Analyzing the effects of ESG strategies on lithium prices : a case study of sustainability and ethical requirements in the electric vehicle battery supply chain
SONAR|HES-SO
- Eschler, Anthony
- Watts, Richard (Degree supervisor)
- Genève ; Haute école de gestion de Genève
109 p.
Bachelor of Science HES-SO in International Business Management: Haute école de gestion de Genève, 2024
English
The electric vehicle (EV) manufacturing industry is increasingly emphasizing Environmental, Social, and Governance (ESG) considerations, particularly in the sourcing of lithium, a key material for EV batteries. As global interest in sustainable transportation solutions intensifies, the ethical and sustainable sourcing of lithium has come under significant scrutiny. This study investigates the extent to which Original Equipment Manufacturers (OEMs) integrating ESG principles into their lithium procurement strategies affect lithium pricing. It aims to uncover the motivations behind their decisions, the practices they adopt, and the challenges they face in aligning with ESG standards.
The literature review underscores the critical role of lithium in the EV sector and explores the growing focus on ESG strategies in its sourcing. It highlights the environmental challenges associated with traditional lithium extraction methods, such as high water usage and ecological damage, and introduces innovations like Direct Lithium Extraction (DLE), which promise greater efficiency and reduced environmental impact. The review also addresses social issues related to lithium mining, including impacts on local communities and human rights, and examines corporate governance practices, emphasizing the need for transparency, ethical sourcing, and adherence to ESG standards. Additionally, it analyzes the economic implications of ESG compliance, noting how these practices affect production costs and market dynamics, and discusses the varying impacts on lithium pricing across different stages of the supply chain.
The research methodology is divided into two phases. The first phase involves gathering secondary data from existing literature, articles, and prior studies to build a foundational understanding and identify key questions for further exploration. The second phase focuses on collecting primary data through survey questionnaires and interviews with industry experts and stakeholders. This approach provides a comprehensive view of current practices, challenges, and opportunities in the lithium supply chain.
Survey results indicate that sustainability practices have a varying impact on lithium pricing across different stages of the supply chain. At the mining stage, most respondents acknowledge a moderate influence of sustainability practices on pricing, though some see it as minimal. At the Free on Board (FOB) stage, opinions are more divided, with many perceiving a slight effect on pricing and others recognizing a more significant impact. At the refined stage, sustainability practices are generally seen as having a limited effect on pricing. Social responsibility is viewed as having a moderate
Page 6 of 109
Analyzing the Effects of ESG on Lithium Prices Anthony Eschler
influence on sourcing decisions but a lesser impact on pricing. Governance practices are considered to have minimal influence on pricing at all stages, with respondents viewing them as less critical compared to sustainability and social factors. There is notable uncertainty about the feasibility of achieving fully ethical lithium sourcing, with opinions split on the challenges and potential for improvement. Despite this, there is a strong expectation that ethical sourcing requirements will increasingly influence pricing and practices in the future.
Interviews with industry experts provide additional insights into the current state and prospects of the lithium market. Through these interviews several topics are discussed. For instance, the Keliber lithium mine project in Finland, highlights the regional differences in lithium extraction practices and contrasts Finland’s stringent environmental regulations and commitment to ESG principles with the more aggressive mining practices in Australia and South America. Also mentioned are the challenges of integrating these practices globally, where cost-efficiency often prevails, and the geopolitical implications of reducing reliance on Chinese lithium sources. One of the interviews also offers an overview of advancements in lithium battery technology, particularly the potential of lithium metal anodes to improve energy density. Finally, an crucial point that was on the need for massive shifts in the lithium supply chain for ESG requirements to affect prices. For premiums to be viable, efforts towards traceability and transparency have to be made.
This study highlights the growing importance of environmental sustainability and social responsibility in the lithium supply chain. However, the direct impact of these factors on pricing varies across different stages, with governance practices playing a relatively minor role. There is a strong indication that ethical sourcing requirements will become more significant, prompting changes in pricing and requiring a balanced approach to accommodate these considerations into supply chain management. This paper also includes recommendations based on the research carried out. The evolving landscape emphasizes the need for ongoing adaptation and strategic planning to address sustainability and ethical challenges in the lithium market, ensuring a more responsible and sustainable future for the EV industry.
The literature review underscores the critical role of lithium in the EV sector and explores the growing focus on ESG strategies in its sourcing. It highlights the environmental challenges associated with traditional lithium extraction methods, such as high water usage and ecological damage, and introduces innovations like Direct Lithium Extraction (DLE), which promise greater efficiency and reduced environmental impact. The review also addresses social issues related to lithium mining, including impacts on local communities and human rights, and examines corporate governance practices, emphasizing the need for transparency, ethical sourcing, and adherence to ESG standards. Additionally, it analyzes the economic implications of ESG compliance, noting how these practices affect production costs and market dynamics, and discusses the varying impacts on lithium pricing across different stages of the supply chain.
The research methodology is divided into two phases. The first phase involves gathering secondary data from existing literature, articles, and prior studies to build a foundational understanding and identify key questions for further exploration. The second phase focuses on collecting primary data through survey questionnaires and interviews with industry experts and stakeholders. This approach provides a comprehensive view of current practices, challenges, and opportunities in the lithium supply chain.
Survey results indicate that sustainability practices have a varying impact on lithium pricing across different stages of the supply chain. At the mining stage, most respondents acknowledge a moderate influence of sustainability practices on pricing, though some see it as minimal. At the Free on Board (FOB) stage, opinions are more divided, with many perceiving a slight effect on pricing and others recognizing a more significant impact. At the refined stage, sustainability practices are generally seen as having a limited effect on pricing. Social responsibility is viewed as having a moderate
Page 6 of 109
Analyzing the Effects of ESG on Lithium Prices Anthony Eschler
influence on sourcing decisions but a lesser impact on pricing. Governance practices are considered to have minimal influence on pricing at all stages, with respondents viewing them as less critical compared to sustainability and social factors. There is notable uncertainty about the feasibility of achieving fully ethical lithium sourcing, with opinions split on the challenges and potential for improvement. Despite this, there is a strong expectation that ethical sourcing requirements will increasingly influence pricing and practices in the future.
Interviews with industry experts provide additional insights into the current state and prospects of the lithium market. Through these interviews several topics are discussed. For instance, the Keliber lithium mine project in Finland, highlights the regional differences in lithium extraction practices and contrasts Finland’s stringent environmental regulations and commitment to ESG principles with the more aggressive mining practices in Australia and South America. Also mentioned are the challenges of integrating these practices globally, where cost-efficiency often prevails, and the geopolitical implications of reducing reliance on Chinese lithium sources. One of the interviews also offers an overview of advancements in lithium battery technology, particularly the potential of lithium metal anodes to improve energy density. Finally, an crucial point that was on the need for massive shifts in the lithium supply chain for ESG requirements to affect prices. For premiums to be viable, efforts towards traceability and transparency have to be made.
This study highlights the growing importance of environmental sustainability and social responsibility in the lithium supply chain. However, the direct impact of these factors on pricing varies across different stages, with governance practices playing a relatively minor role. There is a strong indication that ethical sourcing requirements will become more significant, prompting changes in pricing and requiring a balanced approach to accommodate these considerations into supply chain management. This paper also includes recommendations based on the research carried out. The evolving landscape emphasizes the need for ongoing adaptation and strategic planning to address sustainability and ethical challenges in the lithium market, ensuring a more responsible and sustainable future for the EV industry.
- Language
-
- English
- Classification
- Economics
- Notes
-
- Haute école de gestion Genève
- International Business Management
- hesso:hegge
- Persistent URL
- https://sonar.ch/global/documents/331038
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