OM in the News: The Challenge of Socially Responsible Sourcing

Cobalt metal is a crucial component of lithium-ion batteries, which are used to power electric vehicles as well as portable electronic devices due to its ability to conduct electricity when stacked with other metals such as lithium and nickel. And it is in high demand, as the price of the metal has soared to $75,000 a metric ton, more than double the price from the start of 2017. Cobalt prices are further expected to double in the next 2 years as demand for electric-vehicle batteries continues to outstrip existing supply of the metal.

The problem, reports The Wall Street Journal (Jan. 3, 2018), is that most cobalt currently comes from the Democratic Republic of Congo, where supply is threatened by political, legal and labor issues. The Congo produces 2/3 of the world’s cobalt, (about 66,000 metric tons a year), but mines there have been criticized over reports of child labor and unsafe conditions. Thousands of children, some as young as 7 years old, mine cobalt in the country and work in perilous conditions without basic protective equipment.

Volkswagen and 9 other leading car makers, including Ford and Mercedes, whose supply chains include cobalt buyers, just set up a “raw materials observatory” that aims to address ethical and labor-rights issues in sourcing raw materials, including cobalt. One Canadian battery maker’s CEO said: “All of our customers want ethical sourcing.”

Child labor is a difficult issue in developing countries, usually caused by poverty.

Classroom discussion questions:

1. What is “socially responsible sourcing”?
2. What are the alternatives to sourcing from the Congo?