Due diligence (battery/supply chain)

## Supply chain due diligence Supply chain due diligence is the ongoing process by which companies identify, prevent, mitigate and account for adverse human rights, environmental and governance impacts in their supply chains. In EU product law it is an obligation: the Batteries Regulation requires operators to run due diligence policies for raw materials including cobalt, lithium, nickel and natural graphite, verified by third parties. ### Key facts - Due diligence is risk-based and ongoing: it requires embedding responsible sourcing into management systems, not a one-off audit. - The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals provides the internationally recognised five-step framework that EU law references. - Under Regulation (EU) 2023/1542, battery economic operators must adopt due diligence policies covering social and environmental risk categories in the sourcing of cobalt, lithium, nickel and natural graphite. - The battery due diligence duty applies from 18 August 2025 for large operators, with the regulation's staggered application bringing the obligations into force. - Third-party verification of the due diligence system by a notified body is required, making it an audited management system rather than a self-declaration. - The EU Conflict Minerals Regulation (2017/821) already imposes due diligence on importers of tin, tantalum, tungsten and gold from conflict-affected and high-risk areas. - Broader corporate sustainability due diligence legislation extends similar duties beyond minerals to companies' full value chains, multiplying the compliance surface. ### What supply chain due diligence is Due diligence, in this context, borrows its name from the investigation a buyer performs before an acquisition, but applies it to the supply chain as a continuous discipline. The OECD framework defines five steps: establish strong management systems, identify and assess risks in the supply chain, design and implement a strategy to respond to identified risks, carry out independent third-party audits, and report publicly on the process. The point is not to guarantee a perfect supply chain, which no company can do, but to show a credible, documented, continuously improving effort to find and address harm. The risks in scope go beyond the familiar conflict minerals narrative. The Batteries Regulation lists social risk categories including human rights, labour rights, community impacts and corruption, and environmental risk categories including water use, soil and air impacts, biodiversity and climate. A due diligence system must therefore assess mines, refiners and traders against a broad risk register, not just check whether they fund armed groups. Crucially, due diligence is about leverage and mitigation, not just avoidance. The framework expects companies to use their commercial influence to improve supplier practices, to suspend or disengage only where mitigation fails, and to account publicly for what they found and did. A policy that simply drops every risky supplier without assessment is not due diligence; it is avoidance, and it can harm the very communities the rules aim to protect. ### Why it matters for market access Battery due diligence is a condition of placing batteries on the EU market. Economic operators must have the due diligence policies in place, operate them, and have them verified; without that, the battery's conformity documentation is incomplete. This makes responsible sourcing a market access gate of the same order as safety testing: a battery with perfect technical performance but no verified due diligence system cannot be sold. The obligation restructures supply chain relationships. Because the duty sits with the economic operator placing the battery on the market, typically the brand or importer, it forces visibility upstream: the operator must know where its cobalt, lithium, nickel and graphite come from, assess the risks at each stage, and document the response. Traders and refiners that cannot provide chain-of-custody information and risk data become unusable, regardless of price. Supply contracts must now carry due diligence clauses: disclosure of origin, cooperation with audits, corrective action plans and termination rights for unremediated severe risks. The verification requirement professionalises the field. Notified body verification means the due diligence system must be audit-ready: documented policies, risk assessments, supplier engagement records, grievance mechanisms and public reporting. Companies that treated responsible sourcing as a CSR narrative will need to rebuild it as a management system with the same rigour as quality or environmental management. ### Who it applies to The battery due diligence obligations apply to economic operators placing regulated batteries on the EU market: - Battery manufacturers, who must operate due diligence for the raw materials in their batteries. - Importers, who bear the duty for batteries manufactured outside the EU. - Authorised representatives and other EU-established operators, according to their role in the supply chain. - Upstream suppliers of cobalt, lithium, nickel and natural graphite, who are not directly obliged but must provide the traceability and risk data their customers need. - Notified bodies, which verify the due diligence systems as part of conformity assessment. The duty applies per operator and covers the raw materials listed in the regulation, with the Commission empowered to update the list. Separately, the Conflict Minerals Regulation applies to EU importers of tin, tantalum, tungsten and gold, and broader due diligence legislation reaches large companies' value chains across sectors. A battery company may therefore face overlapping duties from product law, minerals law and corporate law simultaneously. ### Requirements and the due diligence process A compliant due diligence system follows the OECD five-step structure adapted to the Batteries Regulation's requirements. 1. Management systems. Adopt and publish a supply chain due diligence policy covering the listed raw materials and the regulation's risk categories. Assign senior responsibility, train relevant staff, establish document retention, and set up a grievance mechanism for affected stakeholders to raise concerns. 2. Risk identification and assessment. Map the supply chain for each listed material to the point of origin: mines, refiners, traders and transport routes. Assess each against the social and environmental risk categories using credible sources: audit reports, NGO and media reporting, government data and on-the-ground assessments. Document the methodology and keep it current. 3. Risk response. Design mitigation strategies proportionate to the findings: corrective action plans with suppliers, enhanced monitoring, capacity building, and, where risks cannot be mitigated, suspension or disengagement. Track the effectiveness of measures and adjust. Disengagement decisions must consider the impact on affected communities. 4. Third-party verification. Have the due diligence system verified by a notified body. Verification examines whether the system meets the regulatory requirements and is actually operated, not whether the supply chain is risk-free. Findings must be addressed for continued conformity. 5. Public reporting. Report annually on the due diligence policies, the risks identified and the measures taken. The report must be accessible and sufficiently detailed to allow scrutiny, balanced against legitimate commercial confidentiality. | OECD step | Battery regulation application | Evidence | |---|---|---| | Management systems | Published policy, assigned responsibility | Policy document, training records | | Risk assessment | Supply chain mapping to origin | Risk register, source documentation | | Risk response | Mitigation plans, engagement | Corrective actions, monitoring data | | Third-party audit | Notified body verification | Verification report | | Public reporting | Annual due diligence report | Published report | ### Market access relevance Due diligence readiness should be built before the first regulated battery is placed on the market, because supply chain mapping takes longer than any other workstream. Identifying the origin of cobalt or lithium through traders and refiners to mines can take many months, and suppliers that cannot or will not disclose origin must be replaced. Starting mapping during product development, not after, is the only way to meet the timeline. Procurement becomes a compliance function. Supplier selection criteria must include traceability capability, audit cooperation and risk profile; contracts must include due diligence clauses with data deliverables and corrective action obligations; and supplier scorecards should track risk findings alongside price and quality. The cheapest material from an opaque supply chain is the most expensive once verification fails. The public reporting duty makes due diligence a reputational surface. NGOs, journalists and competitors read these reports, and inconsistencies between the report and known supply chain realities invite scrutiny. Reports should be honest about challenges and specific about measures: vague assurances are worse than candid descriptions of difficult risks being managed. Finally, plan for scope expansion. The listed materials can be updated, other product groups face their own due diligence expectations, and corporate-level due diligence legislation overlaps. Building a general due diligence capability, rather than a battery-only bolt-on, prepares the organisation for the broader regime. ### Common misconceptions | Misconception | Reality | |---|---| | "Due diligence means auditing every supplier." | It is risk-based: resources focus where risks are highest, with the methodology documented. Blanket auditing without risk assessment is not the requirement. | | "We can just buy certified material and be done." | Certification schemes can support due diligence but do not replace the operator's own risk assessment, mitigation and reporting duties. | | "Our suppliers' assurances are sufficient." | The duty requires the operator's own system: mapping, assessment, response and verification. Supplier claims are inputs, not substitutes. | | "Disengaging from risky suppliers is always the answer." | The framework prefers mitigation through leverage; disengagement is for unmitigable severe risks and must consider community impacts. | | "This only concerns conflict minerals." | Battery due diligence covers broad social and environmental risks for cobalt, lithium, nickel and graphite, far beyond conflict financing. | | "Verification certifies our supply chain is clean." | Verification attests that the due diligence system meets the requirements and operates. No audit can guarantee a risk-free supply chain. | ### Frequently asked questions Which raw materials are covered by battery due diligence? Cobalt, lithium, nickel and natural graphite, as listed in Regulation (EU) 2023/1542, with provision for the Commission to update the list. Check the current regulatory text for any additions. When do the battery due diligence obligations apply? The regulation staggers application; the due diligence duties apply from 18 August 2025. Verify the applicable date for the specific operator role and battery category. Does due diligence apply to recycled materials? Recycled content has its own chain-of-custody considerations. The due diligence system must address the sourcing of materials including recycled streams, with appropriate risk assessment for collection and processing. Can we rely on industry certification schemes? Schemes can provide useful data and assurance, and the regulation recognises their role, but the operator retains responsibility for its own due diligence system, risk assessment and reporting. What happens if verification finds gaps? The operator must address them to maintain conformity. Unremediated systemic failures can affect the ability to place batteries on the market, since due diligence is part of the compliance documentation. How does this relate to the Conflict Minerals Regulation? They are separate instruments with different scopes and duties. A company handling both battery materials and 3TG minerals must operate both regimes, though a unified management system can serve both efficiently. ### Sources - Regulation (EU) 2023/1542 on batteries and waste batteries (EUR-Lex): https://eur-lex.europa.eu/eli/reg/2023/1542/oj/eng - EU Conflict Minerals Regulation information: https://policy.trade.ec.europa.eu/development-and-sustainability/conflict-minerals-regulation_en - OECD Due Diligence Guidance for Responsible Mineral Supply Chains: https://www.oecd.org/en/publications/oecd-due-diligence-guidance-for-responsible-supply-chains-of-minerals-from-conflict-affected-and-high-risk-areas_9789264252479-en.html