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Kumi and Circulor hosted a joint webinar, alongside Senior Human Rights Expert, Charline Daelman of Panasonic, to unpack the global due diligence regulatory landscape - beyond the EU Batteries Regulation. 

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Kumi and Circulor hosted a joint webinar, alongside Senior Human Rights Expert, Charline Daelman of Panasonic, to unpack the global due diligence regulatory landscape - beyond the EU Batteries Regulation. They discussed the potential impacts of the EU Omnibus and trade restrictions that should shape your global supply chain due diligence strategy.

-	How to future-proof your compliance strategy

-	The importance of collaboration across your supply chains

-	How to structure your due diligence efforts in the face of ambiguity

They also discuss how traceability systems can be used to pinpoint due diligence actions that companies need to undertake in order to identify, assess and respond appropriately to social and environmental risks in battery supply chains.

If you have any questions on the insights shared in this webinar, or how Circulor can support your business, please set-up a meeting with our team 

Hello and welcome. Thank you for joining Kumi and Circulor's second webinar on the topic of supply chain due diligence. We'll give a few minutes to allow everybody to join and then we'll get started.

Great, with that, I think we're ready to get started. Again, thank you for joining Kumi and Circulor's second webinar on the topic of supply chain due diligence.

My name is Ellen Carey. I'm the Chief External Affairs Officer at Circulor, the leading technology provider on supply chain transparency and material traceability. The global regulatory landscape in this space is becoming increasingly complex. Daily news on policies and their requirements, such as the EU Omnibus, leave businesses without much needed clarity.

Building on our previous webinar, today we'll expound on the EU Batteries Regulation, and will also broaden the context, the global regulatory landscape that shapes and informs your company's global supply chain due diligence strategy.

Joining me today, I'm pleased to share Charline Daelman, Senior Human Rights Expert at Panasonic. Alex Graf, Manager at Kumi Consulting and lead on Kumi's work with the European Commission on the EU Battery Regulation. James Lewry, Director of Client Services at Kumi Consulting, and Yue Jin Tay, Vice President for Customer Engagement and Strategy at Circulor.

Today, we'll cover how to approach uncertainty and ambiguity in today's global environment. We'll also talk about how to future-proof your compliance strategy, why collaboration across the value chain is critical, how to think beyond regulations, and how to learn from certain circumstances and efforts underway by those in your peer group.

For the first part of our time, I'd like to invite Yue Jin Tay and James Lewry to set the scene for us, globally, as pertaining to current due diligence policies and practices, and also pertaining to the EU battery regulation, what companies need to do, how are different players preparing given their maturity and their place in the value chain. This is what James and Yue Jin will share with us next.

From there, Charmaine and Alex will join the discussion, and we'll talk about the ambiguities in today's global regulatory landscape, how to address them, and how to tactically keep moving forward to reduce risk and continue preparedness.

Our goal is to make this an informative and valuable conversation for all of you, our audience. And in that spirit, we'll pause a couple times throughout to solicit your insights and experiences via some multiple-choice questions.

We welcome your questions via the Q&A chat function. We've reserved time at the end to address them, but if we get to all of them, please know that the Circulor and the Kumi teams will be coming back to you with answers after the webinar concludes.

Today's session is being recorded and a link to the recording will be sent to all registrants after we conclude. That is all for me, all the housekeeping, etc. I'm now pleased to turn it over to James and to Yue Jin.

Great, thanks so much Ellen and it's really good to be with everybody today. 

So, after the past decade we've seen a dramatic shift from voluntary standards like the OECD guidelines and the UN guiding principles to legally binding due diligence requirements. Businesses are more aware than ever of environmental impacts, forced labour and human rights abuses in the supply chains of the things that we all buy and this has prompted robust regulatory responses worldwide.

So in the US, Canada, Australia, and the EU, new supply chain acts and trade restrictions are tackling modern slavery risks head on. For example, the German Supply Chain Due Diligence Act, and of course the proposed EU Corporate Sustainability Directive are setting new benchmarks for corporate accountability, even with the changes under the omnibus that Ellen mentioned earlier. At the same time, regulations like the EU Deforestation Regulation and Extended Producer Responsibility policies are really pushing sustainability further upstream in the supply chain.

And building on all of these developments, the EU Batteries Regulation now introduces some of the most demanding sustainability and due diligence obligations yet. It captures battery manufacturers and importers in the EU and is going to be pretty tough as it comes up. 

The Battery Regulations establishes legally binding requirements across the entire battery life cycle, including mandatory due diligence for companies placing batteries on the EU market.

These companies must conduct due diligence on the social and environmental risks in their supply chains, aligned with the OECD framework. Specific thresholds for carbon footprint disclosure and minimum recycled content requirements for key battery materials such as cobalt, lead, lithium and nickel. Stringent traceability and chain of custody requirements for battery supply chains, setting it apart from broader due diligence laws. For example, it mandates digital battery passports for electric vehicle industrial and rechargeable batteries over two kilowatt per hour. In this respect, the regulation goes beyond voluntary standards by making traceability legally enforceable and integrating circular economy principles.

Another key difference is that unlike broader due diligence laws like the EU Corporate Sustainability Due Diligence Directive, or the CSDDDD, of known, and the EU Conflict Minerals Regulation, the battery's regulation is product-specific rather than company-wide. The regulation therefore seeks to reinforce the EU's commitment to sustainable supply chains under the Green Deal with the intention to level the playing field for companies operating within the region.

Now, that's a lot to digest in a short time. So James, what do companies need to do?

Well, pretty simple. You need to conduct due diligence in your supply chain on the four raw materials in scope of the regulation. And of course, these include lithium, nickel, coal, and graphite and their compounds, the battery active materials. Now there are 15 environmental, social and human rights risks which are identified within the regulation, and these have got to be considered within the due diligence. But those are not exhaustive.

The regulation encourages you to think more broadly than just those named risks so in practice, this means that due diligence and traceability need to go hand in hand. On the slide that you can see here, there are articles 49 to 52 of the Batteries Regulation, which specify eight requirements for management systems and processes that companies need adopt to be compliant.

Four of these requirements on the left-hand side here you can see they cover things that you need to have in place within a due diligence management system and this of course includes a policy, it includes making sure that you've got adequate oversight and responsibility for due diligence, it means also putting in place a system of controls and then encouraging transparency. It also includes an adequate grievance mechanism as well and this is something remains quite a key gap for most companies.

Now on the right-hand side the second set of requirements here all relate to processes, and this includes the assessment and response to risks in the battery supply chain, the third party verification of your due diligence process by a notified body and of course then the reporting requirements that you have. 

So, in order to break this down let's have look at how each of these eight requirements lead up to August this year and to do so we'll break it into a roadmap as you can see on the screen. This is a road map of typical activity to follow to achieve compliance and again as Yue Jin was saying it looks like it can be a lot at first particularly given the August timeline but the reality is that most companies will have many of these items in progress already so some of the things that you can see there in terms of establishing the policies we talked about already but a key other item is about building awareness and capacity both within the business but also within the supply chain itself.

In terms of ongoing activities of course due diligence is one of those it's an ongoing process as is developing those risk response plans and monitoring those risk responses and then of course getting ready for the annual reporting that's required under the Batteries Regulation as well. But let's zoom in now on three of these activities and look at what's required in more detail. Yue Jin?

Thanks, James. First, map the supply chain and complete initial risk scoping. This is an early-stage activity that companies should prioritize so that they know what suppliers are in scope of due diligence requirements.

Secondly, establish a chain of custody controls underpinned by material traceability. This underpins your map supply chain with actual relevant flows of material.

Third, conduct progressively in-depth due diligence based on what is happening in your supply chain, and the material flows through your supply chain. What do we mean by material traceability?

The IEA, the International Energy Authority, and the OECD have published a comprehensive report on traceability in critical mineral supply chains very recently, back in February. It defines traceability as the ability to track four specific types of information. Firstly, the product's origin, that is, the location where the product was originally mined, manufactured, or produced. The product's geographical path, that is, the various locations where the product underwent some form of transformation or through which it transited. Thirdly, the product's chain of custody, that is to say the sequence of entities that help ownership or control over the product throughout the supply chain. And fourth, the product's physical evolution, that is the product's different stages of processing and transformation.

You can see on the next slide an illustration of what leading companies and their supply chains are doing with the help of technology. Each actor in the supply chain is connected and providing ongoing traceability data. To enable supply chain traceability, it is necessary to have sufficient clarity and certainty of the flow of materials through the end-to-end supply chain from source to manufacturer.

A key learning from six years of working with OEM customers is that participants in the supply chain is dynamic. It doesn't stand still. It is constantly changing. Chemistry's change, spot purchasing is common, especially when commodity prices fall, and midstream participants are driven by availability and price. Your due diligence is only as good as your knowledge of who is actually doing what in your supply chain.

Moreover, it's impossible for a range of other regulatory obligations to comply with other regulatory obligations without knowing exactly who is in your supply chain at all times for every import. As James mentioned earlier, due diligence and traceability need to go hand in hand.

Thanks, Yue Jin. So let's now look then at what businesses are doing as they prepare for compliance. And to do this, we thought it would be useful to show some examples of three different types of companies at different stages of maturity to see how they're preparing.

Now, the examples we've got are fictitious, but they are based on what we've seen in similar companies at these maturity levels. So starting on the left-hand side, Company A, which is Alpha Storage Solutions. This company is an OEM that manufactures and supplies battery products to European companies for energy storage and data centres.

Now, Alpha Storage is at the very early stages of its maturity and responsible sourcing, particularly with a limited supply chain and not having previously been in scope of due diligence regulations. Therefore, this company's pretty much at the start of its compliance journey for the regulation and is addressing gaps in its due diligence approach very quickly. At the same time, though, it has scoped much of what it's included in its supply chain in the four materials in scope of the regulation it's identified a limited number of suppliers and is now prioritizing the risk scoping of these. As a result, the company's found that its due diligence requirements are much more manageable than first thought, but it's still got quite a bit of work to do to develop its management system where there are key gaps in policy and grievance mechanisms.

On the right-hand side, you can see Company C, which is Cosmos online. Now Cosmos is at the other end of the maturity scale. The company sells the party goods in the European market, including electronic items containing batteries. And it also places its own branded products on the market as well. It's got a very mature sustainability program, but with thousands of third party suppliers and manufacturers due diligence under the batteries regulation is a big challenge in terms of scope and resources for the company. So to make due diligence more manageable, the companies developed a prioritized model for due diligence. 

And this, of course, is in line with the OECD guidelines for multinational enterprises, which encourage companies with large chains to identify general areas where the risk of adverse impacts is most significant, and then to prioritize these. So the company's already mapped its supplier universe is now completing a risk scoping exercise to find out the country, the sector, the product and the raw material specific risks to help it further prioritise. It's also focusing on what we call so-called choke points within the supply chain to make sure it concentrates its efforts below its direct suppliers. Now choke points are where the number of suppliers is low, typically where batteries are produced or battery raw materials are refined and processed. And by taking this approach, Cosmos can channel its due diligence and traceability efforts, especially where the upstream raw material chain is complex.

In the middle of the maturity scale is BetaCars. This is an automotive OEM, which has identified its upstream critical minerals supply chain in collaboration with its tier 1 suppliers. Based on this initial supply chain map, it actively assesses due diligence risk of each of these suppliers using OECD-based assessments. 

On the back of these assessments, the OEM will take risk-based decisions to optimize the participants that are in their supply chain. They then onboard in conjunction, onboard each supply chain actor to implement a solution for ongoing provision of material traceability data to ensure that the raw materials did originate and flow through the expected sources across the supply chain. The traceability solution tracks and verifies the flows of material and flecks alerts where the expected traceability data or material flows does not comply with what is expected. 

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Following on from Kumi and Circulor's webinar on Thursday 14th November 2024 where we discussed how to prepare for the EU Batteries Regulation due diligence requirements, Circulor's CEO Douglas Johnson-Poensgen answers some of your  questions head on. 

See below for more FAQs and helpful resources.

FAQs - Due Diligence under the EU Batteries Regulation

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Beyond the EU Batteries Regulation: Tackling global regulatory complexity with supply chain due diligence

Please fill in the form to access the webinar

Beyond the EU Batteries Regulation: Tackling global regulatory complexity with supply chain due diligence

March 2025 Newsletter: IEA and OECD back traceability for robust due diligence and supply chain resilience

January 2025 Newsletter: Opportunities for resilience and competitiveness through transparency

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FAQs - Due Diligence under the EU Batteries Regulation

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