Why Samsung SDI Is Auditing Overseas Cobalt Refineries

Evaluation of 9 Companies Including Cathode Materials and Precursor Suppliers
Expansion of Targets to Smelters and Major Mines This Year
Emergence of 'Responsible Minerals' Amid Strengthened International ESG Standards

Samsung SDI is conducting rigorous audits on overseas suppliers of key battery materials such as cobalt, nickel, and lithium. By last month, audits were completed for nine companies, including three cathode material suppliers, three precursor suppliers, and three smelters. The audits are commissioned to third-party organizations to examine whether there are any significant violations related to human rights abuses or environmental and occupational health and safety issues during the production process.

The audit results confirmed that minerals were not sourced from small-scale, artisanal mines with high risks of human rights and environmental destruction. However, most companies were found to need improvements in their mineral supply chain policies and risk management, prompting Samsung SDI to request improvement plans from these suppliers.

Starting in the second half of the year, Samsung SDI plans to expand third-party audits to mines that extract minerals. A Samsung SDI official stated, “We include all minerals for which human rights violations or environmental destruction issues are raised during mining or procurement processes in our management scope, and we manage them to comply with responsible mineral sourcing principles.”

The reason Samsung SDI is strengthening audits of overseas suppliers is that customers, namely automakers, demand a high level of supply chain sustainability for the development and procurement of core battery minerals.

The Organisation for Economic Co-operation and Development (OECD) announced the “OECD Due Diligence Guidance for Responsible Business Conduct” in 2018. The purpose was to address unethical corporate behaviors such as labor rights violations and environmental pollution. Although it lacked enforcement power at the time and was therefore less effective, recent efforts to increase enforcement have made compliance unavoidable.

The European Union (EU) will impose sustainability disclosure obligations sequentially from 2024 under the Corporate Sustainability Reporting Directive (CSRD) announced earlier this year. The CSRD came into effect in January and is expected to be legislated within EU member states by June next year. In particular, legislation on supply chain sustainability due diligence is also underway. This requires not only primary contractors but also companies of a certain size within the business relationship to conduct due diligence on human rights and environmental issues within their supply chains and to disclose related information.

Accordingly, automakers selling vehicles in the EU are demanding that partner companies like Samsung SDI strengthen ESG (Environmental, Social, and Governance) management, making mineral supply chain management increasingly important.

Additionally, on the 29th of last month, Sarah Bianchi, Deputy U.S. Trade Representative (USTR), visited South Korea to discuss supply chain cooperation for key battery minerals with the Korean government. The Biden administration has set a goal of making 50% of new car sales electric vehicles by 2030 and is actively supporting a domestic-centered electric vehicle and battery industry through the Inflation Reduction Act (IRA).

The challenge is to secure a stable supply chain to replace the battery-critical minerals that currently have high dependence on China. In this process, establishing an ethically and environmentally sound supply chain is expected to be crucial for the Biden administration to achieve its goals.

These changes are emerging as new opportunities for domestic companies. Other battery material companies are also pursuing measures to strengthen supply chain management, including investments in core mineral internalization.

POSCO Future M supplies tungsten and cobalt through mines and suppliers verified by the Responsible Minerals Initiative (RMI). Using blockchain technology, it has established and operates a “Responsible Minerals Traceability Management System” targeting key raw materials such as cobalt, lithium, and nickel. Last year, 91 out of 339 new suppliers (about 27%) underwent ESG qualification audits, and this year, the company plans to expand responsible minerals education to all raw material suppliers. EcoPro Group inspects 49 mines, smelters, and refiners involved in mineral trading and has suspended new contracts with three entities judged to pose human rights risks.

Black powder form cathode material, a key component of secondary batteries

This content was produced with the assistance of AI translation services.