At present, the Mercedes-Benz AG does not source cobalt directly. To make the complex cobalt supply chains of our battery cell suppliers more transparent and to assess suppliers on human rights performance, we have had suppliers audited by the auditing and advisory firm RCS Global since 2018. On the basis of the findings obtained, Mercedes-Benz will in future require its battery cell suppliers to source cobalt exclusively from certified mining sites.
Cobalt is an important raw material for the production of batteries for electric cars and commercial vehicles. The world’s largest deposits of this material are found in the Democratic Republic of the Congo (DR Congo). Mercedes-Benz has deliberately decided not to generally exclude countries of origin viewed as high-risk - such as the Democratic Republic of the Congo - as sources of supply. Instead, the holistic approach aims to improve the local situation for the people working there and to strengthen their rights. This is the only way to achieve long-term, and sustainable, social changes.
By doing so, Mercedes-Benz AG is following the recommendation of non-governmental organizations, governments and other relevant interest groups not to generally withdraw from high-risk countries. In accordance with the principle of using leverage before withdrawing, the aim is to encourage the local economy while at the same time ensuring that higher standards in relation to the protection of human rights are established and then improve over time.
Already in 2018, Mercedes-Benz commissioned RCS Global
Mercedes-Benz will in future only source battery cells with cobalt & lithium from certified mining sites. In order to achieve this, Mercedes-Benz Procurement is making the industry-wide recognized “Standard for Responsible Mining” of IRMA one of the key criteria for supplier decisions and supplier contracts within raw material supply chains. The standard is in the early stage of adoption by the industry, a process Mercedes-Benz seeks to accelerate. In the company’s contracts, partners need to commit to ensure that they will source exclusively from raw material suppliers who are audited in accordance with the IRMA mining standard. The supply chains will in the future also be regularly monitored.
Important criteria in the IRMA standard include human rights, occupational health and safety and environmental impact of raw material mining. The standard also takes into consideration further social and societal aspects that are related to the consequences of industrial mining.
As things stand at present, there are currently no cobalt mines certified in accordance with IRMA Standard. Mercedes-Benz is therefore working with IRMA and RCS Global on a step-by-step approach for dealing with particularly challenging local situations. This approach will be taken with a limited number of cobalt mines in the Democratic Republic of the Congo, auditing them against specific requirements in the IRMA Standard for Responsible Mining. In the medium term, this approach aims on the one hand to establish realistic expectations of mining suppliers, while on the other pressing for increasingly responsible practices in order to meet Mercedes-Benz’s requirements for sustainable supply chains. The long-term objective is a clear commitment to a process of continuous improvement. Included in this are transitional periods for the achievement of different levels of performance for an IRMA certification.
Auditing by RCS Global
The supply chains of battery cell suppliers to Mercedes-Benz are assessed at all tiers, from battery cell supplier to mine site, by RCS Global. This assessment includes aspects such as the prevention of child labour and forced labour, health and safety at work, material control and due diligence systems. Where necessary individual corrective action plans are agreed with the suppliers and their implementation is continuously monitored. The aim of this corrective action and regular monitoring is to ensure that a continuous improvement process takes place in the supply chain. This ultimate aim is that the cobalt for battery cells comes from responsible sources of supply that meet the requirements of Mercedes-Benz AG.
As a basic principle, a supply contract for battery cells at Mercedes-Benz Cars requires the supplier to agree on disclosing the entire cobalt supply chain.
Starting in 2018, RCS Global audited the complex cobalt supply chain of a battery cells supplier in accordance with OECD Due Diligence Guidelines as part of a pilot project, and arranged corresponding corrective measures. The gained insights were incorporated into the further assignment of a three-year auditing program for the cobalt supply chain which Mercedes-Benz started with RCS Global in April 2019. The program‘s aims are as follows:
- Creating transparency and auditing of the company's cobalt supply chain at every tier from the battery cell supplier down to mine level
- Auditing the due diligence management systems and procurement practices of suppliers in the cobalt supply chain
- Initiate a process of continuous improvement by monitoring the implementation of corrective action plans and providing auditee trainings.
In the first year, the focus was on creating transparency and performing an initial assessment of the cobalt supply chains in the form of audits. As part of the program each stage in the cobalt supply chain of Mercedes-Benz is audited – from downstream battery manufacturers to refineries, smelters and mining sites. This process enables Mercedes-Benz to map its supply chain beyond the first level and to identify associated risks. The program also includes the development and monitoring of corrective measures for suppliers. This includes on-site training courses individually tailored to each supplier to achieve improvement in supplier performance relating directly to the areas of highest need. This approach has resulted in a notable improvement in performance by suppliers. At the mining level “rightsholder consultation” is an integral part of the audit methodology for assessing mining suppliers under the program. This work has included rightsholder interviews with communities in the DRC to identify salient issues of risk. With these elements, the program aims to support both direct and indirect Mercedes-Benz suppliers, and help them to meet the international standards and expectations of stakeholders for due diligence for cobalt.
From the second year the program focus has been on so-called identified risk hotspots. This means that selected suppliers are prioritised for re-audits and supportive measures to improve performance.
Since the start of the program, Mercedes-Benz has conducted 86 audits as part of its cobalt risk identification and assessment process, 58 in the first and 28 in the second year. The audits covered battery cell manufacturers, cathode manufacturers, refineries, crude smelters and mines.
The audit requirements are tailored to the different supplier levels, and are based on international standards relevant to cobalt due diligence. Criteria assessed as part of the program include:
- Due diligence management systems for cobalt, including material control, risk management and mitigation and public reporting, based on the 5-step criteria set out in OECD Due Diligence Guidance for Responsible Sourcing from High Risk Areas; the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chain (Chinese Guidelines), and CCCMC, RCI and RMI Pilot Cobalt Refiner Supply Chain Due Diligence Standard;
- Human rights including child labour, modern slavery, severe human rights violations, based on OECD Due Diligence Guidance Annex 2, the Chinese Guidelines, and the UK Modern Slavery Act (2015).
- Occupational Health and safety based on ISO 18001; OHSAS 18001 or ISO 45001 Certification. At mine site level: Responsible Business Alliance, Code of Conduct, Version 6.0 (2018), Provision B.1 Health and Safety; IRMA Critical Requirements.
- Ethics and Transparency including the disclosure of the supply chain information and audit cooperation.
The main findings of the program are as follows:
- No serious human rights violations were found during the audits and eight rightsholder consultations at mine sites, which were conducted so far.
- However, the companies often lacked in appropriate due diligence systems.
- Example: One company was identified to be at risk due to lacking processes to avoid modern slavery for its workforce. The company did not have the relevant policies in place as well as related actions to monitor this issue and mitigate the risk. Corrective action plans including policy revisions, training and requirements for active monitoring were implemented as a result of the findings.
- Companies achieved relatively better results in health and safety management. Only at one audited mine a risks in this category was identified.
- Example: A health and safety risk was identified at one audited mine. To resolve the problem, the company at the next higher stage of the supply chain was contacted in order to identify possible solutions, and both companies were offered training courses and to respond to requests to monitor the implementation of the corrective measures. Due to the lack of response, the supply relationship with the mine concerned has been suspended and will only be resumed once the situation improves. Mercedes-Benz remains in contact with the sub-supplier.
- The vast majority of suppliers were transparent, and fully cooperated with the auditors by providing access to information, personnel and facilities. Many suppliers viewed the audits as learning processes and embraced the principle of continuous improvement for feedback to improve their own activities.
As a result of the audit program, Mercedes-Benz now has an understanding of their performance against international good practice standards.
Following the audits, the Mercedes-Benz AG continues to work with the audited suppliers to monitor their progress. For this purpose, each supplier was directed to agree to an individual corrective measure. The few cases requiring further action by Mercedes-Benz AG mostly concerned the failure to agree on corrective action plans. They include the regular monitoring of the implementation of the corrective measures, and support e.g. in the form of dialogues with the auditors to remedy the deficiencies. In cases where no agreement could be reached on an action plan, or suppliers had not implemented the plan within the agreed time, measures were taken to resolve the situation. Among other measures, the suppliers were invited to take part in on-site training, including a review of their management systems and individual capacity building to fill any gaps.