A coalition of companies led by IBM will use blockchain technology to ensure that the supply chain for minerals will be ethically sourced. The coalition includes Ford Motor, Huayou Cobalt, LG Chem, and RCS Global.
We’ve all heard about “blood diamonds” and conflict minerals, where mined goods are used to fuel wars and human rights violations. This coalition means to do something about that by using the transparency and security of the decentralized ledger known as blockchain. It can use blockchain to verify the uniqueness of an item, such as a diamond or a lithium mineral, and track its shipment from a mine through the distribution channel to the ultimate buyer.
IBM has invested heavily in blockchain. It has done projects with Maersk to reduce shipping costs, Seagate to reduce counterfeiting of hard drives, and Hu-manity.co to protect your privacy.
In addition, Kutcho Copper spin-out MineHub Technologies is working with IBM to use blockchain technology to improve operational efficiencies, logistics, financing, and cost reduction in high-value mineral supply chains, from the mine to the buyer. Partners working on top of the IBM Blockchain Platform include Goldcorp, ING, Kutcho Copper, Ocean Partners USA, and Wheaton Precious Metals.
The blockchain coalition’s goal is to create an open, industry-wide network to trace and validate minerals and other materials for the automotive and consumer electronics industries. The first project will focus on responsible sourcing of industrially mined cobalt.
Cobalt is in high demand for its use in lithium-ion batteries, which power a wide range of products such as laptops, mobile devices, and electric vehicles. According to a report from Morgan Stanley, demand is expected to multiply eightfold by 2026, especially for use in electric vehicles and consumer devices. The typical electric car battery requires up to 20 pounds of cobalt, and a standard laptop requires around one ounce of the mineral.
The blockchain pilot is already under way and seeks to demonstrate how materials in the supply chain are responsibly produced, traded, and processed. For this pilot based on a simulated sourcing scenario, cobalt produced at Huayou’s industrial mine site in the Democratic Republic of Congo (DRC) will be traced through the supply chain as it travels from mine and smelter to LG Chem’s cathode plant and battery plant in South Korea, and finally into a Ford plant in the United States. An immutable audit trail will be created on the blockchain, which will include corresponding data to provide evidence of the cobalt production from mine to end manufacturer.
“With the growing demand for cobalt, this group has come together with clear objectives to illustrate how blockchain can be used for greater assurance around social and environmental sustainability in the mining supply chain,” said Manish Chawla, general manager of global industry products industry at IBM, in a statement. “The initial work by these organizations will be used as a precedent for the rest of the industry to be further extended to help ensure transparency around the materials going into our consumer goods.”
Participants in the network will be validated against responsible sourcing standards developed by the Organization for Economic Cooperation and Development (OECD).
Traditionally, miners, smelters, and consumer brands rely on third-party audits to establish compliance with generally accepted industry standards. Coupled with these assessments, blockchain technology offers a network of validated participants and immutable data that can be seen by all permissioned network participants in real time. Blockchain can also be used to help network participants address their compliance requirements.
While the initial focus is on large-scale miners (LSMs), the group wants to increase transparency in artisanal and small-scale mining (ASMs) and enable these operators to sell their raw materials in the global market by showing that they meet internationally ratified responsibility requirements. The network can help enable ASM operators to partner with due-diligence data providers and, ultimately, join a blockchain-based network of validated participants. The pilot will also explore the use of incentives or financial benefits for ASMs and their local communities impacted by mining.
Built on the IBM Blockchain Platform and powered by the Linux Foundation’s Hyperledger Fabric, the platform is designed to be adopted across industry. The solution could enable blockchain usage across the supply chains of the automotive, electronics, aerospace, and defense industries. The group will encourage supply chain networks to join this open, industry-wide network to trace and validate minerals upon successful completion of the pilot.
“We remain committed to transparency across our global supply chain,” said Lisa Drake, vice president of global purchasing and powertrain operations at Ford Motor Company, in a statement. “By collaborating with other leading industries in this network, our intent is to use state-of-the-art technology to ensure materials produced for our vehicles will help meet our commitment to protecting human rights and the environment.”
Work is expected to be extended beyond cobalt into other battery metals and raw materials, including minerals such as tantalum, tin, tungsten, and gold, which are sometimes called conflict minerals, as well as rare earths.
As for the MineHub partnership, IBM said the $1.8 trillion global mining and metals market has traditionally suffered from inefficiencies due to manual, paper-based processes and a lack of transparency between supply chain participants.
Blockchain technology helps address this by providing a shared ledger to create a single, real-time view of transactions and data across the supply chain that can be seen by all permissioned participants. The participating companies represent key areas of the supply chain from mining, streaming, trade, and finance.
“We are delighted to be working with some of the most forward thinking and innovative companies from each area of the mining and metals industry. By digitizing the supply chain, we can increase the level of automation, reduce reliance on intermediaries, and increase the speed at which goods are transferred from miners to end buyers. This creates the opportunity for transformative efficiencies and cost reductions throughout all aspects of operations,” said Vince Sorace, CEO of MineHub, in a statement. “This is a significant advancement for an industry looking to integrate and use data in ways not previously possible.”
The first example on the MineHub platform will manage concentrate from Goldcorp’s Peñasquito Mine in Mexico throughout its path to market. When ore is mined, the mining company will upload data, including sustainability and ethical practices, allowing independent verification from regulators to end users as required.
When materials are loaded for transport, the MineHub platform can record each transaction and allow permissioned parties to view and reconcile information throughout its journey. Smart contracts for supply chain processes such as trade finance, streaming, and royalty contracts will be used by companies such as Wheaton Precious Metals and institutions that provide credit facilities, such as ING.