Know Your Supply Chain: Corporate Complicity Index

There are two major facts and one claim you will keep coming across in the cobalt sourcing discourse.

• Fact #1: The Democratic Republic of the Congo (DRC) produces around 70% of the global cobalt supply and possesses the world’s highest grade cobalt (as high as 20%). 

• Fact #2: Cobalt extraction in the DRC promotes abhorrent practices such as child labor, sub-human working conditions, unfair wages and environmental pollution that bear maiming, birth defects and deaths.

• Claim: The cobalt supply chain is too complex (too many layers) to render itself to full traceability. Traceability is the ability to track a mineral from cradle to grave or cradle to cradle (in the case of recycling).

What are the implications of the two facts? None of the top cobalt mining and refining companies, cobalt commodity traders, battery manufacturers and consumer electronics manufacturers can claim isolation from the DRC cobalt supply chain. Consequently, all the top companies in the value chain are enabling, promoting or contributing to the irresponsible sourcing of cobalt in the DRC. What is the implication of the claim? Supply chain complexity is used as an excuse to abdicate accountability and hide complicity.

Corporate complicity index

Complicity takes many forms, one of which is profiting from morally wrong practices such as forced labor. Labor practices within the cobalt industry of the DRC meet the criteria for designation as forced labor. This article is dedicated to demystifying the midstream and downstream actors of the lithium-ion battery (LIB) supply chain and to providing a corporate complicity index for forced labor in the DRC. Of what use is a corporate complicity index?

1. Problem solving perspective: the questions ‘who is involved?’ and ‘to what extent?’ are fundamental to defining and understanding any problem. This societal problem is no exception.

2. Accountability perspective: viewing this issue as a collective industry problem without identifying primary actors breeds lack of accountability.

3. Consumer education perspective: revealing the involvement of vendors enables well-meaning consumers to characterize their vendors and develop targeted responses and actions.

Overall, the complicity index helps put a face to the problem. The index leverages publicly available market share information for various battery related industries. This article posits that complicity is largely directly proportional to market share.

Midstream

The chart above compares cobalt production volumes of major global cobalt producers with significant operations in the DRC. Contrary to the widely held notion of China’s domination, European companies Glencore and ERG came top with about 57% of the production volumes of the group of 5. Chinese companies produced 24%. However, CMOC is projected to overtake Glencore in 2023.

Downstream

Downstream entails three main levels: LIB manufacturing, equipment manufacturing and end use.

Battery manufacturers

The global top 10 LIB manufacturers are all located in East Asia with 6 in China, 3 in South Korea and 1 in Japan. Chinese companies hold 63.1% of the LIB market. The companies manufacture both cobalt-containing (NMC, NCA and LCO) and cobalt-free (LFP) LIB chemistries. The production ratio of cobalt-containing to non-cobalt containing LIB chemistries exceed 2:1. These companies source cobalt through partnerships with the leading cobalt mining and refining companies covered in the Midstream section. CATL, the leading producer by a wide margin, continued to strengthen its position in the market by acquiring a 25% equity stake in the Kisanfu cobalt concession in the DRC. CMOC is the majority equity holder in the Kisanfu concession.

Equipment manufacturers

Equipment manufacturers provide the market for LIBs. The market is divided into three main segments: consumer electronics, electric electric mobility and stationary energy storage. The equipment manufacturers are the level of the battery supply chain that consumers interact with and thus most familiar with.

Smartphone manufacturers

The global sales of smartphones as of October 2023 were dominated by Apple and Samsung (And yes, Motorola still makes phones and is in the top 10 globally). The list features 6 Chinese companies, 2 US companies and 1 South Korean company. The Chinese companies boast a combined market share of 29.6%, just slightly lower than Apple’s.

Tablet vendors

Apple controls more than half the global tablet market! Given the volume of units sold annually (hundreds of millions), this dominance means Apple consumes millions of batteries per year! E-commerce giant Amazon sells more units than more established smartphone and laptop manufacturers such as Huawei.

Laptop / PC manufacturers

The sales of laptops and PCs are usually coupled such that the major manufacturers of PCs also do well in laptop sales. US giants Dell and HP clearly dominated the market as of October 2023 with a combined market share of 53.4%. Adding Apple’s share brings the total market share of US companies to a whopping 66.7%!

Electric vehicle (EV) manufacturers

The EV market is more contested than the rest we have seen so far. Here, the traditional German automobile manufacturers (a combined 13% market share) appear to be playing catch up to pure play EV manufacturers Tesla and BYD (a combined 37.9% market share). Tesla is still in the lead with manufacturing operations in the US, China and Germany.

Cobalt-containing LIB chemistries such as NMC and NCA still dominate the e-mobility market due to their higher energy density. However, fire safety concern has forced the manufacturers to venture into cobalt-free chemistries such as LFP. LFP batteries have lower energy density but demonstrate higher fire safety. BYD, the EV manufacturer with internal battery manufacturing, has developed the blade battery design aimed at increasing the energy density of LFP battery packs through more efficient packaging. Unsurprisingly, the migration to LFP has mainly been driven by cost and fire safety concerns, not ethical ones.

Stationary energy storage manufacturers

Battery energy storage systems (BESSs) are a crucial component to the modern electric grid. As the penetration of renewable energy grows, storage technologies including LIBs provide a solution to the intermittency of generation resources, primarily solar and wind.

The LIB cell is the fundamental component of a BESS. The companies that make BESSs are called integrators. This market is dominated by 3 Chinese companies (a combined market share of 34%) and 2 US companies (30% combined market share). Fluence and Tesla are the leading brands in North America.

End use

End use refers to the application of the final product. This is the part of the chain where consumers (you and I) belong.

While the Global North swims in consumerism, the average Congolese drowns in abject poverty - earning an average of $1 per day with no chance of ever affording a smartphone, a laptop or an EV. In fact, most Congolese have never seen or touched an iPhone, do not own cars (let alone an EV) and will definitely not encounter a laptop or a tablet (school-age children work alongside their parents in the mines). And yet, they pay the highest price!