In August, Europe passed into law its EU Battery Regulation, strengthening responsibility rules for industrial and battery manufacturers, setting a global precedent for digital battery passports, and making clear that adherence to upstream environmental and due diligence requirements is the new standard for selling large batteries in Europe. Now, following close behind, the bloc has also passed its Ecodesign for Sustainable Production Regulation, applying the requirement of digital product passports to items beyond batteries, like aluminum, steel, and electronics.

The U.S. has used 2023 to leap ahead on supply chain transparency, especially by defining key provisions in the Inflation Reduction Act and the Bipartisan Infrastructure Legislation. Most recently and notably, U.S. Departments of Energy and Treasury have defined what constitutes a Foreign Entity of Concern within battery supply chains. Informed by other global precedents, as well as Circulor’s technical capabilities, the U.S. made clear this month that “physical tracing” is required to prove compliance with these definitions and provide the granular data needed for U.S. officials and American EV buyers.

Such initiatives within markets, including similar efforts in India, South Korea, Japan, Canada and others, are boiling up to the global stage. At last week's UN Climate Conference, COP28 DUBAI, UN Secretary-General António Guterres emphasized that the extraction of green energy materials must be “sustainable and just” and announced the establishment of The Panel on the Critical Energy Transition Minerals to provide global guidance and common principles that can manage the energy transition, while also managing the geopolitical and sustainability challenges expected to ensue.

In a complementary fashion, the International Energy Agency (IEA) delivered a similar message in its inaugural critical minerals report last week— “Sustainable and Responsible Critical Minerals Supply Chains.” The report stresses that clean energy supply chains are only reliable and resilient when also responsible and sustainable and calls specifically for “making critical mineral supply chains transparent” and continuously “tracking and monitoring performance.”

Market drivers don’t just come from governments and intergovernmental agencies. Industry holds similar power to set new standards, and that’s what we’ve seen in the recent announcement between the world’s second largest lithium provider SQM, Volvo Cars, and Circulor. The three companies confirmed end-to-end traceability of SQM’s IRMA 75 audited lithium, an industry first that differentiates SQM’s lithium as the most sustainable lithium and its incorporation into specific battery cells and packs downstream. Read more from SQM, Volvo Cars, and Circulor here.

The beauty of supply chain transparency, material traceability, and digital identifiers is that in a world with layering issues that require attention, 2023 tells us there is coalescence around the fact that transparency solves for a myriad—greater economic, climate, and market resilience—and that on the back of that, 2024 is poised to be an even bigger year of progress.

Finally, ‘Season’s Greetings’ from Circulor. We wish you joyous holidays and a very Happy New Year! We look forward to continuing to bring you these global insights here and on circulor.com and LinkedIn. More on the latest global traceability trends below.

What we’re reading

Physical tracing needed to prove adherence with latest U.S. battery guidance

The U.S. Departments of Energy and Treasury recently published draft guidance of definitions regarding “Foreign Entity of Concern” (FEOC) for battery supply chains, especially appliable for the Inflation Reduction Act’s Section 30D Clean Vehicle Tax Credit and the Bipartisan Infrastructure Legislation grants. Per this guidance, administering compliance with these provisions requires “physical tracing” of primary battery materials.

Leading International Energy Agency calls for supply chain transparency, tracking and monitoring for critical minerals

The International Energy Agency published its critical minerals report last week, which highlights the role of both governments and companies to combat ESG risks protecting people, communities and the environment while adopting sustainable and responsible practices bolsters security of supply. It provides five recommendations to policy makers to ensure that critical mineral supply chains are sustainable and responsible, including the need to encourage or require companies to improve transparency throughout the supply chain.

Creating a sustainable, closed-loop ecosystem

Toyota Motor Corporation is expanding its battery recycling network in a new collaboration with Cirba Solutions. The collaboration will focus on the collection, transportation, dismantling and processing of scrap and end-of-life lithium-ion electric vehicle batteries, extracting critical minerals at Cirba’s Lancaster, Ohio facility with a 95% recovery rate.

Europe is making sustainable products the norm In reaching provisional agreement on the Ecodesign for Sustainable Products Regulation (ESPR), Europe sets requirements for minimum recycled content, proof of carbon and environmental footprints, and Digital Product Passports, to achieve more sustainable, repairable and circular products. Expect the list of products covered by ESPR to be regularly updated—but for now, priority products include iron and steel, aluminum, tires and electronics, among others. While consumer organizations applaud the move, ensuring effective implementation and adequate resources for enforcement once formally adopted into law early next year, are crucial next steps.

Car companies are betting big on climate tech

Sifted, by the Financial Times, writes that from 2035 onwards, any new cars and vans sold in Europe and the UK must be zero emission vehicles. Car companies are now seen to be increasing their electric vehicle lineup and racing to secure necessary components, prompting increased investments in climate tech startups including supply chain traceability companies like Circulor. Current and proposed regulations will put increasing pressure on car companies to know the source of their components and deliver sustainable mobility for the future.

What we’re sharing

Enabling digital proof of SQM's IRMA 75 lithium to downstream customers

Combining third-party audits with material traceability, Circulor confirms SQM's IRMA 75 lithium from its Salar de Atacama operation to Volvo Cars. Using its PROVE platform, Circulor is able to authenticate the lithium as IRMA 75, connecting the IRMA audit report with the flow of material, and assuring incorporation into specific battery cells and packs downstream. This marks a significant industry shift and showcases SQM's commitment to sustainability, supported by Volvo Cars' dedication to responsible sourcing. Read more.

The EU is cracking down on greenwashing

Europe’s Green Claims Directive sets new rules governing the environmental claims companies make about their products and services. To comply, companies will need to authenticate their environmental claims with auditable data that is specific to their products and services. Circulor's expertise in supply chain mapping, material traceability, and digital product passports is indispensable in providing such proof. Read more.

Being ready for Europe’s increasing regulatory demands

Circulor's Battery Passport addresses Europe's growing regulatory requirements, providing a balanced approach to compliance and circularity in the battery industry. Circulor’s network, covering over half of the world’s EV battery manufacturing, combines with our market-leading solutions to help companies unlock supply chain transparency and drive traceability and accountability throughout their supply chains. Read more.

Updated content guidance on the EU Battery Passport

The German Government’s Battery Pass project, of which Circulor is the technology lead, has published updated Content Guidance on the EU Battery Passport – in line new insights from the Consortium and final requirements from the EU Battery Regulation. It outlines reporting rules for the battery industry, aiming to enhance sustainability and circularity in batteries while identifying harmonization opportunities with other regulations including the Ecodesign for Sustainable Products. Read more.