BMW: Driving for sustainable sourcing of lithium
The BMW Group plans to accelerate its expansion of e-mobility, with at least half of the company’s global sales expected to come from fully-electric vehicles by 2030. As this will result in an increase in raw material requirements, most critically, lithium, the company has contracted sourcing from a second leading supplier, US-based Livent. From 2022 on, Livent will supply the lithium directly to the BMW Group’s battery cell manufacturers. The multi-year contract is expected to total approximately 285 million euros.
The BMW Group creates transparency over the origin and the mining methods used in the extraction of the lithium used in its battery cells by sourcing critical raw materials like lithium and cobalt directly from producers.
Regarding the decision to source through Livent, Dr Andreas Wendt, member of the Board of Management of BMW AG responsible for Purchasing and Supplier Network said, “Lithium is one of the key raw materials for electromobility. By sourcing lithium from a second supplier, we are securing requirements for production of our current fifth generation of battery cells. At the same time, we are making ourselves technologically, geographically and geopolitically less dependent on individual suppliers.”
Driving for sustainable extraction of lithium
In 2019 the BMW Group also signed a contract to procure from hard-rock lithium mines in Australia. In order to broaden its supplier base and mitigate risks, the company is now sourcing lithium from Argentina where Livent obtains the raw material from brine from salt lakes using an innovative method that minimises the impact on local ecosystems and communities and focuses on sustainable water use.
In late 2020 together with BASF, the BMW Group commissioned a study on sustainable lithium mining from the University of Alaska Anchorage and University of Massachusetts Amherst. The study will focus on the water use of different lithium mining methods in South America and the resulting impact of lithium mining on local water resources and the surrounding ecosystems.
Livent will contribute important data towards the study, which aims to provide the foundation for assessing sustainable lithium mining by evaluating different technologies to gain a better understanding of the relationship between fresh water and lithium brine aquifers. This will provide companies with a scientific basis to allow for more informed decision making on sustainable lithium mining in Latin America. Results are expected in the first quarter of 2022.
In conventional lithium mining, brine from the layers below the salt lakes that border the region between Argentina, Bolivia and Chile (home to roughly half the world’s lithium reserves) is pumped out of the ground and evaporated in shallow basins. However, Livent obtains lithium from a brine resource in northern Argentina using a proprietary, more sustainable method.
Rather than evaporating the used brine, most of it is returned directly to the surrounding ecosystem, minimising the impact and in large part preserving the balance between the brine layers and groundwater layers. It also takes up much less space. Since evaporation basins are barely used, the process takes up less space, and solvents and other chemicals s do not come into contact with the environment during this process. The company is also involved in local educational programmes and infrastructure measures.
Germany Adopts Revolutionary Supply Chain Human Rights Laws
While the title states that Germany’s newly adopted that targets human rights abuse across global supply chains is “revolutionary” ─ which it is ─, it certainly shouldn’t be. But nonetheless, today, on June 11th, 2021, the German Parliament has ushered in a long-awaited shift to mandatory company compliance rules. After months of negotiation, the German lawmakers finally pushed it over the finish line within the final days of the current legislative period. The bill will see German multinational corporations held legally responsible for any human rights or environmental abuses found across their global supply chains.
“The German government has taken a critical step to ensure that companies operate responsibly,” said Juliane Kippenberg, associate director, children's rights division, at Human Rights Watch. “Respect for human rights in global supply chains is not something that should be optional.”
This news comes at a time when global corporations are already being pushed towards environmental, social and governance (ESG) compliance, with a massive drive to reduce Scope 1, 2, and 3 carbon emissions from their supply chain operations and a concerted effort to avoid suppliers and manufacturers that do not meet the standards that industry-leading companies are now expected to meet.
Who will the new law affect?
With Germany’s new legislation, organisations that fail to meet the rules and regulations could be forced to pay fines potentially equivalent to 2% of their annual global turnover. However, it isn’t applicable to all.
According to Reuters, under the act, companies above a certain size will be forced to establish set due diligence procedures that prevent the abuses; from 2023, only companies with more than 3,000 employees in Germany will be affected. From 2024, the rules will expand to companies with more than 1,000 employees.
Statistics from within the country suggest that the first stage of this regulation rollout will affect 900 companies, while the second stage will put 4,800 companies under the spotlight. The bill will also enable the government to temporarily exclude from public tenders companies that receive fines in excess of €175,000.
“Incalculable risks arise for companies,” said Joachim Lang, general manager at the Federation of German Industry. A word of warning from a respected leader, at a time when industry lobby groups and wholesale businesses fear that the new law increases bureaucracy and suggest that price rises may be inbound.
The Take of German Giants
After looking at the incoming legislation, Daimler AG, known more commonly as the automotive giant Mercedes-Benz, a company which, should there happen to be any ESG-compliance issues along its multinational supply chain, would pay a hefty fee, is welcoming of the push for change but hesitant about certain aspects of the bill.
“Daimler's position is: The respect for human rights is a central aspect of our sustainable business strategy. We, therefore, welcome the progress made on the Supply Chain Act. Although the regulations are very ambitious, the proposed legislation has a sound approach overall. It is based on internationally recognised human rights and on international agreements. And it gives companies more legal certainty in an area that has so far only been partially regulated.
Supply chains are not "chains" but rather exceedingly complex networks: Daimler alone has over 60,000 direct suppliers - and many more sub-suppliers. For this reason, we also consider the proposed risk-based gradual model to be sensible. The responsibility of the companies lies primarily in their own business area and with their direct suppliers. Companies must then take action in the deeper supply chain if there are concrete indications of human rights violations. Daimler AG already does that today.
Even though we support the proposed legislation in principle, we consider some aspects to be critical, e.g. the planned fines of up to 2% of the average annual turnover. Instead of threats of sanctions, we consider concrete measures, which companies must take in the event of deficits, to be more expedient. In addition, certain wordings are still vague and leave room for interpretation. Terms such as, e.g. "fair standard of living" should be phrased precisely in order to create legal certainty. Furthermore, documentation and reporting requirements should not lead to unnecessary bureaucracy and should be harmonised with existing rules. On the one hand, this does not help the people on the ground, and on the other hand, it puts a burden on the companies – and the implementation can pose substantial challenges for smaller companies in particular.”
This law is arguably one of the most important developments in the supply chain space so far this year. But it must be remembered that changes do not and will not happen at the push of a button and that democratic principles should be applied to the discussion prior to enshrining legislation into tablature. Environmental and human rights advocacy is a hike, not a brisk walk around the park ─ so, for German companies, it’s time to get their boots on the ground and start assessing their global, interconnected supply chain operations. And, hopefully, they’ll set a stellar example for the rest of us.