Cobalt and the Sustainability of Electric Vehicles

Michael Flippo/Adobe Stock

Spend Matters welcomes this guest post from Nick Peksa, opportunities director at Mintec.

Recently I have been reading a number of case studies based on some of the world’s leading sustainable and socially responsible firms, ranging from Unilever’s work in Brazil and Danone’s work in India to Vodafone and their mobile payment systems in Kenya. One of the other favorite firms for academic research is Tesla, with its “greener than thou” philosophy. Delving a little deeper into the mechanics of batteries, however, the word “cobalt” rang a number of alarm bells.

I am obviously behind the times, as cobalt prices have reached an 8-year high in 2017, with investors looking to capitalize on the rising demand for eco-friendly electric cars. Cobalt’s primary use is in lithium-ion batteries. In 2017, electric vehicle sales were forecast to rise 26% year-over-year, driving investors to buy large inventories of cobalt, which caused prices to climb 188% between January and June.

This demand is set to increase further, with some industry experts believing that in 2030, the total number of electric vehicles could be close to 27 million cars, approximately a third of all cars sold.

But that is not what caused my supply chain antennae to quiver. Around 53% of the world’s cobalt supply comes from the Democratic Republic of the Congo, where poor infrastructure results in around a 10-year wait to build a new mine.

The true problems, however, lie with the country’s supply chain. Congo is a no-go zone for global multinationals, due to slavery and child exploitation. The United Nations Children’s Fund (UNICEF) estimates 40,000 children work in the nation’s cobalt mines in dire conditions, and frankly this is not acceptable for any supply chain.

In 2017, cobalt demand is forecast to rise 5% y-o-y to 109,000 tons, leading to a potential 5,000 ton supply deficit. Total demand based on 27 million vehicles could result in a shortfall of 160,000 tons, a truly staggering figure.

Tesla has stated that cobalt will be exclusively sourced in North America. Unless the technology of EVs changes, however, the EV market is in trouble. There is not enough affordable cobalt available in the world (unless companies sacrifice their morals). But could this predicament be converted into an opportunity?

Early in the year, Lord Bird, the original founder of “The Big Issue,” highlighted his “PECC” framework at a presentation at the London Business School. He asked this question about poverty: Is it “prevention, emergency, coping or cure? Is this getting people out of poverty or is it simply holding their hands when they have a hard day?”

Should global companies and governments work together and look at the cause of the problem in Congo rather than avoiding the problem? Could we not potentially expand this framework and use the world’s green agenda and budget to try to improve Congo’s infrastructure?

By aspiring to have a greener, cleaner world, could we directly affect the slavery issues? Could it be possible for a coalition of car giants and governments to educate, fund, empower and change the mindset of the Congolese people? As a consumer, a shareholder and a taxpayer, could we make a difference?

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First Voice

  1. Peter Roche:

    Excellent point! If only those in power in the Congo would take this on as a game changer.

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