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New blockchain pilot to address strategic mineral supply chain concerns


Ford Motor Company, Huayou Cobalt, IBM, LG Chem and RCS Global are planning to use blockchain technology to trace and validate ethically sourced minerals. 

The group, which includes participants at each major
stage of the supply chain from mine to end-user, will begin with a pilot
focused on cobalt and explore the creation of an open, industrywide blockchain
platform that could ultimately be used to trace and validate a range of
minerals used in consumer products.

Cobalt is in high demand for its use in lithium-ion batteries, which power a wide range of products such as laptops, mobile devices and electric vehicles. According to a report from Morgan Stanley, by 2026, demand is expected to multiply eightfold, especially for its use in electric vehicles and consumer devices. The typical electric car battery requires up to 20 pounds of cobalt and a standard laptop requires around one ounce of the mineral.

The blockchain pilot is already underway and seeks to demonstrate how materials in the supply chain are responsibly produced, traded and processed. For this pilot based on a simulated sourcing scenario, Cobalt produced at Huayou’s industrial mine site in the Democratic Republic of Congo (DRC) will be traced through the supply chain as it travels from mine and smelter to LG Chem’s cathode plant and battery plant in South Korea, and finally into a Ford plant in the United States. An immutable audit trail will be created on the blockchain, which will include corresponding data to provide evidence of the cobalt production from mine to end manufacturer.

Participants in the network will be validated against
responsible sourcing standards developed by the Organization for Economic
Cooperation and Development (OECD). 

Traditionally, miners, smelters and consumer brands
rely on third-party audits to establish compliance with generally accepted
industry standards. Coupled with these assessments, blockchain technology
offers a network of validated participants and immutable data that can be seen
by all permissioned network participants in real time. Blockchain can also be
used to help network participants address their compliance requirements.  

While the initial focus is on large-scale
miners (LSMs), an important objective of the group is to help increase
transparency in artisanal and small-scale mining (ASMs) and enable
these operators to sell their raw materials in the global
market, while they meet their internationally ratified responsibility
requirements. The network can help enable ASM operators to
partner with due diligence data providers and, ultimately, join a
blockchain-based network of validated participants. The pilot will also explore
the use of incentives or financial benefits for ASMs and their local
communities impacted by mining.

Built on the IBM Blockchain Platform and powered by
the Linux Foundation’s Hyperledger Fabric, the platform is designed to be
adopted across industry. The solution is built to allow interested parties of
all sizes and roles in the supply chain easy access, including original
equipment manufacturers (OEMs) across the automotive, electronics, aerospace
and defense industries and their supply chain partners such as mining companies
and battery manufacturers. Supply chain networks will be encouraged to join
this open, industrywide network to trace and validate minerals upon successful
completion of the pilot.

Work is expected to be extended beyond cobalt into other battery metals and raw materials, including minerals such as tantalum, tin, tungsten and gold, which are sometimes called conflict minerals, as well as rare earths. Focus industries for the solution include automotive, aerospace and defense, and consumer electronics.

There are plans for a governance board representing
members across these industries, to help further ensure the platform’s growth,
functionality and commitment to democratic principles.

The pilot is expected to be completed mid-year 2019.

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