Tool to Assess Raw Material Social Supply Risks

Abstract

This research considers the use of country-level social indicators of governance, conflict and human rights used by companies to assess social risks in product supply chains. The study developed a computational tool that brings together three areas relevant to companies with global supply chains: life cycle assessment, critical raw materials and responsible sourcing of minerals and metals. This work is particularly valuable given the growing use of the OECD guidance for responsible sourcing of raw materials from high-risk and conflict-affected areas, which describes practices that are being increasingly adopted by businesses. To better understand the short-term supply risk and the associated impacts that social aspects can have on the sourcing of critical raw materials, the research built on the method for the Geopolitical Supply Risk (GPSR), which has been previously used to extend environmental life cycle assessment (LCA) to consider raw material criticality based on the World Bank’s Worldwide Governance Indicators. The computational tool developed provides improved access and speed of calculations, making the GPSR more manageable for researchers and available to companies The functionality of the GPSR is also extended by adding eight additional country social indicators of social supply risk to the computational tool, selected based on policy guidance and industry practice in areas of governance, conflict and human rights risk. A case study was used to show operationalization of the tool. The social supply risk was calculated for eight materials associated with lithium ion batteries, assuming production in the EU-27, Japan and USA for 2015-2018. A database was created based on information from the US Geological Survey and United Nations Comtrade. Results demonstrated that social supply risks can provide additional information on raw material impacts for companies to consider in their sourcing decisions. This information is complementary to environmental LCA and there is future potential to integrate GPSR calculations into LCA software. As such, meaningful assessment of multiple social supply risks can be provided as part of understanding and management the life cycle of products.