Responsible Supply Chain Management

October 10, 2024

Solar technicians installing solar panels, los muertos crew

Solar technicians installing solar panels, los muertos crew.

As RE deployment upscales, demand for critical minerals intensifies and so do the social risks in the supply chain, such as human rights violations and unsafe working conditions. Additionally, half of the transition minerals needed for renewable energy implementation are in Indigenous territories with potential adverse impacts.^{[1]Indigenous Peoples and the Just Transition, 2024, Declaration of Indigenous Peoples’ Participants in the Conference on Indigenous Peoples and the Just Transition} Mitigation strategies include reducing mineral dependence through circular design, robust human rights due diligence, and traceability tools. Supply chain management must maximise local and regional benefits. While private business models dominate specialised equipment manufacturing, the potential for more inclusive models, such as cooperatives or employee ownership, should be explored.

The energy transition depends heavily on the availability of transition minerals and resilient supply chains. This chapter focuses on several key social risks and opportunities within the RE supply chain: sourcing transition minerals, labour rights in manufacturing and recycling, and local economic development.

Context

With solar and wind equipment supply chains maturing and growing in number, the mining of transition minerals to meet the global demand is intensifying, as are associated risks, including to human rights, labour rights and biodiversity conservation. To meet Net Zero goals by 2050, the International Energy Agency (IEA) estimates a sixfold increase in demand for transition minerals.^{[2]International Energy Agency (IEA), 2022, The Role of Critical World Energy Outlook Special Report Minerals in Clean Energy Transitions} Companies and countries in the Global North are scrambling to secure their mineral supply chains, half of which are linked to the Global South, with 50% of the world’s transition minerals in Indigenous territories.^{[3]Indigenous Peoples and the Just Transition, 2024, Declaration of Indigenous Peoples’ Participants in the Conference on Indigenous Peoples and the Just Transition}

Data from the Business & Human Rights Resource Centre’s Transition Minerals Tracker reveals human rights abuses related to transition mineral mining. The Tracker currently includes 631 allegations of abuse from 2010-2023 associated with the mining of seven of the transition minerals: bauxite, cobalt, copper, lithium, manganese, nickel, and zinc. These allegations include environmental, land and Indigenous Peoples’ rights violations, with a significant increase in labour rights violations and worker fatalities.^{[4]Business & Human Rights Resource Centre, 2024, Transition Minerals Tracker: 2024 Analysis} Indigenous Peoples are particularly vulnerable to the impacts of mining activities.^{[5]Graziela Dias Blanco et. a.l, 2023, The impacts of mining on food sovereignty and security of Indigenous people: a global review}

Moreover, workers can be exposed to unsafe conditions in mineral processing plants. A case example is in Indonesia, where there were 57 fatalities in Chinese-owned nickel smelters from 2015 to 2020.^{[6]Business & Human Rights Resource Centre, 2023, Indonesia: Unsafe working conditions at Chinese-owned nickel smelters led to 76 injuries and 57 deaths from 2015 to 2020, CSO report shows} Similarly, in the production of polysilicon (a key material in solar modules), allegations of forced labour in the Xinjiang region of China persist.^{[7]Climate Rights International, 2022, Nickel Unearthed, The Human and Climate Costs of Indonesia’s Nickel Industry} According to multiple sources, the Uyghur people and other minority groups in the Xinjiang region are being denied the right to free choice of employment as defined in Article 23 of the U.N. Declaration of Human Rights.^{[8]Bill Bartles, ABC News Australia, 2018, China defends ‘vocational training centres’ amid international pressure over mass Uighur detentions}

Construction companies and their staff also form part of the supply chain. The opportunity exists to stimulate the regional economy during the lucrative construction phase of power plants’ development, when various businesses can be contracted or subcontracted and many jobs are created. In some cases, labour and contractors are brought in from other regions. This can cause resentment among the local communities and limits the benefits that stay in the area. The time span of the local socio economic benefits depends on several factors, such as the development of the RE industry in the area, policy and regulation or agreements with local populations.

Poor labour conditions in collecting, segregating, and treating solar panel waste are an issue, particularly in the Global South. Solar panels contain toxic heavy metals such as cadmium and include shatterable elements like glass, making them difficult to disassemble safely.

Emerging Good Practice

There are emerging good practices in inclusive RE supply chains. Tools are being developed to support procurement and supply chain managers with traceability and informed decision-making, such as Supply Trace^{[9]Supply Trace, Home [Accessed in June 2024]} and the BHRRC Transition Mineral Tracker. Some RE developers are now performing more robust and gender-sensitive human rights due diligence processes as part of procurement and supply chain management, and this should be encouraged to become the norm.^{[10]Business & Human Rights Resource Centre, 2023, Renewable Energy & Human Rights Benchmark: Key Findings From the Wind and Solar Sectors} This section focuses on three main aspects of the supply chain: transition mineral mining, manufacturing, and supplier development.

The availability of critical minerals in the Global South makes it essential to avoid the common exploitative dynamics of extractive industries, and to ensure that the value created from these deposits remains within the Global South.

When mines are proposed, and during their operation and decommissioning, communities should be meaningfully engaged (see Chapter 4), including, where applicable, through FPIC, and receive fair compensation and benefit-sharing arrangements that enable shared prosperity. Particular attention should also be paid to managing pollution risks resulting from operations, waste storage, and transportation associated with a mine, including harm to potable water and soil health. High standards for mine closure procedures and guarantees for the integration of local and artisanal miners should also be adopted.^{[11]Solidaridad, 2018, CRAFT Code for Risk Mitigation in Mining Facilitates Responsible Sourcing of Minerals}

Mining companies should adopt policies to guarantee worker safety, ensure payment of fair living wages, and guarantee workers’ freedom of association and right to collective bargaining with trade unions. Ideally, companies should include workers and their unions in upstream project conception and design to support models of shared prosperity through decent work and new models of co-management, ownership, and cooperation. Lastly, mining companies should implement gender-sensitive human rights, environmental due diligence in operations and supply chains, and access to remedy through effective grievance mechanisms built on safe and inclusive worker and community engagement.^{[12]Responsible Energy Initiative Philippines, 2024, Renewable energy to responsible energy: A call to action}

Robust impact assessments in siting nickel refinery

German chemical giant Badische Anilin und Soda Fabrik (BASF) had plans to partner with French mining company Eramet to build a nickel refinery in Halmahera, Indonesia. Nickel mining and refining in the area has impacted the lives of the Hongana Manyawa Indigenous people.^{[13]Business & Human Rights Resource Centre, 2023, Indonesia: Uncontacted tribe might not survive destruction that will result from a nickel project concession for electric car batteries, report alleges} In April 2023, the BHRRC reached out to BASF regarding their plans, and the company responded by saying that it is still evaluating the project and has not yet decided on whether or not to implement it. BASF mentioned that its evaluation process is an intensive assessment of environmental, social, and governance (ESG) risks against the benchmarks of the International Finance Corporation (IFC) standards, the Equator Principles, and the International Responsible Mining Assurance (IRMA) standard. BASF also mentioned that they are willing to engage in constructive dialogue with civil society.^{[14]Business & Human Rights Resource Centre, 2023, BASF’s response} On 24 June 2024, BASF announced, after thorough evaluation, that it will not push through with the planned nickel refinery.^{[15]BASF, 2024, BASF decides against investment in nickel-cobalt refining complex in Indonesia}

Reducing the need for transition minerals through recyclable batteries

The 2023 winner of the Earthshot Prize, Green, Renewable, Sustainable Technology (GRST), has developed a cleaner way to make batteries that cause less pollution and use more easily recyclable components. GRST has created a way to build batteries using a water-soluble binding composite instead of toxic solvents and hard-to-recycle materials. Through this process, lithium, cobalt, and nickel can be recovered more economically and reused in other batteries, reducing the demand for further extraction of transition minerals.^{[16]The Earthshot Prize, 2023, GRST}

The industry is trying various approaches to respond to labour rights risks in manufacturing. Companies with more robust sustainable procurement approaches set expectations that labour and gender standards, occupational health and safety, and worker representation, among other responsible practices, are included in supplier codes of conduct and contracts.^{[17]REI India, Responsible Energy Initiative Call to Action — India [Accessed in June 2024]}

To avoid enabling negative impacts on the Uyghur people, JustRE’s experience suggests that some RE companies are attempting to buy from manufacturers outside of China, in countries where supply chain transparency and scrutiny are perceived to be more robust and standards more rigorously upheld. However, diversifying the supply chain is proving challenging for procurers around the world. Currently, over 80% of solar panels’ components and stages (including polysilicon, ingots, wafers, cells, and modules) are produced in China.^{[18]IEA (2022), Solar PV Global Supply Chains, IEA, Paris, Licence: CC BY 4.0} Countries like India seek to boost local manufacturing, demonstrating how acting on these new norms can support national ambitions. Whilst avoiding high-risk suppliers is not always possible, a great deal can be learned from other industries (such as textiles and apparel) about effective and constructive engagement for supplier-by-supplier or group-based improvement. Leading investors are encouraging this practice in their investees.^{[19] Jag Lamda, PV Magazine, 2024, Solar panel production is struggling to stay clear of forced labor}

Whilst most prominent solar and wind energy equipment manufacturers are private, business models from other industries can point to more inclusive structures that could be applied to organisations in the RE supply chain. For instance, cooperatives or employee-ownership approaches may also apply to RE manufacturing. These models incorporate shared decision-making and profit sharing (examples include jam maker Wilkin & Sons and polymers manufacturer Scott Bader).

Eventide investor transparency requirements

Eventide has been working with its renewable energy-related investees to develop an approach to increase visibility and traceability in the solar supply chain, specifically to avoid forced labour. They are “directly engaging companies in the solar supply chain who have the power to change sourcing and asset managers who have the power to move capital”. Eventide has proposed three phases, gradually requiring the RE company to trace one tier of its supply chain in each six-month-long phase. They stipulate six months and three phases to allow time for supply chains to respond and increase capacity.^{[20]Eventide, 2022, Eradicating Forced Labor from Solar Supply Chains: Eventide’s Approach}

Owing to the substantial number of jobs and business opportunities created in the construction phase of new projects, this phase offers a key entry point into supporting the local economy and engagement with local communities. Developers need to understand how the capabilities of local labour and businesses compare to the expertise required during the construction using participatory technical skills and business competency audits as part of early community engagement. The engagement can expedite recruitment, ensure transparency, and build social acceptance and rapport.

Ideally, key gaps would be addressed through capacity-building programmes that empower individuals and businesses to access work and contracts beyond construction. While RE companies may not always be in a position to invest in such a detailed and costly exercise before operations and revenue flow, in some countries, this task may be undertaken by an existing RE company as part of its supplier or business development investment requirements.^{[21]Valve+Meter, 2023, Solar Panels Made In USA vs. China: Past, Present, and Future} Collectively planned and implemented strategic supplier development investments could significantly contribute towards economic development, as evidenced in other sectors, especially in areas with a high concentration of renewable energy projects.

Perdekraal East Wind Farm Supplier Development Programme in South Africa

In South Africa, RE projects must make enterprise development investments within the economy surrounding the site. To fulfil this requirement, the Perdekraal East Wind Farm, operated by Mainstream Renewable Power, launched a supplier development initiative involving multiple stakeholders, including local contractors, security service providers, and waste removal services. The initiative provides training and development to improve skills, productivity, and capacity, thereby benefitting the wind project and the wider local economy.

The capacity-building programme, for example, had the Guardhouse Contractor receive Safety, Health, Environment and Quality (SHEQ) training consisting of working at heights, erecting scaffolds and inspection, first aid, basic firefighting, operating hand tools and machinery, hazard identification and risk assessment, hazardous substances, and incident investigation training. The transport and security services providers received on-site Defensive Driving and Gravel Road training and funding to upskill security guards from Grade C to Grade B. The waste removal service provider received basic business training and grant funding for Personal Protective Equipment (PPE). One heating, ventilation, and air conditioning provider also received funding for SHEQ training before commencing on-site work.

Relevant Stakeholder Insights

Below, we share some key elements to consider when working with the private sector, policymakers, and communities towards more inclusive RE supply chains.

Challenges and Opportunities Commonly Raised

Out of sphere of control: For RE developers procuring equipment, the supply chains have many tiers, meaning the procurer is far removed. Therefore, it can be perceived as impossible for developers to influence (let alone control) suppliers’ business practices.

Complexity: Issues in mining and enterprise development are complex, with risks driven by deep, long-lasting systemic factors such as class, caste, ethnicity, etc. Other industries, societies, and governments have long tried to resolve such matters.

Retention of control: Corporate leaders can perceive unionisation or other worker representative bodies as a time and attention drain that brings little business benefit. Sharing decision-making with workers can be against prevailing norms, sometimes driven by assumptions about workers’ low capability to engage in business matters effectively and unwillingness to collaborate.

Time: Building the capacity of local enterprises surrounding sites, so that they are ready to be suppliers at the construction stage, can take time — which developers may not believe they have.

Recommendations for Practitioners

Raise the industry’s awareness that businesses are ultimately responsible for practices in their supply chain. In promoting change, various strategies can be applied, including showcasing good practices that corporations can effectively engage to achieve business benefits through responsible approaches, and by providing access to traceability and transparency tools such as the BHRRC Transition Minerals Tracker.

Enabling collaboration across the industry and collectively implementing good labour and Occupational Health and Safety (OHS) practices.

Building an understanding of effectively enabling workers’ voices in decision-making by inviting manufacturers and developers to learn from industry leaders to raise ambition.

RE developers need to plan well in advance to ensure they build local suppliers’ capacities to deliver during the construction phase. Practitioners can enable this by encouraging the integration of supplier development into national and regional development plans and early community engagement plans.

Challenges and Opportunities Commonly Raised

Risk to rights defenders: Standing up to poor labour practices and human rights violations carries particularly significant risk in the Global South. This risk may be physical, psychological, or financial, jeopardising the defenders’ freedom.

The impermanence of opportunities: RE projects do not require significant amounts of labour or suppliers past construction. Investing in starting an enterprise to supply one specific business targeting one stage of the project lifecycle can be a significant financial and resilience risk.

Social norms and structures: In some cases, existing social structures or norms can undermine livelihood or gender outcomes. For instance, even when training is specifically designed for women on skills that can be used in micro-enterprise suppliers to RE developers, women may not take up job opportunities due to cultural norms of working with men, safety, and expectations of their role in the household.

Recommendations for Practitioners

Any work on rights should factor in the risks to workers and communities. Practitioners should promote collaboration and cooperation between corporations, governments and rights defenders to create safe and enabling environments for engagement.

Local supplier capacity building must be sensitive to the community’s norms and interests to support outcomes meaningful to the intended beneficiaries.

Local supplier capacity development should include an element of longer-term planning and, where possible, be interrelated with broader local economic planning.

Challenges and Opportunities Commonly Raised

Priority to secure transition mineral supply: Current attention and effort in many Global South countries is to secure transition mineral supply. Once secured, it may be possible to consider the conditions under which they are mined and processed, but few promises or commitments are being made.

Falls outside or between traditional remits: Transition minerals, conditions in RE manufacturing plants and enabling enterprise development through RE often cut across multiple remits within governments, making decision-making and responsibility lines unclear, particularly where government silos are strong.

Encouraging local economic development and local manufacture: Government programmes might be able to support and fund supplier development, if the suppliers are guaranteed access to contracts as part of the RE supply chain. This is particular valuable where the RE companies are not in a position yet to invest in such a costly exercise before operations and revenue flow.

Recommendations for Practitioners

Working within the flow of government attention, finding hooks in the current agenda can help open the door to deeper conversations on supply chain issues. For example, local manufacturing agendas (e.g., Make In India) and trade relations can be supported when countries build a reputation for better labour practices and, therefore, become preferred suppliers.

Where possible, engage with the government by creating transition task forces or special bodies with representatives from across departments or ministries.

Future glimpse

Dominique has wanted to work at the Co-op ever since the solar panel manufacturing plant leader gave a talk at her college in 2025. The thought of having a say in how her company was run, even at a junior level, inspired her. When she learned a role was available in the supplier engagement team, she jumped at it. What if she could support their suppliers in adopting similar models? Dominique was pleasantly surprised by how many local suppliers were in their network and were already keen to learn. Even some of their clients wanted to know more. She’d heard they, too, saw this as a way of attracting the best talent. She feels excited and nervous as she gets ready to talk with her fellow members of the Just Transition Minerals for Renewable Energy Alliance.

Today, they heard from her friend Ngoy from the artisanal mining collective in the Democratic Republic of Congo about the results of their ecosystem and community regeneration efforts. Dominique loves that she has gained a friend through their supplier engagement programme. From what she has heard, none of her predecessors got to know people so far into their supply chain, but they never had the data and visibility she had at her fingertips. She hopes to save enough flight credits to make it to Ngoy’s family celebrations next year.

Business & Human Rights Resource Centre, 2024, Transition Minerals Tracker: 2024 Analysis
Teresa Kramarz et. al., 2021, Governing the Dark Side of Renewable Energy: A Typology of Global Displacements, Energy Research and Social Science, Vol. 74
Business for Social Responsibility, 2022, Addressing Human Rights Risks in Renewable Energy Supply Chains, BSR Blog.

[1] [3] Indigenous Peoples and the Just Transition, 2024, Declaration of Indigenous Peoples’ Participants in the Conference on Indigenous Peoples and the Just Transition
[2] International Energy Agency (IEA), 2022, The Role of Critical World Energy Outlook Special Report Minerals in Clean Energy Transitions
[4] Business & Human Rights Resource Centre, 2024, Transition Minerals Tracker: 2024 Analysis
[5] Graziela Dias Blanco et. a.l, 2023, The impacts of mining on food sovereignty and security of Indigenous people: a global review
[6] Business & Human Rights Resource Centre, 2023, Indonesia: Unsafe working conditions at Chinese-owned nickel smelters led to 76 injuries and 57 deaths from 2015 to 2020, CSO report shows
[7] Climate Rights International, 2022, Nickel Unearthed, The Human and Climate Costs of Indonesia’s Nickel Industry
[8] Bill Bartles, ABC News Australia, 2018, China defends ‘vocational training centres’ amid international pressure over mass Uighur detentions
[9] Supply Trace, Home [Accessed in June 2024]
[10] Business & Human Rights Resource Centre, 2023, Renewable Energy & Human Rights Benchmark: Key Findings From the Wind and Solar Sectors
[11] Solidaridad, 2018, CRAFT Code for Risk Mitigation in Mining Facilitates Responsible Sourcing of Minerals
[12] Responsible Energy Initiative Philippines, 2024, Renewable energy to responsible energy: A call to action
[13] Business & Human Rights Resource Centre, 2023, Indonesia: Uncontacted tribe might not survive destruction that will result from a nickel project concession for electric car batteries, report alleges
[14] Business & Human Rights Resource Centre, 2023, BASF’s response
[15] BASF, 2024, BASF decides against investment in nickel-cobalt refining complex in Indonesia
[16] The Earthshot Prize, 2023, GRST
[17] REI India, Responsible Energy Initiative Call to Action — India [Accessed in June 2024]
[18] IEA (2022), Solar PV Global Supply Chains, IEA, Paris, Licence: CC BY 4.0
[19] Jag Lamda, PV Magazine, 2024, Solar panel production is struggling to stay clear of forced labor
[20] Eventide, 2022, Eradicating Forced Labor from Solar Supply Chains: Eventide’s Approach
[21] Valve+Meter, 2023, Solar Panels Made In USA vs. China: Past, Present, and Future