NORDEA ASSET MANAGEMENT
ISSUE: Cobalt is a metal which is often used in recharge- able batteries because of its unique properties which improve the performance, safety and longevity of the batteries. Cobalt mining does not face any significant different ESG risks to those which are inherent in other types of mineral mining. However, the challenge around cobalt is that 70% of the annual global supply comes from the Democratic Republic of Congo and an estimated 25% of it is mined in artisanal way. Artisanal mining refers to informal and unregulated mining, which is often done in abandoned mining pits or old mining tailings. The health, safety and working conditions of artisanal cobalt miners are poor, and because it is unregulated there is a high risk of environmental pollution. PERFORMANCE: Samsung SDI has addressed its exposure to artisanal-mined cobalt by assessing all of its suppliers that use cobalt through the application of the Responsible Mining Initiative’s Cobalt Reporting Template, to ensure traceability and transparency of its cobalt supply chain. In 2017, 23% of the company’s suppliers complied with the requirement, and this has increased to a 91% compliance rate in 2020. To further reduce its reliance on artisanal cobalt and to secure its cobalt supply, Samsung SDI has made a direct cobalt purchase agreement with an industrial miner in the DRC, which will ensure that the company has full traceability of all its cobalt. At the same time, the company has implemented several initiatives to address the reliance on mined cobalt, such as recycling programmes to recapture cobalt from used batteries and product design to reduce the amount of cobalt used in its batteries. The work the company is doing, through intense research and development, to reduce and even eliminate the cobalt content in its batteries is highly beneficial here. Newer batteries have ever lower cobalt content and the company is working on developing so-called solid state batteries that don’t use cobalt at all. This would not only reduce the overall cost raw materials and thus improve the profitability outlook of the company, but also improve its standing versus competitors and proposition to cus- tomers, and help the company stay ahead of potential future regulation. ENGAGEMENT: NAM’s main engagement focus with Samsung SDI has been on cobalt for several years. NAM has requested that the company increases the trans- parency of its cobalt supply chain and has it audited.
make easier the separation of raw materials in discarded batteries. We view it as essential that the company suc- ceeds in its efforts to create partnerships to recycle its discarded electric vehicle batteries, as this would reduce the negative externalities that arise from their use. Supply Chain Management Supply chain management is an integrated part of NAM’s ESG analysis and follows the issues identified by SASB Materiality Map. ISSUE: Samsung SDI has a complex supply chain, with production among suppliers as well as its own facilities. Its supply chain is also diverse, which means that its sup- pliers have different ESG challenges and the company has to adjust its supply chain audits accordingly. PERFORMANCE: Samsung SDI has a relatively good process of supply chain management. The company utilises a combination of self-assessment and onsite audits of all new and major suppliers to assess its supply chain’s ESG risks. The company has a comprehensive Supplier Code of Conduct 7 , which describes its policies on issues such as human and labour rights, health and safety, environment, and ethics. Samsung SDI also pro- vides ESG awareness training to suppliers and supports manufacturing innovations in partnership with major suppliers. It is transparent with the result of the audits in relation to how many had to make improvements and how many failed the audit. ENGAGEMENT: NAM has not had any specific engage - ment with Samsung SDI on its supply chain management of its direct suppliers, as our assessment is that the company generally manages this issue quite well. Our engagement on this topic is focused further up the supply chain around the raw materials used in produc- tion, specifically its cobalt supply chain. Materials Sourcing SASB Materiality Map flags raw materials as one of the challenges for companies within the industry where Samsung SDI operates. NAM has focused its engage- ment on the company’s sourcing of cobalt. 7 https://www.samsungsdi.com/upload/download/sustainable-management/ Supplier_Code_of_Conduct_v1.01.pdf
7 | SASB STANDARDS INTEGRATION CASE STUDY
SASB.ORG/INVESTOR-USE
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