Regulation, blockchain and the traceability revolution

As pressure mounts for businesses to meet their ESG commitments, regulators are increasingly mandating transparency across supply chains, forcing even notoriously opaque industries like mining to adopt traceability.

EV batteries will be the blueprint for future solutions

EV batteries will be the blueprint for future solutions

The short-lived honeymoon period during which electric vehicles (EVs) were seen as a sweeping solution to global emissions is already over. Consumers and governments alike are now taking a closer look at the environmental, ethical, and geopolitical issues surrounding the sourcing of minerals that make up EV batteries.

This awareness is quickly evolving into regulation on both sides of the Atlantic and in emerging jurisdictions outside of Europe and the US, suggesting that traceability solutions will soon become a "must-have" tool for miners rather than a "nice-to-have."

Miners will increasingly face a complex new landscape of laws, technologies, and industry standards as traceability evidence from mine to market becomes the norm rather than the exception. Standards include the Responsible Minerals Initiative's (RMI's) framework for responsible mineral sourcing that includes the use of traceability solutions. The Initiative for Responsible Mining Assurance (IRMA) has also developed a standard for responsible mining that includes requirements for traceability and transparency.

Laws include the US Inflation Reduction Act and the EU's battery passport, which require manufacturers to provide verifiable evidence that large percentages of material sourcing and manufacturing take place within certain countries.

Tracing these minerals will require a blending of physical and digital "identities," a task that many believe is best achieved by a combination of blockchain and RFID.

"The use of blockchain allows the various stages of the mine-to-metals value chain journey to be connected using transactions," said Ashiss Kumar Dash, Executive Vice President, Industry Head for Services, Utilities, Resources, Energy at Infosys.

"The data points used could include attributes of ore location mined, various ore materials for smelting, energy consumption, the alloy produced, transportation and compliance certificates, along with carbon emissions, and water usage, all to be validated at key strategic points in the mining supply chain. These transactions would be linked to the physical materials using IoT such as RFID tags."

Dash notes that in mining, the traceability problem is particularly complex because it involves multiple factors - a complex supply chain, multiple stakeholders, compliance and regulatory burdens, and legacy IT systems.

"In these circumstances, Blockchain can offer the right solution as it can handle a complex combination of stakeholders and regulatory compliance, and bring in transparency and accountability to the system."

Fractured fields

But mining also faces a lack of standardisation in mining and metals, he added.

"Different types of metal commodities - all with different specifications and properties - make it difficult to develop a one-size-fits-all solution. Therefore, regulators and organizations must be aligned in their effort to reduce technology adoption hurdles and create a globally standardized regulatory compliance such as a digital passport in the EU for large mining and metals enterprise adoptions."

However, other players in the emerging market for traceability solutions are keen to stress that technologies should not overshadow the main objectives of the process.

"Blockchain is one element in our suite of technologies," said Ellen Carey, Vice President, Global Policy and Public Affairs at Circulor.

Ultimately it's the end consumer that will drive the demand for transparency

"It creates an immutable record of activity. It creates trust in that activities can't be gone back and tampered with. But it's only one part of our technology; it does enable that distributed ledger, and then that immutable record, but it needs inputs of various redundant pieces of data that give you verification that that is exactly what happened. And then, also, machine learning, data processing, business logic, all of those are also very important parts of the technological solution."

One example of the progress that can be made was a deal Circulor signed with lithium producer SQM in February, which will see Circulor's technology suite used to ensure the provenance of SQM's lithium from the mine to the EV battery. Circulor is also working with a number of carmakers, including Volvo and Polestar, and with StoreDot, an Israeli startup developing fast-charging batteries.

The SQM-Circulor partnership aims to create supply chain transparency and offer downstream automakers the power of traceability. But also aside from end-to-end lithium supply chain traceability, Circulor will also provide dynamic tracking of scope one, two, and three emissions produced by each supply chain participant.   

Green catalysts 

Carey says that EV batteries are proving the catalyst for wider traceability in mining. 

"Batteries are the blueprint. Batteries are setting a global precedent for product passports, which are now commonly referred to as "digital identities" in both Europe and America. So then it's going to be about how do we develop the content and the technical standards. And how do we play with data in a way to demonstrate that when different people provide different information, it's kept safely and securely. And it all ends up here, this digital identity of a battery." 

From 2024, manufacturers in Europe must disclose the carbon footprint of their batteries and from 2027 comply with a carbon dioxide (CO2) emissions limit, regulated by the European Union (EU) with independent auditors checking compliance. 

The battery passport will create a transparent record of all the constituent parts in a battery, enabling eco-focused businesses to verify that their fleet purchasing decisions comply with corporate ESG commitments. These include issues of child labour and human rights violations in the mining of the metals and minerals.

Carey notes that the ramifications of this will ripple down the value chain.

"This process actually creates an opportunity for the upstream to connect further downstream, and even to end products and to everyday consumers to build brand recognition and extend that responsibility on what they're doing."

A critical piece of the puzzle is adoption, something that miners have long resisted due to the potential risks to their reputation - and therefore bottom line - that are inherent in revealing more about their supply chain details.  

Nutrition warning

One early mover in the space is Minery, a Brazilian mineral commodity trading marketplace, which started adding digital traceability to their platform using Minespider's blockchain back in 2021.

The project was chosen because due to the opaque nature of supply chains in Brazil, which has over 9,415 active mines. Traders in the global market procuring metals there can end up buying and sell minerals at substantial premiums and negotiations can take up to six months.

"Adoption is a mixed bag. Some miners love it and are big adopters of the technology, trying to convince their neighbours to use it too. However, we have cases where miners got a bad score and are telling others not to accept certification, as it could be a problem for them and block them from buyers," said Eduardo Gama, chief executive and co-founder at Minery. "This process is still in its very early stages, but I believe it will become normal at some point. Like any new technology, it's always hard at the beginning."

MInery and Minespider's unique partnership aims to not only improve liquidity in the market by reducing negotiation times but also to improve mining conditions. Minery has developed Certimine, their own certification that ensures all mines comply with international standards. Minespider has built a public, permissioned blockchain specially designed for raw material traceability.

Their clients, including Minsur and LuNa Smelter, create blockchain-secured digital IDs called digital Product Passports to track their material shipments downstream. These passports contain information such as provenance data, due diligence documents and carbon emissions data.

One potential evolution of product passports that is often touted is the idea of a label on an end product detailing its source of metals and emissions - akin to a nutritional label on food but on an iPhone, for example.

Carey said that technology-wise, the solution is all ready to deploy.

"We are definitely seeing demand from our downstream customers for solutions like that.  They that want to start providing that information. But I think it's going to be as many technologies are, it will start with, you know, version one, and then go to version two, version three, version four."

She adds, however, that the technology is important, its more about society's attitude.

Nathan Williams, founder and chief executive of Minespider, notes that deploying such a solution at scale may become complex.

"In my opinion, anything that goes to consumers should not be too complex. The biggest challenge with supply chain traceability is the amount of data, and giving too much information to consumers can be overwhelming. Product passports can manage this complexity for things like batteries or cars. However, for something like human rights, providing all the necessary details can be challenging. I can imagine traceability happening with singular metrics like carbon emissions or even just some transparency ranking for something like gold. But we're a long way away from it."



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