Indonesia Nickel “Riddled” in Social, Environmental Harms
Increased due diligence and risk mitigation across global EV companies’ supply chains is paramount, the BHRRC insists.
The manufacture of electric vehicle (EV) batteries in Indonesia is riddled with human rights and environmental abuses, according to new research by the Business & Human Rights Resource Centre (BHRRC).
The report highlighted human rights and environmental allegations linked to some of the world’s largest EV manufacturers, including Tesla, Hyundai and Volkswagen.
“Responding to the climate crisis is the most urgent priority of our time, with a shift to renewable energy at the forefront of this,” said a BHRRC spokesperson. “This is why it’s so concerning that the extraction of nickel, one of the essential components of EV batteries, is riddled with human rights and environmental abuses.”
The International Energy Agency (IEA) has estimated that demand for nickel could grow tenfold by 2040, with Indonesia set to dominate nickel production with a 62% share of global supply by 2030.
Currently, the majority of Indonesian nickel is used to make stainless steel, but the country’s growing stockpile will be increasingly required for EV battery manufacturing.
Last year, the BHRRC had already identified alleged harms linked to nickel mining and processing by several companies globally – including Indonesia’s CNGR Advanced Materials. One year on, the research centre has expanded its research to examine more specifically the environmental and social impacts of nickel mining on two small islands in the south-east of the Indonesian province of Sulawesi: Wawonii and Kabaena.
One of the biggest environmental risks associated with increased nickel mining across the region is the associated widespread deforestation. “Many of these forests are key natural carbon sinks and critical biodiversity areas,” the BHRRC said.
The impacts of deforestation are further exacerbated by emissions from Indonesia’s captive coal plants, the report noted, which are used to power nickel processing and smelting.
Over a third of Sulawesi’s forests lie within nickel mining concession areas. In addition, a global study found that Indonesia was responsible for 58% of all tropic forest lost to the direct impact of mining between 2000-19.
This has also caused social harms. “On Wawonii island, the incoming nickel mining industry has resulted in land-clearing in forest areas above villages, causing contamination of communities’ water supply,” the report noted.
Nickel mines have also impacted access to food, as dust from the mines covers local crops. Meanwhile, nickel mining on Kabaena island is threatening the Indigenous Bajau people’s way of life, as well as the marine ecosystems they depend on.
Separate research has identified potential links between nickel mines on Wawonii and Kabaena and global EV manufacturers.
The BHRRC reached out to 21 of the EV companies identified in that report, asking them to respond to the allegations of abuse in nickel supply chains. Only Volkswagen, BMW, Mercedes-Benz and Tesla responded.
“Responsible mining is a barrier to investing in Indonesia’s minerals that are deemed as important for the energy transition,” said Putra Adhiguna, Co-founder of Asia-focused energy finance think tank Energy Shift Institute. “While Indonesia has the largest nickel reserves in the world, [this] does not necessarily make [it] a key player in the EV industry. Its downstream policy needs to be aligned with the direction of global battery industry standards and development.”
Risks everywhere
The Climate Rights International has documented allegations of Indonesian communities having had their land grabbed by nickel companies, while others have been intimidated into selling their land by police or military personnel.
Some investors have exited Indonesia due to sustainability concerns relating to nickel mines.
Meanwhile, major Chinese companies are investing in Indonesian nickel mining and refining – such as the Tsingshan Group, the world’s largest producer of the resource. In 2022, Tesla signed a US$5 billion deal to buy nickel for its batteries from Tsingshan’s nickel-processing complex in the Sulawesi region.
Concern has also stretched to higher ranks. Earlier this year, an Australian government official suggested cooperation with Indonesia to improve the environmental and labour standards of the Indonesian resources sector.
“These abuses risk derailing the urgent transition to clean transportation, with US senators already objecting to a critical minerals trade deal with Indonesia due to the South-East Asian country’s standards for labour rights, environmental protection, safety and human rights,” the BHRRC spokesperson added.
Responsible growth
With Indonesia’s nickel market set to expand as pressure for critical mineral sourcing ramps up, the BHRRC outlined recommendations to restrict associated environmental and social harms.
The report called on nickel mining companies to respect Indigenous Peoples’ land and forest rights, as well as their right to free, prior and informed consent (FPIC) – “including their right to define the process by which FPIC is achieved and to withhold consent”. In addition, the group urged companies to operate in line with the UN Guiding Principles on Business and Human Rights (UNGPs).
Nickel refining companies should also ensure the prevention and mitigation of air, water and soil pollution from industrial activities, and immediately cease the construction of all new coal plant, the BHRRC report noted. Meanwhile, investors should aim to commit to rights-respecting investments, undertaking and promoting analysis consistent with the UNGPs for all transition minerals mining and renewable energy investments.
“EV companies and investors have a crucial role to play in cleaning up the industry to deliver a just transition,” said the BHRRC spokesperson. “If these companies are serious about curbing carbon emissions, they must begin by addressing the human rights risks in their supply chains – and this starts with improving transparency and sourcing practices.”
Emerging regulation – such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) – is now making the identification, understanding and remediation of human rights abuses in corporate supply chains increasingly important.
“If we are to achieve a true just and equitable transition to renewable energy that advances human rights, EV companies can no longer afford not to know where their nickel comes from,” the spokesperson said. “Battery manufacturers and investors must recognise their role and use their unique leverage with suppliers to drive supply chain transparency and address abuse through robust human rights and environmental due diligence.”
Unless this is urgently done, the positive momentum towards EVs risks being derailed, the spokesperson warned.
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