Mercedes-Benz taps blockchain to track emissions in cobalt supply chain

Dive Brief:

Mercedes-Benz, in partnership with traceability startup Circulor, will pilot blockchain technology to track carbon emissions, ethical compliance and product flows in its cobalt supply chain, a key raw material in electric vehicle (EV) batteries, according to an announcement on Thursday.
The Democratic Republic of Congo produces the majority of the world's cobalt, and the production is notorious for involving child labor and other human rights abuses. The metal enters Mercedes-Benz's supply chain via recycling facilities, according to the release, and the blockchain platform will trace carbon emissions and help the company hold suppliers accountable for ensuring "working conditions, human rights, environmental protection, safety, business ethics and compliance are passed on to all companies involved."
The pilot supports the automaker's Ambition2039 program, launched in May 2019, which aims to render its European supply chain carbon neutral by 2022. In addition, the company is working with suppliers and manufacturers to transition production facilities to renewable power sources and less carbon-intensive operations as it ramps up EV production in the coming years.

Dive Insight:

While EVs reduce carbon emissions, the production process of the vehicles, their batteries and the sources of the electricity used to power them have come under scrutiny for their negative impact on the environment.

As a result, some companies are focusing on ensuring sustainability practices upstream by transitioning to cleaner production practices and sourcing electrical power from sustainable wind, solar or geothermal sources. The same thought applies to cobalt usage as an increase in EV production will ramp up industry demand for the metal.

Mercedes-Benz launched a blockchain pilot targeted at general suppliers last year, focusing on certifying procurement and contractural compliance. It is unclear from this most recent pilot announcement how the automaker will use blockchain to ensure human rights and ethical accountability, leaving the emphasis of the program on emissions.

"The focus of the commitment is initially on materials whose production is particularly CO2 intensive," according to the release, "In addition to battery cells, this also includes steel and aluminium." As part of this effort, the automaker began sourcing battery cells last year from a supplier whose production facilities ran on electricity generated from 100% renewable sources.

Mercedes-Benz said it will work with suppliers to set emissions reduction goals and strategies, although it does not include specific numerical targets in the blockchain pilot or Ambition2039 announcements.

"Let’s be clear what this means for us: a fundamental transformation of our company within less than three product cycles," Ola Källenius, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars, said in a speech announcing Ambition2039. Each product cycle is approximately 10 years.

"Overall, global EV-sales volumes are becoming large enough to create substantial profit pools for well-positioned suppliers and other upstream players," according to research from McKinsey. As the market heats up, automakers, including BMW, Ford, Toyota and Volkswagen, are setting vehicle electrification targets for the next decade, anticipating growing demand from general consumers and commercial fleet operations looking to reduce their environmental impact.

Fiat Chrysler, Ford, Volkswagen, Volvo and others are also leveraging blockchain technology to map the environmental impact of their supply chains, tracing cobalt and other key raw materials like gold, mica, tantalum and tungsten as part of IBM's Responsible Sourcing Blockchain Network.

Any additions or changes members make to the blockchain's ledger are visible to everyone. In this way, as partners in a supply chain update sourcing and transit information for raw materials, post contractual information or compliance requirements, companies benefit from greater visibility into their operations and can gauge the effectiveness of initiatives such as reducing emissions or verifying working conditions.