The Responsible Sourcing Blockchain Network (RSBN) announced today that its digital supply chain for cobalt has moved past its pilot phase and will go out to live production starting in spring 2020.
The RSBN is a blockchain network committed to human rights and environmental protection in mineral supply chains. It’s built on the IBM Blockchain Platform and assured by RCS Global Group, with inputs from the Ford Motor Company (F.NYSE), Volkswagen Group (FWB.VOW), LG Chem 003550 (KRX), Huayou Cobalt 603799 (SHA), and Volvo Cars.
The network is building an open blockchain platform to be used industry-wide that will trace responsibly produced minerals from source through to end product.
“We are setting in motion a process of mainstreaming responsible sourcing practices across major industries,” said Dr. Nicholas Garrett, CEO of RCS Global Group.
The cobalt problem
Electric cars were supposed to be the ethical sustainable alternative to the climate-change inducing internal combustion monstrosity presently clogging our streets. It makes sense on paper. An electrical battery doesn’t use gas, doesn’t add emissions, and doesn’t pollute our atmosphere. Good deal. Right?
Except if you look deeper the ethical ramifications jump out.
The Tesla (TSLA.Q) megapack is a huge lithium-ion battery comprised of lithium, cobalt, nickel, manganese, and graphite as active cathode materials.
The second metal in that list is cobalt, which is difficult to source. There’s some in Ontario (around the aptly named “Cobalt, Ontario” area) but that’s bound to be prohibitively expensive, and it’s far easy to go to the developing world, where the prices are—pun intended—dirt cheap.
Here’s what Forbes had to say about the Democratic Republic of Congo (DRC):
“Democratic Republic of Congo accounted for around 64% of global mined cobalt production last year, according to the United States Geological Survey. Tesla’s latest battery will force the company to gain a larger portion of the cobalt supply. Also, Darton Commodities predicts cobalt use in batteries is going to jump from 50,000 tons in 2016 to more than 320,000 tons by the year 2030.”
The DRC is one of the most impoverished nations on earth. It’s history is fraught with colonialism, tribal warfare, civil war, disease and famine. It’s also home to human rights abuses, some of which were perpetuated either for (or allegedly, by) resource companies against the Congolese people.
Perhaps not surprising, but the social backlash has been immense as the death toll climbs.
Now maybe the conscience-relieving Tesla doesn’t seem so shiny anymore, and there’s pressure on car companies to source their cobalt either elsewhere, or in a more sustainably equitable fashion.
But there’s another added problem and that’s the general lack of trust. Just because the bill of lading on the shipping container says the cobalt was ethically mined in Australia doesn’t mean it wasn’t mined in the DRC, sent to a country where corruption and bribery is part of the fabric of the society, and the appropriate customs official bribed to obscure the origin.
It’s an everyday occurrence in the diamond industry.
The solution
There’s nothing intrinsically wrong with sourcing your cobalt from the DRC. It brings in foreign direct investment, which can have a positive effect on the local economy by introducing growth factors in terms of jobs and infrastructure developments. The problem is the supplementary business practices that go along with many operations, and the DRC’s infamy involves using child labour at cobalt mines.
Depending on how blockchain’s accessibility and transparency, the ethically-conscious customer could source the cobalt (or any other product) back along to any entry point in the supply chain and make their decision based on what they know about each of these operations.
Let’s take another example:
If an ethically-conscious consumer wandered into the Apple (AAPL.Q) store in search of a new Ipad, and Apple had sufficiently logged all of its materials onto a blockchain, then they could see the Longhua factory in Shenzhen, China, on the manifest, find out about the suicides and the generally hellish working conditions after some research, and make an ethical decision to go somewhere else.
It wouldn’t stop Apple and other like companies from being evil, but it would at least produce enough of a disincentive regarding their bottom line to curtail their worst abuses. The data gathered is going to be overseen by a governance board representing members across participating industries. The board is there to help with the platform’s growth, functionality and adherence to good practice principles.
And this is an excellent place to transition into:
The complication
Organizations, like the above mentioned, start out with the best of intentions. But people suck, or if you’d prefer a bit more of an elegant explanation, they’re subject to the second law of thermodynamics in that everything eventually falls apart. Even the greatest, most well-meaning systems eventually develop holes and become corrupt.
If there’s a system in place, people will hack it for no other purpose than to hack it. In this case, wherein a cadre of right-minded individuals are seeking to do something positive for their industry (and for humanity in general, if we can extend it so far), there’s going to be a dedicated group of people looking for a loophole to exploit to get an advantage on the competition.
That’s human nature.
Unfortunately, blockchain comes with a built-in weakness—and that weakness is the human element.
One of the biggest selling points about the blockchain is whatever goes on it, stays on it. The secret to avoiding the immutability factor is, of course, to not put anything on the blockchain that you don’t want to be held accountable for later. There’s nothing implemented to stop a company from sourcing their cobalt in some hellish mine with the most ruinous human rights violations, and paying a premium to another company with a better reputation to add their tonnage onto the blockchain for a share of the profits. But if we could reduce the amount of freeriders taking advantage of this system to a handful, which we could then find through other means and punish respectively, then blockchain will have paid for itself.
Blockchain as harm reduction technique, what’s not to like?
—Joseph Morton