Supply chain data collection: supply chain audits in the face of confidentiality

The EU Battery Regulation (EU 2023/1542) has driven both European and non-European automotive manufacturers targeting the EU market to rapidly align with its compliance requirements.

For many Asian manufacturers, the challenge is compounded by a relative lack of experience and internal infrastructure to support the traceability and transparency demands now expected in the European regulatory landscape.

SLR was selected to collaborate with a globally recognised automotive manufacturer based in Asia. The client’s primary goals were to:

• Uncover their sub-suppliers and assess them against responsible sourcing criteria.
• Ensure alignment with EU Regulations expected by their European customers.
• Strengthen supply chain visibility to support proactive risk management.
• Maintain a stable and ethical supply of critical minerals.

SLR was selected for this project due to its proven expertise in responsible sourcing audits and its ability to operate as a second-party auditor, while helping the clients build up their internal management ecosystem. Through tailored audit programs and strategic guidance, SLR enables clients to build the necessary capacity and foundational knowledge to meet regulatory expectations and maintain their business in the European market.

Challenge

The client faced a critical issue: lack of transparency in their upstream supply chain, particularly concerning the sourcing of raw materials from mining operations. However, due to the sensitive nature of the supply chain and the absence of a formal written agreement between the client and their immediate battery cell supplier, the suppliers refused to disclose the supply chain details to the client. This presented a barrier to fulfilling the client’s requirement to gather due diligence information on the sub-supply chain.

Solution

When faced with the challenge of supplier reluctance to disclose supply chain information to the client, SLR made an agreement with the supplier that SLR could have full visibility of the supply chain, while maintaining anonymity for the client, essentially keeping the specific details of the suppliers’ names, addresses, and identifying information anonymous to the client, but still allowing the audit program to proceed as planned without bias or conflict of interest. In parallel, SLR collaborated with the client to engage with its suppliers to ultimately agree to disclose the supply chain to the client.

SLR continued to conduct the supply chain validation audits of the key suppliers to uncover sources of upstream battery raw materials and provide the client with risk assessments for each battery supply chain based on the supply chain information collected. SLR also monitored the improvement of key suppliers via the Corrective Action Plan (CAP) after the audit.

Impact

By acting as a trusted intermediary, SLR helped bridge the gap between the client and the mine sites, ensuring that the audit process could move forward smoothly and credibly, while still meeting the objectives of the client.

The final solution was a neutral audit framework that the client accepted and actively supported. This approach enabled:

• Direct communication and relationship with the mine site that allowed successful audits.
• The client's increased understanding of the geographic distribution, size, and complexity of the battery supply chain and potential risks.
• A baseline understanding of the supply chain to meet regulatory expectations, while prompting further engagement with the Tier-1 supplier for eventual full disclosure of the supply chain.

While specific metrics remain confidential, the client expressed high satisfaction with the outcome. The project demonstrated how SLR’s neutrality and expertise can de-risk complex supplier relationships and support long-term compliance with responsible sourcing regulations, especially in light of evolving frameworks like the EU Batteries Regulation (EUBR).