Labor Prevention Act (UFLPA) and the EU Battery Regulation law that have been designed to make the battery industry more sustainable and accountable.
Consequently, this research suggests that battery products could be at risk of being blocked from the market since regulators, banks and lenders are mandating enhanced supply chain visibility and risk data – with the possibility of divestment from investors due to ESG requirements.
Infyos has developed an AI supply chain risk platform for customers of lithium-ion batteries to track their supply chain and mitigate the risk that they are exposed to human rights abuses and its findings come from data that it has compiled on its platform using thousands of government datasets, NGO reports, news articles and social media sources.
According to Tony To, Co-founder & CTO, the platform has been designed to provide users with insights into the complexities of the battery supply chain so they can take proactive measures to identify and mitigate risks.
The widespread human rights abuses identified range from people being forced to work in lithium refining facilities under the threat of no or minimal pay to five-year-old children mining cobalt materials out of the ground in hazardous conditions.
Severe human rights incidents are occurring globally, especially in resource-rich countries with fragile and corrupt governments like the Democratic Republic of Congo and Madagascar.
The automotive and solar industry has already been hit with public allegations of widespread forced labour from journalists, government agencies and non-profit organisations.
Electric vehicle and battery manufacturers have a complex supply chain and its connections to these various incidents stem from manufacturers sourcing components or materials from unethical companies in their supply chain network or entering business relationships, including joint ventures or equity investments hidden in complex and changing ownership structures, which conceals the reality of the unethical connections.
Sarah Montgomery, CEO & Co-Founder, Infyos, said: “The relative opaqueness of battery supply chains and the complexity of supply chain legal requirements means current approaches like ESG audits are out of date and don’t comply with new regulations. Most battery manufacturers and their customers, including automotive companies and grid-scale battery energy storage developers, still don’t have complete supply chain oversight.”
Sourcing is coming under growing scrutiny, particularly in Europe and the US, where failure to address the issues means companies could be in breach of current and future regulations.
All of this is damaging the battery industry’s clean credentials and hampering investment into the global battery market forecast to be worth nearly $500 billion in 2030.
With more legislation such as the EU Battery Regulation and the US’s Uyghur Forced Labour Prevention Act (UFLPA) being phased in, action will need to be taken now, according to Infyos, so companies can still sell their products.
Research conducted by PwC found that 89 per cent of institutional investors are considering or have already rejected investments in firms with ESG shortcomings and deeper supply chain risk management and visibility are now becoming a condition of lending or investment to minimise their own financial risk.
All of which will have profound implications for renewables and clean energy projects. If products are blocked on entering these markets, delays and increased costs will hit renewable energy projects as well as the reputations of those companies involved.
