SfC members are satisfied with companies’ responses. But structural problems will have to be addressed soon.
The energy transition cannot happen without rare metals and rare earths. However, they are often extracted in countries at high risk of environmental and human rights violations, such as China or the Democratic Republic of Congo, as evidenced in the ‘Rare metals supply chains’ report, released in 2019 by Meeschart AM on behalf of SfC.The report was the basis of a two-year engagement project of the network, targeting 12 companies, including Vestas (wind turbines), BMW, PSA and Daimler, Renault (electric vehicles) and Solvay (chemicals).
“Shareholders for Change members wrote letters to companies and engaged in a series of calls,” says Aurélie Baudhuin, president of SfC and deputy managing director of Meeschaert AM. “We asked very specific questions, in particular about supplier monitoring as well as recovery and recycling targets”.
The first phase of engagement with companies ended in June 2021. ” Companies generally cooperated with SfC, there was a good level of dialogue,” continues Baudhuin. “In 80% of the cases, the answers given were ‘good’ or ‘very good’“.
As stated in the ‘Engagement Results’, published on 3 August, only the PSA group (now Stellantis) did not respond. Spanish wind power giant Iberdrola did respond, but in a very generic way. All others provided detailed information on how suppliers are monitored.
However, the engagement identified some problems that seem to be structural and common to almost all companies in the three sectors considered: wind energy, automotive and chemicals. First of all, audits almost exclusively concern direct, or “Tier 1” suppliers, who are usually only intermediaries. Those potentially involved in environmental or social violations at the end of the chain are not monitored.
The second problem identified concerns metal recycling, which is still at a very early stage: only 1% of the materials used are actually recycled.
“There are still open questions,” explains Aurélie Baudhuin. “That’s why we decided to continue the engagement, moving on to ‘phase II’. So far we have only asked for more disclosure. We will now ask companies to commit to specific supplier verification and recycling targets”.
The issues to be addressed are complex and often not solvable by individual companies. They require the commitment of entire sectors, new regulations and possibly subsidies from states. For this reason, SfC will be consulting international experts in the second phase of its rare metals engagement.
One of these is Julie Klinger, assistant professor in the Department of Geography and Spatial Sciences at the University of Delaware and author of the book “Rare Earth Frontiers”. Professor Klinger herself hosted a webinar on rare metals during the Shareholders for Change Summer Meeting in June 2021.