EV supply chains seek clearer visibility with blockchain
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When Volvo Cars wanted to verify whether materials in its batteries were sourced ethically, its managers visited the Democratic Republic of Congo, the world’s leading producer of cobalt, where some mines use child workers, according to organisations such as Unicef and Amnesty International.
“We had to make sure sites were protected, workers got the right safety gear, and there were no children,” says Martina Buchhauser, Volvo Cars’ head of procurement. “What we were missing was a technological way of tracing back and making sure that cannot be fiddled around after the fact.”
But what was once a near-impossible task — tracking the materials and individual components in auto supply lines through multiple providers — is now becoming easier with blockchain.
Volvo is using the technology to track the supply of cobalt on its journey from the mine through suppliers and into the car itself. The carmaker recently invested in Circulor, a blockchain provider, to track a wider range of minerals.
Blockchain allows the business to track parts as they flow through its supply chain without the need for physical checks at every stage. Ms Buchhauser says Volvo has already axed at least one supplier from its network for non-compliance exposed by the technology.
It will also expand its monitoring to heavy components in order to reduce CO2 emissions throughout its network. All of these changes need suppliers to get on board with the technology.
“When we first started reaching out [to suppliers], we made it clear that responsible sourcing is a big piece of what we do,” she says.
“It was a bit funny, because after we explained [the technology] to them, they said: ‘Oh, you really mean this’.”
The rise of electric vehicles, for which numbers remain global numbers remain small yet are growing on the back of emissions targets across Europe and China, is changing the way carmakers view their often disparate network of suppliers.
Minerals such as cobalt and mica, sourced primarily from the DRC, raise the stakes for any group wanting to sell battery cars as an “ethical” choice.
“There is a widespread admission among electric vehicle producers that the current state of play is not adequate,” says Doug Parr, chief scientist at Greenpeace in the UK.
He cites the example of how a public outcry over the deforestation associated with the production of palm oil prompted food businesses to change practices to become more ethical.
“Transparency is an important starting point. It’s not an end in itself, but it’s an essential component of getting to the right place,” he says. “For a mass electrification of transport, it will need to be a lot better than it currently is, both from an environmental and a human rights perspective.”
But as carmakers seek greater oversight of their sourcing, particularly those buried in the depths of networks that cross the world, they are reaching a natural ceiling for the amount they can realistically monitor.
“You cannot know everything, it would be chaos,” says Ian Harnett, who in July retired as head of procurement at Jaguar Land Rover, the carmaker.
“I would love to know everything all the way, but I’d need an army of people, supercomputers, and the first time a fifth-tier supplier changed, my data is out.”
Despite that, the company has considered working with Circulor to help it track products, Mr Hartnett told an FT virtual summit this summer.
Yet while carmakers have grappled with the complexity of their supply lines long before electric technology came in, the move towards battery vehicles makes their job easier.
While the engine of a VW Golf contains 113 moving parts, the equivalent section of an electric Chevrolet Bolt has three, according to a teardown of both models by UBS, the Swiss financial group.
As new types of companies, such as battery makers, enter the system, businesses specialising in parts for traditional engines risk being cast out unless they adapt to new technology.
Thorsten Muschal, president of Clepa, which represents automotive suppliers in Europe, says the changes are far wider than simply the long-term phase-out of traditional engine makers.
“It’s not only about the ones in combustion engines, there are changes in interiors, digitalisation, new technology fields, needing to find components for the batteries, every part of the car needs electric features, and there are sensors,” he says.
“There are a lot of new things coming up on the supply side. There’s a real transformation happening.”