Follow Up on Lithium Battery Supply Chain Issues: Working with NGOs on Sourcing Issues
In January 2016, we wrote about a report issued by NGOs Amnesty International and African Resources Watch, revealing that most of the world’s cobalt supply – an integral ingredient for lithium batteries – comes from the Democratic Republic of Congo (DRC) and is mined using child labor. At that time, the major retailers of products that use lithium batteries (basically anything with a rechargeable battery) denied sourcing cobalt from the DRC, even though anyone buying cobalt in commercial quantities almost had to be sourcing from the region. The evident confusion was likely caused by the circuitous supply chain between the DRC “artisanal” and the major tech suppliers – one that almost invariably wound through China, where the cobalt changed hands several times before being purchased as a component of lithium batteries by western tech companies.
Now, more than a year later, at least one tech supplier has begun to acknowledge the source of its cobalt supply. This month, the Washington Post reported that Apple has “temporarily” stopped buying cobalt from the DRC, and has plans to implement a program to verify the working conditions of the “artisanal” mines that supply its products, and ultimately to implement a cobalt control program similar to how US companies handle the four so-called conflicts minerals. It does not appear that other tech companies have followed suit yet, however.
This brings us to an important discussion about how to deal with NGOs that have questions about your company’s supplier labor conditions or practices. As supply chains grow increasingly global, direct supervision becomes more difficult. Furthermore, some suppliers are better about being transparent about their labor practices and production conditions. These days, almost any company with a global supply chain is potentially vulnerable to reputational damage due to supplier practices.
So what should you do if you are confronted by a NGO that has questions about your supply chain practices?
First, check out the NGO. Many NGOs are legitimate organizations with proven track records of pursuing laudable goals, and are willing to work through – and help you work through – what they perceive to be your issues. Not all are, however. Some NGOs merely operate as “fronts” for competing products or industries. Some are seeking publicity for themselves. Some have principles with problematic records and/or ulterior motives. If you do encounter a NGO that you have questions about, consider pairing with a reputable NGO that you know you can work with productively.
Second, consider investigating the problem alleged by the NGO. A tightly controlled audit or investigation, done preferably under the protection of the attorney-client privilege, can solve problematic business issues that you likely didn’t want to have in the first place. You may then have to negotiate how much information you give to the NGO to “prove” that you have solved the issue, but sometimes, if you hear the NGO out, and follow some or all of its suggested protocol, you can handle the situation with minimal publicity and reputational damage.
Third, consider enlisting other constituencies in your work. Obviously, your supplier has to be an integral part of the solution, but often – particularly in still developing areas – questionable labor practices are tied up in much larger societal or economic realities. It may be prudent to work through governmental authorities in the supplier’s country. It may also be helpful to list local guilds or trade groups. Sometimes, unconventional solutions like contributing to the local schools or day care programs can be a productive way to lessen society-wide problems.
Publicity from NGO interest in your supply chain can at first seem like an intimidating issue, but if handled right, can often produce good outcomes for all parties.