Feeling the green chemistry: why sustainable sourcing is key to energy transition

The success of renewable-energy technologies increasingly hinges on the critical raw materials used to produce batteries, electric vehicles, wind turbines, and solar panels.

Entrepreneurs and sustainability experts often disagree on how to ensure an equitable and ethical supply chain for these resources, which can positively impact both production and recycling.

It is not an easy task, especially for chemical and mining companies. However, failing to address these issues can lead to negative consequences—ranging from human rights abuses to increased greenhouse gas emissions and biodiversity loss—which could ultimately render the energy transition counterproductive or nonviable.

“With the prospected demand growth for raw materials for the transition, such copper, cobalt, nickel or mica, the risk appetite for sourcing raw materials is equally changing,” says Famke Schaap, sustainability expert at Hyacint Consult, a Brussels-based boutique advisory practice on responsible supply chains and ESG risk management. “Supply chains are becoming increasingly diversified as companies are keen to secure materials from across the world, with low- and middle-income countries boasting key supply reserves.”

Life cycle

According to the United Nations Environment Program (UNEP), global supply challenges could slow down the energy transition or jeopardise it altogether, making it more expensive and unequal.

“Greater efficiency, circularity, and responsibility in the extraction and use of energy transition minerals throughout their life cycle can address three looming challenges: supply shortages of energy transition minerals, time lags in ramping up supply, and the potential environmental and social impacts of a rapid expansion in mining,” the UNEP said in a paper published in November.

Collaboration between and within the main industries involved is essential not only to uphold the highest standards of corporate environmental and social responsibility, but also to reduce risks and secure investments.

“Raw materials supply chains are complex, with lack of traceability from the manufacturing or processing down to the mine- or agriculture area of origin, and hence no guarantees that human and environment conditions are respected,” Hyacint Consult’s Schaap says. She notes that many chemical and mining companies already distinguished themselves for developing relations with suppliers that source the nations where labor conditions or solutions for addressing impacts may require continuous monitoring and support.

Supply circles

“New business models are needed to transform supply chains into supply circles, fostering circularity and sustainability,” says Charlie Tan, Chief Executive Officer of the Global Impact Coalition (GIC), a venture builder and accelerator from the World Economic Forum, founded by some of the world’s largest petrochemical companies with around $250 billion in annual revenue. He is also convinced that the transition “demands a fundamental shift in how industries collaborate.”

At GIC “we bring diverse players together to co-create scalable solutions,” he says. “For example, in our Automotive Circular Plastics project, we are uniting the entire value chain, from chemical companies and plastics manufacturers to original equipment manufacturers, shredders and dismantlers, to tackle shared bottlenecks to End-of-Life Vehicle plastics recovery and recycling.”

Such an approach – he adds – “demonstrates how collaboration can address critical material supply challenges, making the vehicle supply chain more circular and integrated – and this is especially needed for electric vehicles where polymer components in the batteries and connectors are needed.”

No ‘box-ticking’

Collective industry efforts need to complement individual efforts - to create leverage across a rapidly changing environment. That affects all the stakeholders, from firms to government and consumers.

“If we want our EV-batteries and wind turbines, we will need to acknowledge that ESG risk and impact management is a key factor to business success - targeting a company’s own operations as well as up- and down the value chain,” says Schaap. "The need for such a due diligence is now well enshrined in the voluntary frameworks of the Organization for Economic Cooperation and Development and of the United Nations Guiding Principles on Business, but also translated into mandatory legislation” in many parts of the globe.

Companies — she says — cannot approach the sourcing task “as a box-ticking exercise. Continuous and risk-based due diligence must be exercised at all levels of the supply chain through a combined approach of individual and collective efforts.”

“By fostering collaboration and developing new business models and internal policies focused on circularity, industries can secure a resilient supply of critical raw materials."

“Connections enable companies to reduce risks and secure the investments and offtake agreements needed to scale innovative solutions, cut emissions, and accelerate the sustainable transition,” GIC’s Tan says.