As companies worldwide face increasing demands for ESG management, LG Energy Solution, a global battery industry leader, aims to operate a responsible supply chain that values human rights, ethics, and the environment.
Let’s take a look at LG Energy Solution’s key issues and activities to improve the sustainability and transparency of its raw material supply chain.
Putting the Code of Conduct for Suppliers into Action
LG Energy Solution uses the Code of Conduct for Suppliers to reduce the risks associated with sourcing raw materials for batteries and to raise awareness of responsible supply chains.
The Code of Conduct includes regulations and global standards that suppliers must follow to maintain a responsible supply chain, such as human rights and labor, ethical management, health and safety, environmental sustainability, responsible mineral purchasing, and grievance handling systems. LG Energy Solution communicates with its suppliers regularly in accordance with these standards and will make every effort to reduce risks in the supply chain.
Responsible Sourcing Policy Implementation
LG Energy Solution has established the Responsible Sourcing Policy in addition to the Code of Conduct for Suppliers to practice responsible raw material sourcing. The policy is based on the OECD Supply Chain Due Diligence Guidance. It contains the fundamental principles of supply chain management between LG Energy Solution and its suppliers to reduce supply chain risks such as human rights violations and environmental pollution.
LG Energy Solution examines its suppliers’ management systems through supply chain assessments, then conducts additional due diligence based on the findings and monitors the implementation of improvement tasks. It also ensures supply chain transparency by adhering to laws and regulations regarding sourcing raw materials from conflict or risky areas.
Evaluation of Supply Chain Risks
Since an international human rights organization raised the issue of human rights labor in the raw material supply chain in 2016, LG Energy Solution has made various efforts for responsible supply chain management, including conducting due diligence on the raw material supply chain. In 2021, it joined the Responsible Minerals Initiative (RMI) to join international efforts.
Based on LG Energy Solution’s extensive supply chain due diligence experience and systematic management policies, it will continue to verify and improve supply chain risks for major raw materials such as lithium, nickel, and natural graphite, as well as cobalt.
Establishing Preventive Processes
LG Energy Solution has implemented a proactive risk identification process in its supply chain. To improve supply chain transparency, it introduced a blockchain platform that makes it impossible to manipulate or hack decentralized data storage, and it automatically syncs process-specific data to the platform to track and manage the history of raw material receipt and product production. It will gradually expand the raw material supply chain and partner companies that can use the platform in the future.
Carbon Reduction Activities in the Supply Chain
LG Energy Solution is implementing carbon-reduction activities in its supply chain in order to achieve carbon neutrality across the value chain by 2050. It has identified hot spots in the supply chain that emit a lot of carbon by analyzing the carbon footprint data of the entire battery life cycle. It discusses detailed plans with its suppliers to convert 100% of the electricity used in raw material production to renewable energy.
It is contingent on its suppliers’ cooperation and efforts to realize carbon neutrality, including the transition to renewable energy.
LG Energy Solution meets with its suppliers regularly to convey the importance of carbon reduction, share regulatory trends, and investigate specific measures to assist them in switching to renewable energy under optimal conditions, considering the renewable energy procurement environment in each country.
LG Energy Solution will continue to actively reflect the opinions of various stakeholders in the raw material supply chain to achieve complete carbon neutrality throughout the battery life cycle and will practice ESG activities by operating a transparent and ethical supply chain in the future.