What you should know about the EU Battery Regulation

 

Entry into force: August 17, 2023

Scope of application: All economic operators placing new batteries on the market or putting them into service. Due diligence obligations apply only to those operators with a net turnover exceeding €40 million in the financial year preceding the last. The regulation sets out distinct obligations for manufacturers, distributors and importers of batteries.

Main implications for your business:

• Mandatory human rights and environmental due diligence for lithium, cobalt, natural graphite, and nickel found in batteries and battery products
• Transparency requirements towards consumers regarding human rights and environmental impacts
• Extended technical product requirements such as the battery passport and recycling targets

What is the EU Battery Regulation and how does it relate to your business?

The EU Battery Regulation, which aims to improve the sustainability, performance, and safety of batteries sold in the EU, has been in force since August 2023. However, amongst the abundance of developments in the business and human rights regulatory space, it has only entered the radar of many businesses’ due diligence operations in recent months. This is largely because the human rights and environmental due diligence obligations will apply from August 2025. While other core obligations, such as those relating to the battery passport or recycling targets will become relevant in the coming years, this year will be the first-time many retailers, importers, and producers of batteries and products containing batteries will come into contact with the Battery Regulation.

So, what do they need to be prepared for?

The EU Battery Regulation’s scope of application

A key challenge companies face in light of the EU Battery Regulation is the fact that it does not just target companies producing batteries, but also those who purchase them for sale to end-consumers. Due diligence obligations concerning products containing batteries apply to a wide spectrum of companies, from those putting batteries to use in their products to those importing them for re-sale in the European Union.

Retailers sourcing batteries as part of a broader product portfolio often lack detailed insights into their compostion and production steps. This makes the implementation of due diligence processes mandated by the EU battery regulation challenging, given the requirement to trace the origin of the four in-scope raw materials – cobalt, lithium, nickel, and natural graphite – down to country-level.

Building effective due diligence systems for the batteries your business produces, sells or uses, necessitates taking stock of your battery portfolio and identifying to the best of your abilities how they made it from rare earth mining to your store shelves and into your operations.

The challenges in battery supply chains

Conducting appropriate due diligence on the raw materials that make up the batteries is no easy feat, yet economic operators doing just that is a cornerstone of the EU Battery Regulation. This heightened level of scrutiny can be ascribed to the gravity and pervasiveness of devestating human rights violations found within the extraction stage of the raw materials needed to produce batteries. Child labour, land grabbing, deadly accidents, environmental degradation and physical and sexual violence being enacted by public and private security forces against workers and local communities are well documented rights violations that occur in the extraction of all four of the Battery Regulation relevant minerals: cobalt, lithium, nickel, and natural graphite. Opaque supply chains, the prevalence of artisanal mining, and localised concentrations of these natural resources in regions with contentious human rights and environmental practices make meeting due diligence obligations even more difficult for businesses to achieve.

Staying ahead of the curve

Companies already in scope of the German Supply Chain Act (LkSG) have a significant advantage in meeting the EU Battery Regulation’s due diligence requirements. Setting up internal risk management systems, identifiying and evaluating negative impacts within supply chains, establishing grievanche mechanisms, and reporting publically on due diligence efforts are among the many obligations companies face under the EU Battery Regulation that they have been familiarised with through the LkSG. Through adapting and extending policies and processes that are already tried and tested to the specific requirements of the battery business, companies can conduct human rights and environmental due diligence more efficiently and effectively.

Partnering with Löning, subject-matter experts on conducting human rights and environmental due diligence, will help companies get a clearer picture of the risk exposition of their sourcing supply chains and provide actionable steps to fulfilling battery due diligence obligations imposed by the Regulation. While full alignment with the EU Battery Regulation might seem challenging, with the right partners the Regulation offers an opportunity to lead in sustainability and human rights-centered conduct.

Communicating your commitment

Businesses are not the only ones growing in awareness of the risks entrenched in battery supply chains. The EU Battery Regulation mandates public communication on due diligence processes and identified risks within product supply chains. With consumers increasingly concerned about human rights and environmental violations connected to their battery-powered products, presenting strong due diligence processes can build trust, strengthen brands and differentiate businesses in a market that values responsible practices more than ever.

Despite the novelty of this regulation, Löning has already sucessfully conducted due diligence assessments of battery portfolios and is experienced in helping companies integrate respect for human rights into all stages of supply chains, no matter how complex.

If you’d like to explore how we can support your business in implementing the EU Battery Regulation and explore risks and opportunities in your battery supply chains, get in touch with us today:

Clara Philippi
Associate Consultant
clara@loening.org