From compliance to capability: What 2025 revealed about battery supply chain due diligence

Lawsuits, import bans, and NGO allegations: these are the direct negative consequences observed in poorly governed battery supply chains for battery manufacturers and original equipment manufacturers (OEMs). With regulatory scrutiny intensifying across both the EU and US, battery manufacturers and automakers are already expected to have baseline responsible sourcing schemes in place. Yet in practice, many companies find themselves unprepared or discover their initial programmes fall short of delivering the high level of detail and transparency that assurance regulators, investors, and customers now expect.

So what’s standing in the way? And more importantly, what should OEMs be doing differently?

Drawing on SLR’s 18 years of experience supporting global OEMs with responsible sourcing, supply chain mapping, and human rights risk management, we see several recurring obstacles, and equally clear recommendations for how to overcome them.

The context

Rising compliance pressures in US and EU battery supply chains

In Europe, the EU Battery Regulation (EUBR) continues to shape corporate priorities. Despite the two-year postponement of due diligence obligations entering into force under the EUBR, economic operators still bear pressure to prepare for the upcoming mandatory supply chain due diligence in a challenging market environment, where broader budget constraints persist. In the United States, 2025 marked a decisive shift from incentive expansion to eligibility control. The One Big Beautiful Bill Act (OBBBA) has narrowed access to clean energy tax credits by tying bonuses for battery storage and other energy assets to how much of the product is actually produced in the USA. The Bill also reinforces strict restrictions on material sourcing from Foreign-Controlled Entities (FCEs), which includes China. This significantly elevates the importance of supply chain traceability, supplier screening, and upstream due diligence.

SLR supports our clients and industry leaders in navigating these complexities by gathering the supply chain data needed for compliance and decision-making.

A new standard for supply chain transparency

Lessons learned from working with battery leaders

Working closely with leading battery manufacturers in 2025 offered a clear view of how expectations around supply chain transparency are evolving in the face of regulatory drivers such as the EUBR and OBBBA.

Across the industry, expectations around traceability, data quality, and auditability have become more demanding and more structured than in previous years. Battery producers are no longer questioning whether due diligence is necessary, but how deeply, consistently, and effectively it can be implemented. In parallel, the focus has shifted decisively toward the quality of corrective action implementation. Battery clients are now required to demonstrate their own due diligence in their supply chains, and therefore increasingly expect audit outputs and corrective action plans to move beyond fragmented reports. This involves providing a consolidated, decision-ready view of supply chain risks that clearly prioritise issues, linking findings to actionable recommendations, and supporting both regulatory compliance and strategic oversight.

A common trend among major battery companies is the increased effort being invested in building internal material traceability systems. Leading battery manufacturers are actively strengthening their ability to track materials within their own operations and, to some extent, across downstream and immediate midstream suppliers. However, visibility still often remains opaque beyond the immediate T-1 suppliers. As a result, expectations for second and third-party assurance are increasingly focused on mid- and upstream segments of the supply chain, where independent verification plays a critical role in closing visibility gaps.

Barriers for due diligence in multi-tier supply chains

Critical blind spots in electric vehicle (EV) and battery supply chain due diligence

The greatest sources of delay and stress during due diligence preparation consistently come from weaknesses in supply chain mapping, constrained overall supply chain transparency, and incomplete disclosure. On-site audits frequently showed that gaps in systems and practices make these challenges harder to resolve.

Many of the delays SLR observed were driven less by a lack of intent and more by structural limitations in how due diligence is operationalised at facility level, and how due diligence requirements are transferred from downstream OEMs through the supply chain to upstream mine sites. In many mid- and downstream organisations, existing policies and management systems were not built to systematically identify ESG risks across multi-tier supply chains, which meant material issues were either detected late or not captured clearly in audit outputs. Even where risks were identified either through their own due diligence or as a Corrective Action stemming from an audit, prioritisation was often weak: internal teams lacked training or capacity to assess severity and materiality and to translate findings into a clear sequence of actions. This was compounded by the absence of effective grievance mechanisms among many suppliers, limiting the flow of reliable information on labour, human rights, and environmental concerns.

Implementation becomes more challenging the further upstream the site sits. Unless a site has an individual company mandate to build due diligence systems that systematically review and mitigate risks, the incentives and requirements for due diligence must be passed down from the downstream actors. Without consistent support and involvement from midstream actors for their upstream suppliers, quick improvements are challenging to achieve. This includes gaining audit acceptance and sharing audit results to downstream OEMs in a transparent and proactive manner.

Looking ahead

Building resilient due diligence systems for the long-term

Responsible sourcing is not achieved in a single assessment or project cycle; it is a long-term, iterative effort that requires persistence and adaptation. In today’s regulatory and market context, responsible sourcing is no longer optional, but a baseline expectation. Identifying risks without addressing them, or deliberately avoiding their discovery, is not a viable path forward. Meaningful progress depends on collective action across the entire supply chain, with responsibility and accountability cascading from downstream to upstream. Ultimately, the most resilient due diligence systems are those that combine external expertise with the deliberate development of internal capability. Progress is rarely linear, and organisations often learn what works only through implementation.

How SLR supports this transition

What differentiates SLR is not only our technical alignment with the OECD Due Diligence Guidance, the EU Battery Regulation, and emerging due diligence laws, but our ability to make these requirements work in complex, real-world supply chains. We operate where many due diligence efforts stall: China, upstream, across jurisdictions, and beyond tier-1 suppliers.

SLR combines independent supply chain mapping with risk-based, on-site audits in high-risk upstream regions, supported by continuously updated, field-verified data. Our long-standing presence in China and international upstream markets where we have established relationships with suppliers allows us to access information, validate practices, and sustain engagement in contexts where documentation is limited and direct contractual leverage is often weak. This enables a level of accuracy and credibility that desk-based assessments or one-off audits cannot achieve.

Crucially, we focus on outcomes, not reports. Through tailored, hands-on training and close engagement with suppliers, we help clients move from risk identification to performance improvement, supporting the implementation of corrective action plans and strengthening governance across N-tier supply chains. By leveraging both technical expertise and trusted multi-party relationships, SLR helps clients build due diligence systems that are not only compliant but also resilient, operational, and scalable.