What the Cobalt Industry Can Learn From Coffee Producers

For several years, the energy transition has been roiled by a seemingly intractable problem. The basic building blocks of renewable technology—critical minerals such as aluminum, nickel, and cobalt—are routinely mined with devastating environmental and social consequences.

Photographs of children working in cobalt mines have accompanied reports about the metal, sometimes called the “blood diamond of batteries,” leaving many consumers and voters to wonder if climate progress is a choice between two evils: greenhouse gas emissions or human rights abuses and biodiversity loss.

These concerns usually overlook that fossil fuels also require extraction, and by most estimates, extracting coal, oil, and gas displaces vastly more earth than all the critical minerals required to meet global climate commitments.

But the ugly environmental footprint of the fossil fuel industry doesn’t excuse the damage from mining, and this industry’s business practices run the gamut from relatively responsible to unequivocally abhorrent. The challenge before downstream industries today is ensuring that purchasers of critical minerals—including commodities traders and clean technology manufacturers—procure from the good actors and steer clear of the bad ones. Sounds simple, right?

Frustratingly, after years of false starts and poorly coordinated industry action, many industry leaders have thrown up their hands in collective exasperation, as if to say: There’s nothing we can do to solve the problem. It’s just too hard to distinguish responsible commodities from the rest. As a result, the overwhelming majority of large companies, from automakers to consumer electronics manufacturers, simply do not know the headwaters of their critical mineral supply chains—even when having that information is legally mandated by Congress (more on that shortly).

In the past several years, I’ve spoken with experts and corporate leaders across the critical mineral supply chain to try to better understand this issue. For the most part, nobody will defend the status quo, but the sense of helplessness is pervasive. The biggest obstacle to change is the collective failure of the industry to imagine a viable alternative to business as usual, where commodities of various provenance are hopelessly mixed together as soon as they enter the market—even if they come from well-run mines, such as those certified by the Initiative for Responsible Mining Assurance.

To reboot these conversations, industry players should consider any number of commodities markets that have successfully (and profitably) embraced traceability. Many of these commodities are edible.

“Nothing New Under the Sun”

For centuries, commodities markets have carved out niches for goods that fetch higher prices, and for that reason, they have kept these goods segregated from the rest. Think of Darjeeling tea, Egyptian cotton, or Scotch whisky. Since the days of the Silk Road, these products traveled from “cradle to gate” on oxcarts and crowded merchant ships, kept painstakingly separate from their less-prized counterparts.

In the food industry, tracking the origins of certain products became so commonplace that in 2002, Congress required most food sold in U.S. grocery stores to be labeled with countries of origin. Today, the requirements (while far from perfect) extend to a wide range of meat, poultry, fish, and perishable produce.

Country-of-origin labeling for food goes well beyond congressional mandates. Chocolate, coffee, tea, and wine routinely carry highly detailed information about provenance, often exceeding national boundaries to pinpoint particular farms. The concept of “farm-to-cup” traceability gained so much traction in the coffee industry that even Starbucks has a program linking discrete bags of coffee to originating farms.

To be clear, these industry changes have not required enormous innovations in technology, although blockchain is now involved in several cutting-edge pilots, ranging from palm oil to rubber. Nor has the industry done this out of goodwill. Consumers are simply willing to pay more for products with a known origin, whether it be sparkling wine from Champagne, France, or olive oil from Spain. In other instances, consumers are unfussed with geography but will pay a premium for responsibly produced goods, which led to the Fairtrade label’s extraordinary success.

The mining industry may take exception with these comparisons. After all, an apple sold at a grocery store generally resembles the same apple picked from a tree—that is, it’s not processed. But the cobalt that goes into a cell phone battery bears no resemblance to the cobalt ore mined from the ground. All critical minerals require a combination of intensive processing and refining before they can be deployed in technology. But the same is true of coffee and chocolate, which also undergo such intense transformation that the finished product is utterly unrecognizable from the harvest in the field.

Glimmers of Progress

In recent decades, the mining and metals sector has found innovative ways to meet consumer demand for responsible products. Take diamonds, which can be bought with clear origin labels. Diamonds were an ideal vanguard for the mining industry because, like apples, gemstones are nonfungible. Put differently, unlike most other minerals, a diamond can’t be melted down with other diamonds. But the Fairtrade gold program, which recently celebrated its fifteenth birthday, proves that even fungible minerals can thrive as differentiated commodities.

When commodities markets fail to meet consumer demand for responsible production, companies sometimes take matters into their own hands. Tesla recently signed an agreement with mining giant BHP to purchase nickel from a single mine in Western Australia, giving Tesla a measure of confidence about the origin of this key input into its vehicle batteries by cutting out the middleman.

Such agreements are the technology equivalent of farm-to-table restaurants, where the fine print on the menu tells you where the beets in your salad were grown. But because they circumvent commodities markets that drive down prices, these minerals are often sold at a steep premium. What’s more, they are difficult to scale.

This issue of scalability is exactly what made labels such as Fairtrade and USDA Organic so successful. These labels reconstitute commodities markets into separate parts: one green and one gray (that is, with unknown attributes). From there, green commodities like Fairtrade chocolate and Fairtrade coffee can be mixed in value chains so long as gray commodities are kept apart. This is known within industries as an “identity-segregated” chain of custody. It marries a measure of convenience for producers—who don’t have to meticulously track commodities—with a measure of confidence for consumers that the inputs to their products are ethically sourced.

For what it’s worth, companies are not permitted to self-certify their compliance with these labels. In the United States, the Department of Agriculture accredits “certifying agents,” or private firms—more than eighty of which are currently active—that are allowed to certify organic farms and businesses. The Fairtrade label also relies upon an independent auditor. Notably, these processes are both vastly different from the watery guarantees offered by many smelters and refiners, which are rarely subjected to third-party audits.

Next Steps

A UN report found that achieving 2030 climate targets will require eighty new copper mines, seventy new lithium mines, and another seventy new nickel mines. Scaling that mining responsibly requires a more collaborative and innovative approach, particularly from leaders and regulators.

Past regulatory efforts have mostly fallen short. For instance, the 2010 Dodd-Frank Act required U.S. companies to identify when their tin, tungsten, tantalum, and gold (the so-called 3TG minerals) originate from the Democratic Republic of Congo or its neighboring nations. Companies are required to file annual reports to the federal government, and in these reports, just 1 percent of companies attest that the minerals in their products are “conflict-free beyond a reasonable doubt.” The rest admit that they do not know with confidence where their minerals come from—and they face no penalties as a result.

Or consider the 2021 Uyghur Forced Labor Prevention Act (UFLPA), which seeks to ban the import of goods produced in Xinjiang, China, absent “clear and convincing evidence” that the goods were not produced with forced labor. Xinjiang produces roughly half of the world’s polysilicon, a key ingredient in solar panels. But the solar panels themselves are produced elsewhere in China—and the polysilicon is not traced—so U.S. Customs officers are operating under conditions of uncertainty.

Unlike Dodd-Frank, which allows companies to make a “good faith” effort, UFLPA does not give importers the benefit of the doubt. From 2020 to 2022, the share of solar-grade polysilicon produced in Xinjiang fell from 45 percent to 35 percent, and solar companies selling to American customers have adjusted their supply chains to source non-Chinese polysilicon. Although few analysts defend it as a silver bullet, UFLPA shows that well-crafted regulation can move markets swiftly and efficiently toward humane and sustainable supply chains.

UFPLA is just one instance of a new generation of laws bringing higher standards and stiffer consequences to corporations for failing to exercise appropriate due diligence. Last May, the European Parliament passed a new law requiring rigorous supply chain audits for large companies. The law has a staged phase-in timeline from 2027 to 2029, and failure to comply is punishable by steep fines—up to 5 percent of a firm’s global annual revenue. Such regulatory reforms are advancing in tandem with new industry initiatives such as the Global Battery Alliance, which aims to create a QR code linking finished batteries to a digital “passport” showing the origins of a given product.

Here in the United States, Congress and the White House could notch several bipartisan victories that advance the energy transition, protect U.S. manufacturing, and strengthen trade relations with key allies. One initial step should include using the power of federal procurement to ensure that public purchasing supports high-integrity supply chains, such as by ensuring that tax credits and grants from the Inflation Reduction Act do not wind up supporting forced labor. Another area for reform should include jump-starting the requirements of Dodd-Frank to mandate that large companies put in the legwork to know, with some certainty, the origins of certain minerals. These interventions could also help catalyze the deployment of a Fairtrade analog for clean technology, while helping advance the ambitious goals of the State Department’s Minerals Security Partnership by bolstering international cooperation.

By midcentury, the majority of several materials for clean technology could be sourced from recycling, and conversations about responsibly mined critical minerals will hopefully be on the brink of obsolescence. But until the 2040s, the expected yield from recycling will pale in comparison with the necessary supply of critical minerals to limit global warming. According to one analysis, less than 20 percent of soaring lithium demand can be met by recycling even in 2040. Sadly, increasing extraction is a necessary condition for climate stability.

Success—for the climate and local communities—requires an attention to the art of the possible. Industry players and regulators alike must recalibrate their ambition. For U.S. policymakers and industry leaders looking to strengthen the global supply chains that deliver materials required for clean energy infrastructure, there are lessons to be learned from the grocery store.