Our activities in the cobalt supply chain

The Mercedes-Benz AG does not source cobalt directly. In order to make the complex cobalt supply chains of our battery cell suppliers transparent and to examine them on human rights issues, we have had them 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.

Mercedes-Benz deliberately has 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 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.

Already in 2018, Mercedes-Benz commissioned RCS Global to establish transparency over the complex cobalt supply chains behind battery cells and to audit these at every stage in accordance with OECD Due Diligence. More than 120 suppliers were identified and 60 audits were conducted after a corresponding risk assessment. The audit process is now being extended for a limited number of mines to include the IRMA mining standard. The application of the IRMA standard will also apply to lithium in the future.

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 the "Initiative for Responsible Mining Assurance" (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 Daimler seeks to accelerate. In the company’s contracts, partners will need to commit in the future to working within their own supply chain to 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.

The most important criteria of this standard include both human rights aspects and the environmentally friendly mining of raw materials. 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’s Standard for Responsible Mining. 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 a series of specific sets of requirements in the IRMA Standard for Responsible Mining. In the medium term, this approach aims on the one hand to formulate realistic expectations of the mining suppliers, while pressing for increasingly responsible practices in order to meet Daimler'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 all battery cell suppliers to Mercedes-Benz are monitored at all stages by RCS Global. This monitoring includes aspects such as the prevention of child labour and forced labour, health and safety at work, material control and existing due diligence systems. Where necessary, individual corrective action plans are agreed with the suppliers. Their implementation is continuously monitored. The aim of this regular monitoring is to ensure that a continuous improvement process takes place in the supply chain, and that the cobalt for battery cells comes from responsible sources of supply that meet the requirements of Daimler 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.

Overview: smelters and refineries in our supply chains

Already in 2018, RCS Global audited the complex cobalt supply chain of a battery cells supplier in accordance with OECD 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 company’s aims are as follows:

  • Creating transparency and auditing of the company's cobalt supply chain from the battery cell supplier down to mine level
  • Auditing and improving the due diligence management systems and procurement practices of suppliers in the cobalt supply chain

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 continuous improvement in supplier performance. In this way, the program aims to support both direct and indirect Mercedes-Benz suppliers, and help them to meet the international standards and expectations of stakeholders regarding due diligence for cobalt.

Since the second year the focus has been on so-called 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 examined more than 60 suppliers as part of its cobalt risk identification and assessment process. The audits covered battery cell manufacturers, cathode manufacturers, refineries, smelters and mines.

The audit requirements are tailored to the different supplier levels, and are based on international standards relevant to cobalt due diligence. The aspects assessed as part of the program include

  • due diligence management systems for cobalt, including material control, based on OECD guidelines,
  • human rights (child labour, modern slavery, severe human rights violations),
  • health and safety,
  • ethics (disclosure of the supply chain, audit cooperation)

No human rights violations were found during the audits. However, the companies often lacked appropriate due diligence systems, e.g. against child labour, or appropriate human rights guidelines to prevent them. Companies achieved relatively better results in health and safety management, although a health and safety problem was identified in 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, to offer training courses and to monitor the implementation of the corrective measures. The supply relationship with the mine concerned has been interrupted, and will only be resumed once the situation improves. To this end we are 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.

Following the audits, the Mercedes-Benz AG continued 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.

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