EV battery startup Britishvolt’s investment from Glencore came with a cobalt supply—and ESG headaches

August 20, 2021, 2:22 PM UTC

The world desperately needs electric vehicle batteries, and with the first giant battery factory under construction in the U.K., Britishvolt is unsurprisingly hailed as a hometown hero.

But some experts are not so keen on Britishvolt’s deal, announced this week, to sell a stake to mining giant Glencore in exchange for a long-term supply of cobalt.

Britishvolt builds standard lithium-ion batteries and is also exploring solid-state batteries, both of which use cobalt. The company aims to feed the demand for electric vehicle batteries, which is set to balloon as the U.K. approaches its 2030 ban on the sale of pure internal combustion cars.

But despite the excitement surrounding the Britishvolt plant, which is slated to have a total annual production capacity of 30 gigawatt-hours (GWh) by 2027, the Glencore deal—which will supply Britishvolt with a minimum of 30% of its annual cobalt needs—has stoked concerns among environmental and human rights groups that the sourcing of required cobalt might not be as clean as intended.

Using cobalt in batteries increases energy density, enabling them to hold more power and charge faster. But cobalt mining has consistently been mired in human rights abuse, corruption, and environmental scandals. Now, with car manufacturers demanding better environmental, social, and governance (ESG) reviews, working conditions for those mining the treasured resource have got to improve if the industry hopes to pass the Western market test.

Ballooning demand from the global north

In a push to meet the Paris Agreement goals on emission reductions, the demand for minerals used in electric vehicles and battery storage is expected to grow at least 30-fold by 2040, according to the International Energy Agency.

According to analysis done by Bank of America, global EV battery supply will likely be fully utilized by 2025, with a supply shortage intensifying between 2026 to 2030.

Much of this demand will come from Western Europe, which is electrifying its grids and cars to cut the use of fossil fuels. In this scenario, both the EU and the U.K. are pushing to build out battery factories to bring production of the energy transition’s most crucial component to domestic soil.

“Without domestic battery production, the U.K. could see its motor industry migrate abroad,” Graham Hoare, president of Britishvolt’s global operations, notes on the company website.

In a move to beat out its European counterparts and keep up with Asia’s and Tesla’s dominance over the battery market, U.K. Prime Minister Boris Johnson committed £1 billion ($1.4 billion) to build six battery factories in the U.K. The £2.6 billion Britishvolt battery production center was the first factory to be given approval and chose its home in the northeast English town of Blyth in December 2020.

However, by bringing battery factories home, the EU and the U.K. will have to abide by stricter governance rules on where they source their materials. That will force them to address the political and human rights situations in places like the Democratic Republic of the Congo (DRC), where most of the world’s cobalt can be found.

Tricky supply from the global south

“Cobalt is so strategic that it is expected to lift the Congolese population out of poverty,” says Elisabeth Caesens, director of Resource Matters, an NGO that focuses on natural resource governance.

Two-thirds of the world’s cobalt reserves can be found in the southern region of the DRC. There, much of the resource is taken out of the ground using “artisanal mining” practices, whereby miners—often children—are not employed in formal jobs by a mining company, but rather mine cobalt using their own tools or hands.

Mining in the DRC faces corruption issues as well. Glencore—one of the world’s biggest cobalt producers—is facing corruption investigations by authorities in the U.K., the U.S., and Switzerland.

Since late 2019, the U.K.’s Serious Fraud Office has been investigating the company for “suspicions of bribery in the conduct of business,” and Glencore faces a criminal investigation from the Swiss government over its alleged failure to prevent corruption in the DRC.

Glencore also continues to pay millions of euros annually to the network of Dan Gertler, who has been on the U.S. sanctions list for high-level corruption since 2017, for royalties he retained after selling his stake in two Glencore mining projects that year.

“As long as Glencore keeps making such controversial payments, we should be hesitant to qualify its cobalt as ethical,” says Caesens.

According to Glencore, the royalty payments to Gertler are a contractual obligation, and the company is not working with him anymore.

Many have ended their relationships with the DRC already, either by choosing different materials or sourcing cobalt from China. Tesla founder Elon Musk even announced in July 2020 that his company would stop using cobalt altogether (though Tesla still buys cobalt from Glencore, according to a spokesperson at the mining firm).

Signs of change?

But there are signs of change in the industry.

The DRC recently granted a monopoly to a new state-owned company to purchase and market all cobalt that is not mined industrially to exert greater influence over prices and have better oversight of artisanal-mining working conditions.

Britishvolt for its part says it is working with cobalt industry groups in the DRC to increase transparency in the production process and improve its business practices and standards, a goal that it believes its Glencore deal will help further. A Britishvolt spokesman told Fortune that the company is exploring options for joining industry bodies that look to improve the working conditions of everyone involved in the battery supply chain.

“Knowing that we are being supplied with ethically produced, low-carbon cobalt is a signal to the market that we are living by our values,” said Orral Nadjari, the founder and CEO of Britishvolt, at the time of Glencore’s investment.

Mining companies and the government of the DRC are also both “trying to take steps to give car manufacturers the confidence that the cobalt they buy from the DRC is ESG-friendly,” says Michael Widmer, commodities strategist at Bank of America Research.

Glencore is among those industry participants trying to address ESG concerns, Widmer notes. The Swiss mining giant is testing out new blockchain technology to enhance the traceability of cobalt in its supply chain for better transparency in its mining practices.

Glencore is also part of the Fair Cobalt Alliance, an initiative founded in August 2020 that works with national and provincial governments to end the use of child labor at mining sites and improve working conditions in the DRC.

“Glencore is committed to operating ethically and responsibly in all aspects of its business,” a Glencore spokesperson said.

This story has been updated with comment from Glencore.

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