This article is part of our special report Sustainable sourcing of batteries.
EV batteries are critical to achieving the EU´s climate change targets. Europe has therefore set itself the ambitious goal of establishing – within a very short time frame – a complete and competitive electric vehicle battery value chain.
Mark Mistry is a Senior Manager of Public Policy at The Nickel Institute.
The level of ambition is even higher with the requirement that all production and manufacturing steps in this value chain are conducted sustainably. The proposed EU battery regulation plays a key role in achieving both targets. The new regulation, which is expected to be adopted in 2022, will provide the framework conditions necessary to operate competitively and to provide sustainably manufactured batteries to the EU market.
The draft regulation pays special attention to the extraction and production of raw materials and their recycling at the end of life. Environmental, social and governance (ESG) impacts of metal production are increasingly examined by both the regulators and value chains and it is very important to correctly identify and manage these appropriately for each metal. Responsible sourcing and due diligence in raw materials production are therefore a key priority in the proposed ruling.
Nickel is one of the essential metals in modern EV battery technologies. It is mined, processed and refined in over 25 countries across the globe. The growing demand for nickel in the coming years will require nickel supply from sources within and outside the EU to go hand in hand. Together with other battery raw materials, nickel is in the focus of the proposed regulation when it comes to sourcing and other sustainability aspects.
Nickel Institute member companies are leading producers of nickel in Europe and globally. They have committed to responsible sourcing requirements. Over the past decades, they have invested in measures to protect the environment, comply with worker´s protection standards and address social and governance risks. Responsible sourcing is an opportunity for companies to demonstrate that they fulfil the expectations of regulators, their customers and civil society.
The term “responsible sourcing” describes a multi-dimensional system. It comprises more than 30 different environmental, social and governance risks which need to be adequately addressed. While some of the ESG risks are common for all companies active in mining and metals production, some are specific to a given metal – and some others are less relevant. There is a need to tailor systems to the raw material in question.
Different metals sectors are now cooperating to define responsible sourcing standards that take the commonalities as well as the characteristics of each metal into account. These standards will undergo a rigorous independent third-party review to show that the level of ambition is met and that the requirements and expectations of society and regulators are fulfilled.
The complexity of the system, the coordination efforts required as well as the third-party review means that that whole process is time-intensive. Before companies can even start to be audited the existing frameworks need to be reviewed and tailored to specific metals such as nickel, and the proposed frameworks must be certified.
We acknowledge concerns that for the EU battery regulation to be a success, it is important that responsible sourcing be implemented shortly after it enters into force. However, the time frame needs to remain realistic to develop and implement solid, rigorous responsible sourcing frameworks before auditing takes place. The initial proposal of the European Commission acknowledged this aspect and indeed provided sufficient time.
However, questions have been raised about industry-led schemes. There is the misconception that such frameworks are less ambitious than the requirements of the regulation. Review by for example the OECD or the International Social and Environmental Accreditation and Labelling Alliance (ISEAL Alliance) will play a critical role. Such independent third-party reviews will ensure that the standards fulfil the necessary requirements and are robust.
We also strongly believe that the European institutions should seek coherence between the responsible sourcing requirements in the proposed EU battery regulation and upcoming legislation where responsible sourcing for raw materials in general and for other value chains will be addressed. Different requirements in different legislative proposals will not create benefits but lead to inefficiencies and confusion. The risk is that companies will have to choose between different EU priorities, which could lead to market disruptions.
Sustainable sourcing of battery raw materials is a critical topic that requires significant efforts from the companies involved. But it also offers opportunities for them to demonstrate their ESG performance and what they are doing to address impacts that need further attention. Companies and commodities are engaging in a joint effort to address concerns and questions through the development and implementation of appropriate and robust tools. These tools and standards will undergo rigorous review to ensure alignment with existing international frameworks and acceptance by accreditation bodies to provide the necessary reassurance to all stakeholders that the metals needed to help tackle climate change are produced responsibly.