Increasing responsible sourcing demand puts a spotlight on mining sector.

Artisanal and small-scale mining (ASM) is a term that describes the subsistence mining sector, where locals work independently using low-tech methods of manual extraction, physical labor, and basic tools.

Many rural communities are historically reliant on artisanal mining for their livelihoods. However, that same history also involves poor working conditions, human rights violations, predatory land grabs and child labor and exploitation.

The cobalt industry has been increasingly sensitive to these negative impacts as investors begin to push for more transparency and integrity in their energy transition supply chains and are otherwise cautious about being involved in transactions in the sector.

This is especially true for the Democratic Republic of Congo (DRC), which produced 74% of the world's cobalt in 2023.

"In light of the rising demand for cobalt, the DRC's unparalleled cobalt resources and its reliance on the cobalt mining industry, solutions to mitigate the human rights risks in the Congolese supply chain need to be developed now," quoted the World Economic Forum's 2020 white paper on artisanal cobalt extraction in the DRC.

Futile avoidance

The prevalent Western response to the artisanal cobalt dilemma has been avoidance, either pushing for less cobalt content in electronics and battery design, such as using lithium-iron-phosphate cells or steering clear of supply tainted by ASM. Apple publicly announced its products in 2021 contained 13% recycled cobalt and is pushing that number to 100% by 2025.

However, cobalt isn't going away, and keeping artisanal cobalt out of the value stream is next to impossible due to the convoluted nature of the supply chain. Companies committed to setting up responsible cobalt sourcing practices are less able to take an arm's length approach.

"Global buyers engaging in a futile attempt to avoid cobalt associated with ASM ignore the inconvenient truth that it is nearly impossible to separate the flow of ASM cobalt from the larger supply of industrially mined cobalt," said Dorothée Baumann-Pauly, director of the Geneva Center for Business and Human Rights.

Cobalt for use in batteries accounted for 93% of total demand growth in 2023. Electric vehicles (EVs) alone are now supporting 45% of the market, according to The Cobalt Institute.

Fair Cobalt Alliance

Artisanal miners work independently of large mining companies, using low-tech methods of manual extraction, physical labor, and basic tools.

Artisanal cobalt case study

An independent report by Baumann-Pauly made observations and recommendations based on the success of the Mutoshi pilot project, a responsible cobalt sourcing partnership between the commodities trading and logistics company Trafigura Group, United Arab Emirates miner Chemaf, COMIAKOL cooperative for artisanal and small-scale mining, and international NGO Pact which was initiated back in 2018.

The main objective of the partnership was to formalize artisanal and small-scale mining, ensuring the safe delivery of cobalt to market.

The pilot involved 5,000 miners at the Mutoshi concession (owned by Chemaf) using machines to create open pits and eliminate dangerous tunnels, invited women into the workforce, and forbade child labor. Though considered a success, the project ended in 2020 during the pandemic.

The project demonstrated that there is a counterbalance struck between human cost and financial cost – safety is expensive. Industrial excavation equipment is much safer than tunneling but incurs a bill of $50,000, which had to be repeated every six months, according to Baumann-Pauly's report.

The report made recommendations to global cobalt buyers regarding a need to legitimize ASM as an integral component of cobalt mining, formalize ASM to address child labor, hasten the integration of women, and promote open-pit extraction to improve safety.

It posed that strong leadership from companies in the battery supply chain, including Western governments on the receiving end of the bounty, must collectively develop and enforce common standards where they work.

Progress at a snail's pace

There are still no officially set international standards defining ASM formalization.

The West needs bigger commitments in the DRC if it is serious about competing with China, which has outpaced and out-spent competitors in the space while the U.S. builds pilot projects and the EU focuses on improved governance.

Many industry organizations and investors are promoting higher standards, such as the due diligence guidelines from the Organization for Economic Cooperation and Development (OECD), to audit their supply chains and are making strides toward finding and supporting collaboration models that work.

Sustainability and responsible sourcing standards incorporate the OECD framework along with the International Labor Organization's requirements to monitor labor conditions.

Additionally, BMW, Samsung, Volkswagen and others help fund Cobalt for Development, and Tesla, Google, and Glencore are funding Fair Cobalt Alliance, multi-stakeholder platforms bringing together actors from across the entire cobalt mineral supply chain to focus on formalizing ASM in the DRC, supporting environmental rehabilitation, developing affected communities and creating safer working conditions.

This year, the Responsible Minerals Initiative's (RMI) Downstream Assessment Program (supported by companies like Apple, Glencore, Microsoft and Volkswagen) has launched an enhanced portfolio of documents in alignment with the OECD Due Diligence Guidance for Responsible Mineral Supply Chains based on the outcomes of the OECD Alignment Assessment.

The West's willingness to pay a premium for responsibly sourced cobalt may be the ultimate test.

Fair Cobalt Alliance

"Global buyers engaging in a futile attempt to avoid cobalt associated with ASM ignore the inconvenient truth that it is nearly impossible to separate the flow of ASM cobalt from the larger supply of industrially mined cobalt." –Dorothée Baumann-Pauly

Unifying standards

Blueprints for further integration projects are largely based on Mutoshi's successful example, whose ensuing backslide into predominantly Chinese hands in its absence is telling.

In 2023, the U.S. signed a memorandum of understanding with the DRC and Zambia to jointly develop a supply chain for EV batteries without China as the middleman.

The MOU "opens the door for open and transparent investment to build value-added and sustainable industry in Africa and creating a just energy transition for workers and local communities," the U.S. State Department reported.

Mines are already required to consult with local communities and stakeholders to develop and apply plans for social development. These communities should include artisanal miners, whose businesses grow informally as community members are drawn to where a formal mine is operating. Those small businesses have the potential to be developed as sustainable enterprises and officially added to the supply chain.

Holders of mining rights in the DRC are expected to fulfill obligations, including compliance with environmental and social standards, health and safety, and the submission of regular reports to competent authorities. Meanwhile, industry-led groups are playing an increasingly important role in assuring investors, lenders, and end-users that their products have responsibly sourced components.

With the greater volume of cobalt being shipped out of Africa for processing abroad, the due diligence process is expanding across the entire supply chain to track who is engaged in all logistical aspects of this trade, ensuring an unbroken progression of the mineral's provenance.

Responsible sourcing in the mining sector reflects significant shifts in business strategies, demonstrating a positive direction that is relatively constant in spite of financial and geopolitical pitfalls and is estimated to continue strongly as 2024 continues.

With clear governance reporting and on-location oversight, this small-scale mining sector can benefit the global energy transition without harming local communities in the process.