Renewable energy is growing rapidly. At times, it generates more energy than fossil fuel sources in certain regions, and companies around the world are increasingly turning to it to decarbonize. However, renewables must grow further still if the world is to achieve net zero by 2050 and the Paris Agreement’s 1.5°C target. Accomplishing this growth will require a massive expansion in renewable energy capacity, which must be met with a substantial rise in inputs essential to building renewable energy infrastructure and products.
Critical minerals and rare earth elements are two of the inputs most needed to accelerate renewable energy adoption. As a result, demand for these materials is skyrocketing, sometimes even exceeding what global supply chains can source in a single year. To meet surging demand, production must increase.
However, critical minerals and rare earth elements are concentrated in a few geographies, complicating companies’ ability to source more of them. For example, the world sources 70 percent of its cobalt from the Democratic Republic of the Congo, 60 percent of its rare earth elements from China, and 40 percent of its nickel from Indonesia.1 With a limited number of places to source from, geopolitical and human rights issues in these geographies threaten companies’ ability to scale their renewable energy ambitions.
Consider geopolitics, particularly rising protectionism. Globally, many countries are turning to critical raw material export restrictions to boost their economies, gain geopolitical advantage, or a combination of both. Human rights troubles present further difficulties to securing critical mineral and rare earth elements supplies due to the location of significant reserves and processing capacity in countries with human rights vulnerabilities such as child and forced labor.
Despite the challenges presented by geopolitics and human rights in renewable energy supply chains, with the right actions, companies can better manage risk and create benefit. We view four steps as being particularly key to risk management and benefit creation.
The four steps are:
- Step 1: Engage your supply chain and go beyond compliance
- Step 2: Explore alternative sourcing options
- Step 3: Seek collaboration and partnerships
- Step 4: Engage with policymakers
Related content
- Renewables Conundrums - Unlocking Net Zero: Why Renewables Conundrums are Key to Corporate Climate Action
- This is the first report in our Renewables Conundrums report series. The second report in the series, which explores steps companies can take to bolster their residency to geopolitical and human rights risks in their renewable energy supply chains, can be found here.
