1、Supply Chain Traceability:Looking Beyond Greenhouse GasesHow responsible mineral supply chains will revolutionize commodities,protect the climate,and advance environmental justiceReport/November 2022rmi.org/2Supply Chain Traceability:Looking Beyond Greenhouse GasesAuthorsHylla Barbosa Valentina Guid

2、oStephen LezakPaolo NataliAuthors listed alphabetically.All authors from RMI unless otherwise noted.ContactsPaolo Natali,pnatalirmi.orgValentina Guido,vguidormi.orgCopyrights and Citation Hylla Barbosa,Valentina Guido,Stephen Lezak,Paolo Natali,Supply Chain Traceability:Looking Beyond Greenhouse Gas

3、es,RMI,2022,https:/rmi.org/insight/supply-chain-traceability-beyond-greenhouse-gases/.RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow interested parties to reference,share,and cite our work through the Creative Commons C

4、C BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.Acknowledgments We want to thank all of the stakeholders that have contributed their time and expertise to this publication.In particular:the Aluminum Stewardship Initiative(ASI),the

5、 Energy Transitions Commission(ETC),Fair Cobalt Alliance,the Global Battery Alliance(GBA),the Initiative for Responsible Mining Assurance(IRMA),the London Metals Exchange(LME),SYSTEMIQ,and our colleagues at RMI:Charles Cannon,Alessandra Carreon,Sravan Chalasani,Josh Henretig,Sara Herrin,Shannon Hugh

6、es,Laura Hutchinson,Nathan Iyer,Linda Jirouskova,Nicole Labutong,Wenjuan Liu,John McGrath,Lara Owens,and Lachlan Wright.Authors and Acknowledgmentsrmi.org/3Supply Chain Traceability:Looking Beyond Greenhouse GasesAbout RMIRMI is an independent nonprofit founded in 1982 that transforms global energy

7、systems through market-driven solutions to align with a 1.5C future and secure a clean,prosperous,zero-carbon future for all.We work in the worlds most critical geographies and engage businesses,policymakers,communities,and NGOs to identify and scale energy system interventions that will cut greenho

8、use gas emissions at least 50 percent by 2030.RMI has offices in Basalt and Boulder,Colorado;New York City;Oakland,California;Washington,D.C.;and Beijing.rmi.org/4Supply Chain Traceability:Looking Beyond Greenhouse GasesContentsExecutive Summary.5The Problem with Commodity Markets.7How an ancient so

9、lution is causing modern problems.7The building blocks of the energy transition.9Reshaping Commodity Markets for a Just Energy Transition.11The greatest barrier to commodity differentiation:Opaque chains of custody.12Models for commodity traceability.13Going beyond GHG emissions.18Toward Commodity D

10、ifferentiation:An Action Plan for Climate Stability .19Conclusion.21Endnotes .22rmi.org/5Supply Chain Traceability:Looking Beyond Greenhouse GasesExecutive Summary Metals and minerals like steel,aluminum,cobalt,and lithium form the backbone of the energy transition.Steel and aluminum production alon

11、e account for roughly the same annual CO2 emissions as all global passenger road and air transit,including buses,cars,motorcycles,and commercial flights.1 Decarbonization to meet climate targets will significantly increase the need for critical minerals.For example,demand for battery materials,inclu

12、ding aluminum,cobalt,and lithium,is projected to grow sevenfold by 2030 relative to 2020.2 At the same time,the social and environmental impacts of producing these materials threaten to undermine the credibility of the climate movement.Mining and mineral processing mostly take place far away from we

13、althy urban centers,but their impacts are the focus of growing attention.When child labor is found in EV battery supply chains,or when a tailings dam fails at a copper mine,the energy transition suffers a setback.These materials are usually treated as commodities;that is,as goods that are designed t

14、o be identical.Long-overdue scrutiny of the human and environmental costs of commodity production especially for metals is leading to energetic discussions about how industry can differentiate responsibly produced products from their counterparts.This transformation would allow responsibly produced

15、commodities to sell at a higher price similar to organic foods and serve to reward better business practices.This shift is essential to the energy transition,but it must be done right.That requires building systems that properly account for the externalities of production to catalyze markets for low

16、-carbon materials.These systems can prevent harms from being laundered away in opaque supply chains.This report illustrates the path forward for responsible climate-differentiated commodities.We focus in part on how damages should be tracked in complex chains of custody.Our analysis centers on the c

17、oncept of fungibility to distinguish how certain damages should be tracked along mineral supply chains.Fungible damages,like GHG emissions,can be offset or compensated in their entirety by actions taken elsewhere,usually irrespective of geography.One ton of pure CO2 emissions in Zambia may be offset

18、 by one ton of CO2 sequestration in Aruba.A nonfungible damage is a damage whose impacts cannot be offset in different supply chains because their location and consequences are specific to the geography where these damages occur(e.g.,child labor,water pollution,or biodiversity loss).This report sets

19、 out a critical ambition for this transition,based on one overarching principle for mineral supply chains:Nonfungible damages(e.g.,child labor)must be tracked along chains of custody that monitor physical proportions of certified inputs and outputs if mixing occurs.To cover the distance between the

20、status quo and a climate-aligned and environmentally just future,we identify five strategic interventions:rmi.org/6Supply Chain Traceability:Looking Beyond Greenhouse Gases1.Strengthen and deploy product-level standards to drive commodity differentiation.2.Deploy tracking and auditing technology at

21、scale to enable seamless traceability.3.Aggregate demand with buyers alliances.4.Rally investors with investors coalitions.5.Tighten regulations and leverage public procurement.The following pages introduce the opportunities and challenges of aligning commodity production with the urgent needs of a

22、warming planet.With targeted and ambitious action,mineral supply chains will become catalysts of the energy transition,providing the building blocks of a more sustainable and just world.rmi.org/7Supply Chain Traceability:Looking Beyond Greenhouse GasesThe Problem with Commodity Markets Commodities p

23、articularly metals and minerals are routinely overlooked in climate discourse.They hardly have the salience of EVs or renewable energy technology.But these raw materials underpin every aspect of industrial life,from construction to manufacturing.By extension,their environmental footprint is vast.The

24、 production of aluminum alone generates more GHG emissions annually than passenger aviation.3 Decarbonizing this part of the global economy requires investing in production of goods that are both responsibly sourced and low in embodied carbon.But by definition,commodities look alike,making it diffic

25、ult to distinguish responsibly produced goods from their less sustainable counterparts.Commodities look alike,making it difficult to distinguish responsibly produced goods from their less sustainable counterparts.How an ancient solution is causing modern problemsThe invention of commodities dates ba

26、ck at least 6,000 years,to ancient Sumerian traders.Buyers and sellers inscribed their deals on clay tablets with a promise to deliver certain goods:barley,silver,goats,and so on.4 They didnt specify which goats or which silver.Instead,the tablets referred to a particular category of good,based on t

27、he assumption that one goat or one ounce of silver is roughly equivalent to another.The Sumerians relied on the basic premise that some goods can be treated as identical or fungible a system that increased efficiency and ease.As commodity markets became more sophisticated,particularly in Renaissance

28、 Europe and North America,markets grew more capable of gathering materials from across the world and rendering them indistinguishable from each other.This standardization became a cornerstone of the Industrial Revolution.Uniform commodities facilitated mass manufacturing;Fords assembly lines could n

29、ot have functioned without a vast supply of steel and copper conforming to uniform specifications.These markets developed at a time when extractive industries were unconcerned with issues of sustainability,environmental stewardship,or social justice.The King of Spain instructed his conquistadores,wh

30、en they sailed to South America,he said,“get gold,humanely if possible but at all costs,get gold.”At the time,buyers and sellers cared only about the material properties of commodities,not their provenance or ethical production.Fast-forward to the 21st century and humanity is grappling with the deva

31、stating consequences of industrial extraction.Mining and metal production have earned a reputation for causing a wide range of negative environmental and social impacts,or“negative externalities.”These are the real costs of doing business in a world where the price for damaging the environment is of

32、ten zero.They have dogged activists,rmi.org/8Supply Chain Traceability:Looking Beyond Greenhouse Gasesresearchers,and policymakers for more than a century yet they persist.The challenge for industry today is to pinpoint the right prices for materials produced with a dramatically smaller social and e

33、nvironmental impact than their forebearers.Unpriced,externalities lead to a world in which nobody pays for the damage done to climate and communities.This is particularly important in the mining and metals sector.Although commodities are identical,they are not produced identically.For example,produc

34、ing one metric ton of aluminum could generate a wide range of CO2 emissions depending on the source,technology,and the share of recycled aluminum used.5 Beyond emissions,bauxite mining,at the basis of aluminum production,also can cause other environmental and social harm.For example,in Guinea dozens

35、 of farmers have reported that mining companies have expropriated ancestral farmlands for their operations without providing adequate compensation.6 Exhibit 1Carbon intensity of aluminum productionSource:Adapted from Carbon Trust,https:/prod-drupal- The Explorer,https:/www.theexplorer.no/solutions/t

36、he-worlds-most-carbon-friendly-aluminium-production/RecyclateBest available technology using hydro-powered electricity Less modern technology powered by coal-based electricity Externalities from producing commodities need to be acknowledged and priced appropriately to incentivize action to address t

37、hem.Producing and exchanging the right data to“price in”the most significant externalities is a challenge arguably as difficult as other innovations in sustainable technologies,such as creating an affordable EV.But only by pricing in externalities will the correct incentives flow toward the activiti

38、es where change is most needed.20 t CO2/t1 t CO2/t3 t CO2/trmi.org/9Supply Chain Traceability:Looking Beyond Greenhouse GasesExhibit 2Metals demand from lithium-ion batteriesSource:Adapted from Canadian Mining Journal 2021,https:/ 5.3x1.5x5.2x4.0 x9.3x6.6x6.6x5.7x5.5xCopper Aluminum Phosphorus IronM

39、anganese Graphite Nickel Cobalt Lithium 20212030Million metric tonsUnlike the commodities they produce,mining and processing operations can differ significantly in terms of the externalities they create.The same ore body might be simultaneously worked by a responsibly run mining company and separate

40、ly by a cadre of underpaid miners,including child laborers,divided by nothing more than a chain-link fence.Across the world,extraction is ineffectively regulated,often resulting in environmental and human tragedy,and sparking reluctance among would-be EV buyers.Major mining interests as well as smal

41、l,niche operations are responsible for these incidents.In 2019,a tailings dam collapsed in the city of Brumadinho in Brazil,killing 270 people.11 The dam was operated by the multinational Vale,one of the largest firms in Latin America.A similar disaster,in 2015 in Mariana,Brazil,took place at a mine

42、 operating as a joint venture between Vale and Anglo-Australian giant BHP Billiton.That collapse is widely seen as the worst environmental event in Brazils history.12 Meanwhile,the climate impact of commodity production is staggering.The building blocks of the energy transitionThe energy transition

43、will require massive additional throughput of primary and recycled materials.7 Steel,aluminum,copper,nickel,cobalt,and lithium are among the minerals critical to production of wind turbines,solar panels,batteries,EVs,and next-generation transmission technology.The International Renewable Energy Agen

44、cy estimates that demand for battery materials,including aluminum,cobalt,and lithium will grow sevenfold by 2030 compared with 2020.8 In the average EV,the battery alone makes up roughly 30%of the price paid by the consumer.9 The supply chain shocks of 202022 provided a cautionary tale about the cen

45、tral role of commodities in the energy transition.After falling more than 80%from 2014 to 2020,the price of EV batteries was projected to increase by 14%in 2022.10 rmi.org/10Supply Chain Traceability:Looking Beyond Greenhouse GasesGlobally,steel(8%)and aluminum(2%)production together is responsible

46、for roughly the same GHG emissions as all road passenger travel by cars,motorcycles,and buses.13 Put simply,there is no solution to the climate crisis that does not involve commodity markets.Fortunately,targeted investments in the transition to efficient and low-carbon technologies have the potentia

47、l to dramatically reduce the carbon footprint of these industries.14 Already,aluminum made with renewable energy and low-carbon anodes can be produced at one-sixth the carbon footprint of its traditional counterparts.15 Similarly,green hydrogen-fueled steelmaking enables nearly carbon-neutral steel

48、production.16 Increasingly,consumers and stakeholders feel that their energy decisions are a choice between two evils.Recent human rights abuses in cobalt mining is just the most recent news to shake public trust in clean energy technology.17 It is another example of ways in which the energy transit

49、ion has failed to make common cause with communities affected by extraction.This failure jeopardizes climate progress.The energy transition,especially a just one,requires restructuring how commodity markets work.This means creating transparency around the climate,ecological,and social impacts of ext

50、raction.The ancient Sumerians lived in a preindustrial,non-globalized economy,and did not worry about the negative externalities embedded in the specific pieces of silver or bushels of grain they purchased.Today,producers and purchasers of raw materials should be held accountable for their carbon in

51、tensities,environmental disasters,and human rights violations.We need to be able to differentiate commodities and expand the scope of the differentiation to look at characteristics beyond emissions,in a systems-thinking framework where both planetary and social boundaries are respected.rmi.org/11Sup

52、ply Chain Traceability:Looking Beyond Greenhouse GasesReshaping Commodity Markets for a Just Energy TransitionWhen responsible corporate buyers try to procure ethically,they rarely succeed.There is no established market for commodities that are responsibly produced with reliably low carbon intensiti

53、es.Market mechanisms fail to provide robust tools to distinguish responsible commodities from less responsible alternatives.Most manufacturers,from electronics brands to automakers,are simply unable to ascertain their raw materials provenance.A study published in the Harvard Business Review,which an

54、alyzed every conflict mineral report submitted to the US Securities and Exchange Commission between 2014 and 2016,found that“only about 1%of the companies were able to declare that their products were conflict-free beyond a reasonable doubt.Of the rest,19%declared that they had no reason to believe

55、their products contained DRC conflict minerals.The remaining 80%admitted that they were unable to determine their raw materials country of origin.”18 But a paradigm shift is already underway,catalyzed by a confluence of aligned incentives,together with new regulation requiring robust due diligence i

56、n supply chains.The French Duty of Vigilance Law requires companies to provide annual vigilance plans,and the German Act on Corporate Due Diligence in Supply Chains establishes mandatory human rights due diligence.19 Product-level disclosures are emerging through regulation,too.For example,the US go

57、vernment in the recent Inflation Reduction Act created provisions on the provenance of battery materials,and through the Federal Buy Clean Initiative aims to expand Environmental Product Declaration requirements to include supply chain GHG emissions reporting at the product level.20 After decades of

58、 inaction,key actors in the supply chain are shifting toward greater due diligence on sustainability:Manufacturers are increasingly demanding accountable sourcing for key materials to achieve corporate sustainability and stewardship aims.Responsible mining firms and smelters see an opportunity to be

59、 rewarded for ethical production by receiving a premium for their products.Investors are seeking alignment with key sustainability objectives and will exert pressure on both sides of the market(miners and manufacturers)to ensure their portfolios are free of environmental and human rights abuses.Regu

60、lators,particularly in the European Union,China,and the United States,are demanding increased accountability for companies within their jurisdiction,and in some cases beyond,particularly in the realm of supply chain due diligence.Leading standard setters and associations recognize the need for bette

61、r traceability and increasingly robust,granular performance and chain of custody standardsCommodities traders see an opportunity to diversify their offerings.rmi.org/12Supply Chain Traceability:Looking Beyond Greenhouse GasesThe greatest challenge to advancing these new markets is implementing solut

62、ions to differentiate commodities.But there is one key barrier:as supply chains transform commodities into intermediate products and finally consumer-facing goods,the original materials and their attributes become blended.Tracing the attributes through this process requires the use of one(or several

63、)chain of custody models.For example,when half of the pig iron entering a steel mill is certified for labor standards,will half of the steel be certifiable or rather,will all of it be half-certifiable?And if the pig iron is being considered for GHG emissions instead,which model applies?Not all model

64、s are legitimate for all attributes,commodities,or tiers of the supply chain,and it is necessary to establish what works for each case.The greatest barrier to commodity differentiation:Opaque chains of custodyCompared to commodities like coffee or chocolate,metals and minerals tend to have complex s

65、upply chains.Often,these commodities will pass through several continents and stages of transformation before they reach the point of final assembly.Most of the worlds cobalt is mined in the DRC and refined in China.That refined cobalt may later travel to the United States to be assembled into an EV

66、 battery.At each step along these chains of custody,minerals from different sources are mixed,and information about their origin is lost.For firms engaged in irresponsible business practices such as carbon-intensive smelting or labor practices that violate basic human rights the long chain of custod

67、y for commodities effectively launders dirty inputs.By the time these inputs reach manufacturers,they are all“grey”devoid of any sustainability attribute.There is a long-held belief that blending makes it impossible to trace the true attributes of products along supply chains,so manufacturers have r

68、elied on hollow assurances,without really knowing if they are supporting irresponsible extractive practices.But some manufacturers are now challenging the status quo by entering direct sourcing arrangements with responsible companies.Tesla and BHP,for instance,have partnered to ensure responsible ni

69、ckel sourcing for the automaker.21 Earlier this year,Glencore did the same with General Motors to ensure a transparent supply of cobalt for GM vehicles.22 In their effort to be certain of product origins,these firms are circumventing the commodity market altogether.These ad-hoc arrangements are both

70、 more transparent and more efficient,removing a web of traders between mining firms and manufacturers.But they arent scalable.What is needed instead is simple:commodity exchanges must adopt tools that allow certified product to be tracked from mine site to market gate.In the next section,we describe

71、 different models for tracking the chain of custody of goods and how they should be used based on the nature of the tracked impact.There is a long-held belief that blending makes it impossible to trace the true attributes of products along supply chains.But some manufacturers are now challenging the

72、 status quo by entering direct sourcing arrangements with responsible companies.rmi.org/13Supply Chain Traceability:Looking Beyond Greenhouse GasesNoncertified productNoncertified productCertified productCertified productExhibit 3Identity preservation model INPUTCONVERSIONOUTPUTSource:Adapted from I

73、SO Standard No.22095:2020,https:/www.iso.org/standard/72532.html,and ISEAL Alliance,https:/www.isealalliance.org/sites/default/files/resource/2017-11/ISEAL_Chain_of_Custody_Models_Guidance_September_2016.pdf1.Identity PreservationIn the identity preservation model,no mixing is involved at any stage

74、of the supply chain.The certified inputs originate from a single source.Consider bottles of wine containing certified grapes coming from a single vineyard.No mixing occursNo mixing occursModels for commodity traceabilityTraceability is the capacity to preserve and verify the chain of custody of good

75、s their flow from one end of the supply chain to the other.Traceability is essential to shed light on opaque supply chains and deliver differentiated commodities.Chain of custody models illustrate how the flow of a product along the supply chain relates to the corresponding claims made for that prod

76、uct.23 One crucial element whether mixing of certified and noncertified inputs takes place determines the nature of chain of custody models.Below are several chain of custody models as defined by the ISO 22095:2020 Chain of Custody Standard.24 rmi.org/14Supply Chain Traceability:Looking Beyond Green

77、house GasesExhibit 4Segregation model 2.SegregationThis model allows the mixing of certified commodities that are kept separate from noncertified counterparts.The inputs originate from multiple sources.Consider organic grapes coming from France and Italy ending up in the same bottle of wine.The bott

78、le says the grapes are organic,but their provenance is unknown.Noncertified productNoncertified productNoncertified productMixing occursMixing occursCertified productSource:Adapted from ISO Standard No.22095:2020,https:/www.iso.org/standard/72532.html,and ISEAL Alliance,https:/www.isealalliance.org/

79、sites/default/files/resource/2017-11/ISEAL_Chain_of_Custody_Models_Guidance_September_2016.pdfINPUTCONVERSIONOUTPUTCertified productCertified productrmi.org/15Supply Chain Traceability:Looking Beyond Greenhouse Gases3.Controlled blendingMixing of certified and noncertified inputs is allowed under th

80、is chain of custody model.The ratio between inputs is known for contained volumes,and output percentages can be ensured after mixing.Each output contains a verifiable amount of 33%material with specified characteristics.Exhibit 5Controlled blending model Noncertified productMixing occursOutput perce

81、ntages knownINPUTCONVERSIONOUTPUTCertified productNoncertified productSource:Adapted from ISO Standard No.22095:2020,https:/www.iso.org/standard/72532.html,and ISEAL Alliance,https:/www.isealalliance.org/sites/default/files/resource/2017-11/ISEAL_Chain_of_Custody_Models_Guidance_September_2016.pdfrm

82、i.org/16Supply Chain Traceability:Looking Beyond Greenhouse GasesOutput percentages unknownNoncertified productMixing occursCertified productNoncertified product4.Mass balanceThe mass balance model allows mixing of certified and noncertified inputs,with the ratio being unknown.In this model,mixing o

83、f certified and noncertified outputs results in claims proportional to the original certified input.Claims on the final blended product reflect either the percentage of original certified input in each product or the percentage of products that can be deemed“certified”in each batch.25 For example,33

84、%of the output can carry a claim of“fully certified”or 100%of the output can carry a claim such as“contains 33%certified content.”Exhibit 6Mass balance model Output percentages unknownOutput percentages unknownINPUTCONVERSIONOUTPUTSource:Adapted from ISO Standard No.22095:2020,https:/www.iso.org/sta

85、ndard/72532.html,and ISEAL Alliance,https:/www.isealalliance.org/sites/default/files/resource/2017-11/ISEAL_Chain_of_Custody_Models_Guidance_September_2016.pdfrmi.org/17Supply Chain Traceability:Looking Beyond Greenhouse Gases5.Book and claimIn the book and claim model,there is no correspondence bet

86、ween the physical inputs and the products associated claims.This model ensures that for every purchase associated with a certified production claim,a product with those characteristics has been produced.Renewable energy credits,carbon credits,and sustainable aviation fuel certificates are well-known

87、 examples of book and claim chains of custody.Exhibit 7Book and claim model Certified producerBuyer of productNo input knowledge:producer decouples specific attributes from physical productsBuyer of certificateProduct 1 with characteristics of certified productProduct 2 with characteristics of certi

88、fied productCertificate with characteristics of certified productOUTPUTCONVERSIONINPUTIn order to assess which chain of custody model applies to each situation,it is useful to start by looking into the nature of the negative externality,or the“damage,”that an attribute represents.Damages may be eith

89、er fungible(i.e.,mutually interchangeable)or nonfungible.Nonfungible damages cannot be offset or credited:paying for child-labor-free cobalt in one place does not compensate for child labor elsewhere.For that reason,the only traceability mechanisms that can target and reduce nonfungible damages of m

90、inerals and metals production with no leakage are those that refuse to treat the molecules in solid material as metaphors for impact.Systems must track actual physical goods and not virtual copies thereof.In short,commodity differentiation along mineral supply chains requires this simple principle:N

91、onfungible damages(e.g.,child labor)must be tracked along chains of custody that monitor physical proportions of certified inputs and outputs if mixing occurs.Buyer and seller not required to be in same physical supply chainSource:Adapted from ISO Standard No.22095:2020,https:/www.iso.org/standard/7

92、2532.html,and ISEAL Alliance,https:/www.isealalliance.org/sites/default/files/resource/2017-11/ISEAL_Chain_of_Custody_Models_Guidance_September_2016.pdfrmi.org/18Supply Chain Traceability:Looking Beyond Greenhouse GasesExhibit 8Chain of custody models suited for nonfungible damages along mineral sup

93、ply chainsSource:Adapted from ISO Standard No.22095:2020,https:/www.iso.org/standard/72532.htmlCan be used for tracking nonfungible damages along mineral supply chainsThe models suited for tracing nonfungible damages along mineral supply chains are therefore controlled blending,segregation,and ident

94、ity preservation.Segregation and identity preservation require major physical changes that are currently likely unfeasible,especially for smelters and refineries,whereas controlled blending requires less change to physical material flows,leaving controlled blending as the only viable model when blen

95、ding happens.This is because under this model,the proportions can be tracked.Nevertheless,mass balance is currently the most commonly used model for tracking nonfungible damages of minerals and metals production,and the provenance and proportions of certified materials are rarely tracked.When mass b

96、alance is applied to nonfungible damages,it is crucial for related end-use claims to follow the“declared percentage”approach as described by ISEAL.This is to say,if one-third of the input material was certified,then the output should be claimed as containing one-third(at a maximum)of certified input

97、s.26 This is because companies making claims cannot offset their connection to nonfungible damages just by buying the portion of output associated with the certified input,which a“certified sourced content”claim would imply.27 Going Beyond GHG EmissionsThe“just transition”requires more than just dec

98、arbonization.Global climate agendas are increasingly recognizing the dangers of a narrow focus on GHG emissions to the exclusion of other environmental and social harms called“carbon tunnel vision.”Selling low-carbon commodities that are not otherwise responsibly produced is not just ethically compr

99、omised;it threatens to undermine the push toward commodity differentiation itself.What“counts”as responsible production is ultimately subjective,but so too is what counts as fair trade or organic.These definitions are imperfect,but on balance have delivered significant value and safeguards to vulner

100、able communities.Where to begin?The needs of traceability will vary from sector to sector,as not all commodities are produced in identical ways.But most commodities should be tracked against a broad set of sustainability attributes,including:GHG emissions Labor rights Local community impactsBook and

101、 claimMass balanceControlled blendingSegregationIdentity preservation Land displacement Biodiversity impact Water impactrmi.org/19Supply Chain Traceability:Looking Beyond Greenhouse GasesToward Commodity Differentiation:An Action Plan for Climate Stability In mineral supply chains,commodity differen

102、tiation does not require any technological breakthrough,or that commodities be tracked like certified grapes in wine.Rather,it requires a modification to existing business practices,such that physical goods can be accompanied by their sustainability data.Five strategic intervention points can drive

103、toward this mission-critical outcome:1.Strengthen and use product-level standards to drive commodity differentiation.Broadly speaking,corporate-level standards predominate in the mining and metal industry,causing information to be lost as metals leave mine sites and make their way to manufacturers.I

104、n terms of chain of custody,mass balance is the norm in the industry,and very few leading manufacturers are investing to improve the traceability of the minerals and metals they source.Product-level guidance,when present,is often insufficiently robust to drive differentiation.A broad array of standa

105、rds exists to certify the business practices of actors at each step of a value chain for example,mining or smelting and only the combination of a few tools can provide a holistic guarantee of provenance.Standard setters have the opportunity to adapt their standards at the product level to drive impa

106、ct,integrate existing offerings,and push chain of custody requirements beyond mass balance.In combination with available digital tools,these solutions will scale rapidly and soon become new industry standards.Current product-level standards,most adapted from the Organisation for Economic Co-operatio

107、n and Developments Due Diligence Guidance for Responsible Business Conduct,are generally weak.Most do not provide auditable information regarding the origins of commodities;instead,they largely rely upon written assurances from firms with misaligned incentives.For instance,a company sourcing cobalt

108、from a Chinese supplier will receive a written document from the supplier claiming that its mines are conflict-free,but without a list of mines with which the supplier is affiliated,or an audit report that provides more detail.These documents have served as risk and reputation management tools for p

109、urchasers but have failed to catalyze differentiated commodity markets.Life-cycle assessment,Environmental Product Declarations,and the product category rules(PCRs)governing how to report product-level environmental information have existed for decades but have also failed to drive meaningful differ

110、entiation in the market.This is in part by design:PCRs govern specific products,and decisions made in one geography or value chain do not always allow for comparability across product categories.Efforts to improve the applicability of PCRs in climate-differentiated commodities can be seen in the Emb

111、odied Carbon in Construction Calculator(EC3)tool or the Pathfinder Framework.Commodities producers are understandably hesitant to disclose some information about their products.Product-level standards can provide a safe information screen by vetting sensitive information and repackaging or anonymizi

112、ng it sufficiently to allay corporate privacy concerns.A product-level standard can rmi.org/20Supply Chain Traceability:Looking Beyond Greenhouse Gasesact as a data reduction tool,while providing third-party assurances about sustainability that are auditable and backed by robust evidence rather than

113、 unverified assurances.Such standards may be particularly useful as demand grows for minerals sourced in North America and Europe,and as new systems,like the London Metals Exchange Passport,28 create infrastructure to support commodity differentiation.2.Deploy tracking and auditing technology at sca

114、le to enable seamless traceability.In the pre-digital era,tracking commodities was onerous.It required that paper documents follow goods,and that smelters and traders keep complex records that might be of interest only to a second-or third-tier purchaser.Technology has fundamentally changed how trac

115、eability can be achieved.Centralized or distributed ledgers can replace the exchange of information through PDFs and spreadsheets.Most importantly,when all parties report to a single ledger,it provides a powerful audit tool.Discrepancies between reported sales and receipts are immediately obvious.In

116、 an industry where fraudulent receipts often circulate bearing the name of well-regarded producers,robust traceability technology ensures that products certified as responsible are authentic.3.Aggregate demand with buyers alliances.All capital-intensive industries suffer from a chicken-and-egg probl

117、em,where investors and would-be producers ask:if we build it,will they come?Demand aggregation among would-be purchasers serves to de-risk investment in responsible production,certification,and traceability platforms.Several companies are already demonstrating their willingness to pay a premium for

118、responsibly sourced commodities.Take the example of Fairtrade Gold,which typically sells at a price 20%higher than recycled gold.29 Other sectors provide interesting examples.For instance,the Sustainable Aviation Buyers Alliance is promoting net-zero aviation through investments in sustainable fuel,

119、and SteelZero is an initiative where members have made“a commitment to procuring,specifying,or stocking 100%net-zero steel by 2050 at the latest.”30 In the mining and metals sector,the obvious leaders for demand aggregation are automakers and consumer electronics manufacturers.These consumer-facing

120、brands must join together around commitments to procure only low-carbon and responsibly produced minerals within this decade,and set interim targets(e.g.,50%certified minerals by 2026)to jump start a system with long time lags.Supplier codes should also be leveraged to make responsible sourcing requ

121、irements contractual obligations.4.Rally investors with investors alliances.Responsible investors are uniquely positioned to leverage their role and drive progress among commodities producers and purchasers.Lenders and equity partners should commit to withholding investments from corporations in cer

122、tain sensitive industries that cannot demonstrate they have slavery-or child-labor-free supply chains for key minerals,such as cobalt.Investors in mining and metals processes should also set rigorous internal standards,ensuring that their involvement increases the supply of green commodities and enc

123、ourages their partners to seek ways to capitalize on responsible business practices.rmi.org/21Supply Chain Traceability:Looking Beyond Greenhouse Gases5.Tighten regulations and leverage public procurement.Regulators and policymakers have the responsibility and opportunity to tighten the sustainabili

124、ty requirements for companies operating in their jurisdictions.We need systems that go beyond“due diligence”in the form of checkbox exercises.Rather,due diligence processes need to be paired with satisfaction requirements that can be verified through digital tools containing proof.In the recent Infl

125、ation Reduction Act,the US government created provisions on the provenance of battery materials,and through the Federal Buy Clean Initiative,aims to expand Environmental Product Declaration requirements to include supply chain GHG emissions reporting at the product level.31 These initiatives will ho

126、pefully pave a way forward where the requirements will expand to attributes beyond provenance and GHG emissions.On the other side of the ocean,the EU Battery Amendment Regulation of 2022 is a leading example of what type of regulation will be required to achieve truly sustainable and transparent sup

127、ply chains supported by technology.32 Tightened regulation in the Global North will exert pressure on each country doing business with companies falling under regulation.Building on tighter regulation and enhanced systems,governments globally could leverage their procurement power,around US$13 trill

128、ion globally in public contracts annually to drive demand for responsible commodities.33 rmi.org/22Supply Chain Traceability:Looking Beyond Greenhouse GasesConclusionThe energy transition cannot begin and end with EVs and heat pumps.The material inputs to material society must equally be the focus o

129、f decarbonization and environmental justice efforts.This report has outlined the most pressing changes needed to catalyze a paradigm shift in the production of responsible commodities.Along mineral supply chains,these changes include the deployment and strengthening of product-level standards,improv

130、ed access to technology and data-sharing platforms,and responsible procurement commitments and requirements.With concerted effort from key stakeholders,mineral supply chains can lead the creation of a more sustainable future.Additionally,as traceability tools improve the ease of identifying and trad

131、ing responsibly produced commodities,commodity markets will become more robust and efficient.This will create new opportunities for miners and metals producers to differentiate their commodities based on the attributes of production,and ultimately help to drive the transition to a sustainable econom

132、y that respects the environment and communities alike.rmi.org/23Supply Chain Traceability:Looking Beyond Greenhouse GasesEndnotes1 Christian Hoffmann,Michel Van Hoey,and Benedikt Zeumer,Decarbonization Challenge for Steel,McKinsey&Company,2020,https:/ Gas Emissions Aluminium Sector,”International Al

133、uminium Institute,October 4,2021,https:/international-aluminium.org/statistics/greenhouse-gas-emissions-aluminium-sector/;and Hannah Ritchie,“Cars,Planes,Trains:Where Do CO2 Emissions from Transport Come from?”Our World in Data,October 6,2020,https:/ourworldindata.org/co2-emissions-from-transport.2

134、D.Gielen,Critical Minerals for the Energy Transition,International Renewable Energy Agency,2021,https:/irena.org/-/media/Files/IRENA/Agency/Technical-Papers/IRENA_Critical_Materials_2021.pdf.3 International Aluminium Institute,“Greenhouse Gas Emissions,”2021;and Ritchie,“Cars,Planes,Trains,”2020.4 E

135、ric L.Cripps,“The Structure of Prices in the Neo-Sumerian Economy(I):Barley:Silver Price Ratios,”Cuneiform Digital Library Journal,2017:2,pp.1-44,https:/cdli.ucla.edu/file/publications/cdlj2017_002.pdf.5“The Worlds Most Carbon-Friendly Aluminium Production,”The Explorer,accessed October 2,2022,https

136、:/www.theexplorer.no/solutions/the-worlds-most-carbon-friendly-aluminium-production/.6 What Do We Get Out of It?,Human Rights Watch,2018,https:/www.hrw.org/report/2018/10/04/what-do-we-get-out-it/human-rights-impact-bauxite-mining-guinea.7 Marcelo Azevedo,et al.,The Raw-Materials Challenge:How the M

137、etals and Mining Sector Will Be at the Core of Enabling the Energy Transition,McKinsey&Company,2022,https:/ Gielen,Critical Minerals,2021.9 Ira Boudway,“Batteries For Electric Cars Speed Toward a Tipping Point,”Bloomberg,December 16,2020,https:/ Steve LeVine,“After a Decade of Declines,EV Battery Co

138、sts Are To Rise 14%This Year,”The Electric,accessed September 29,2022,https:/ Chain Traceability:Looking Beyond Greenhouse Gases11“Three Years after Brumadinho Tragedy,Justice and Accountability Still Elude the Victims,”IndustriALL,2022,https:/www.industriall-union.org/three-years-after-brumadinho-t

139、ragedy-justice-and-accountability-still-elude-the-victims.12 IndustriALL,“Three Years after Brumadinho,”2022.13 Hoffmann,“Decarbonization Challenge,”2020;International Aluminium Institute,“Greenhouse Gas Emissions,”2021;and Ritchie,“Cars,Planes,Trains,”2020.14“Aluminum Pathways to Net Zero,”Mission

140、Possible Partnership,https:/dash-mpp.plotly.host/aluminium-net-zero-explorer/;and“Steel Pathways to Net Zero,”Mission Possible Partnership,https:/dash-mpp.plotly.host/mpp-steel-net-zero-explorer/global_regional_lens.15 The Explorer,“Worlds Most Carbon-Friendly,”2022.16 Owais Ali,“Green Hydrogen for

141、Steel Production,”AzoCleantech,July 27,2022,https:/ Testimony of Ida Sawyer at the Tom Lantos Human Rights Commission,Human Rights Watch,July 14,2022,https:/www.hrw.org/news/2022/07/14/child-labor-and-human-rights-violations-mining-industry-democratic-republic-congo.18 Yong H.Kim and Gerald F.Davis,

142、“80%Of Companies Dont Know If Their Products Contain Conflict Minerals,”Harvard Business Review,2017,https:/hbr.org/2017/01/80-of-companies-dont-know-if-their-products-contain-conflict-minerals.19“Frances Duty of Vigilance Law,”Business&Human Rights Resource Centre,2022,https:/www.business-humanrigh

143、ts.org/en/big-issues/corporate-legal-accountability/frances-duty-of-vigilance-law/;and“Act on Corporate Due Diligence in Supply Chains,”Federal Ministry of Labour and Social Affairs,August 18,2021,https:/www.bmas.de/EN/Services/Press/recent-publications/2021/act-on-corporate-due-diligence-in-supply-

144、chains.html.20 Reed Blakemore and Paddy Ryan,“The Inflation Reduction Act Places a Big Bet on Alternative Mineral Supply Chains,”Atlantic Council,August 8,2022,https:/www.atlanticcouncil.org/blogs/energysource/the-inflation-reduction-act-places-a-big-bet-on-alternative-mineral-supply-chains/;and“Fac

145、t Sheet:Biden-Harris Administration Announces New Buy Clean Actions to Ensure American Manufacturing Leads in the 21st Century,”The White House,2022,https:/www.whitehouse.gov/briefing-room/statements-releases/2022/09/15/fact-sheet-biden-harris-administration-announces-new-buy-clean-actions-to-ensure

146、-american-manufacturing-leads-in-the-21st-century/.21“BHP Enters into Nickel Supply Agreement with Tesla Inc,”BHP,July 28,2021,https:/ and General Motors Enter Multi-Year Cobalt Supply Agreement,”Glencore,April 12,2022,https:/ Chain Traceability:Looking Beyond Greenhouse Gases23 Chain of Custody Mod

147、els and Definitions,ISEAL Alliance 2016,https:/www.isealalliance.org/sites/default/files/resource/2017-11/ISEAL_Chain_of_Custody_Models_Guidance_September_2016.pdf.24 International Organization for Standardization,2020,Chain of custody General terminology and models ISO Standard No.22095:2020.25 ISE

148、AL Alliance,Chain of Custody Models,2016.26 Ibid.27 Ibid.28“LMEpassport,”London Metals Exchange,https:/ Marc Choyt,“Why Fairtrade Gold Costs More,”Reflective Jewelry,February 12,2021,https:/ Members,”Climate Group,accessed September 29,2022,https:/www.theclimategroup.org/steelzero-members.31 Victor

149、Olgyay,Anish Tilak,and Connor Usry,“New White House Buy Clean Guidance Targets Huge Emissions Hidden in Building Materials,”RMI,2022,https:/rmi.org/white-house-buy-clean-guidance-targets-emissions-in-building-materials/.32 Chris Stretton,“EU Battery Passport Regulation Requirements,”Circularise,July

150、 11,2022,https:/ World Bank,Green Public Procurement:An Overview of Green Reforms in Country Procurement Systems,2021,https:/openknowledge.worldbank.org/handle/10986/36508.Hylla Barbosa,Valentina Guido,Stephen Lezak,Paolo Natali,Supply Chain Traceability:Looking Beyond Greenhouse Gases,RMI,2022,http

151、s:/rmi.org/insight/supply-chain-traceability-beyond-greenhouse-gases/.RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow interested parties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.RMI Innovation Center22830 Two Rivers RoadBasalt,CO 81621www.rmi.org November 2022 RMI.All rights reserved.Rocky Mountain Institute and RMI are registered trademarks.