In a bid to bring transparency to the electric vehicle supply chain automaker Volvo has invested in blockchain company Circulor, which offers 100% traceability on cobalt used in EV batteries as well as other business areas such as CO2 reduction.
Circulor's blockchain technology is already used throughout Volvo Cars' battery supply chain, which aims to achieve 100% traceability of cobalt used in the XC40 Recharge P8, its first fully electric car.
Traceability of chemicals and metals used in the production of lithium-ion batteries, such as cobalt, is one of the main sustainability challenges faced by automakers.
The bulk of the world's cobalt comes from the Democratic Republic of Congo.
Blockchain technology, which establishes a transparent and reliable shared data network, significantly boosts transparency of the raw material supply chain as the information about the material's origin cannot be altered without alerting those concerned.
Production of the XC40 Recharge P8 will start later this year in Ghent, Belgium.
ESG critical to investors
"The investment in Circulor allows both companies to expand their focus beyond cobalt, for example by looking at increasing traceability of mica, a mineral used as isolation material in the battery pack of electric Volvos," a statement published July 8 read.
Moving from just being an investing theme, Environmental Social & Governance criteria is becoming central to companies' strategy and operations, with an emphasis on supporting low carbon growth after the COVID-19 pandemic.
Together the companies are also investigating the possibility of expanding their blockchain technology cooperation to other areas, for example tracking and reducing CO2 footprints, helping Circulor to potentially set standards for ethical sourcing in automotive and other industries.
The investment, through Volvo's venture capital arm Volvo Cars Tech Fund, is part of a funding round by Circulor, which also secured funding from three other investors: SYSTEMIQ, Total Carbon Neutrality Ventures and Plug & Play.
"We are committed to an ethical supply chain for our raw materials," said Martina Buchhauser, chief procurement officer at Volvo Cars.
The technology developed by Circulor is implemented in partnership with CATL and LG Chem, Volvo Cars' battery supply partners. CATL and LG Chem are battery manufacturing heavyweights with long track records supplying lithium ion batteries to the global automotive industry.
Swiss investment bank UBS said July 6 it expected EV demand growth to accelerate in 2020-25 supporting 11%/year growth in cobalt demand over the same period; assuming rapid migration to lower cobalt battery chemistries.
Most technology is trying its hardest to reduce cobalt content to the bare minimum in order to mitigate associated supply-side risks, according to sources.
