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Tracing aluminium through the supply chain

A number of companies sourcing commodities, including aluminium, are implementing sustainable purchasing practices, partially as a response to customers and international brands who want to be sure that the aluminium in their products comes from responsible sources. But how can their efforts encompass all members of the supply chain not just immediate suppliers? This article aims to introduce the concepts that are essential to managing a supply chain, the different levels of traceability that can be achieved and the software tools to facilitate implementation. 

Why trace aluminium through the supply chain?

Important reasons to trace aluminium back to the source, for companies wishing to make claims about using responsibly produced aluminium, are likely to include one or more of the following:

To exclude certain high-risk material from the supply chain.

To gain sales advantages for best-in-class mining and smelting operations. 

To promote the use of recycled aluminium.

General principles of traceability

To understand how traceability or ‘chain-of-custody’ can be incorporated into business practices, the following widely accepted principles should be understood. If the goal is to trace actual physical atoms (or goods) then segregation of responsibly produced material is the only possibility. This approach is only feasible for high margin goods with short supply chains, as exemplified by conflict diamonds or organic foods. 

Commodities, which are handled in bulk storage and processing facilities are usually traced using a mass balance system, which allows mixing of materials from different sources. So aluminium from all sources could be mixed but responsibly produced aluminium would be accounted for separately in a mass balance system. This means that the amount of responsibly produced material purchased should be in balance with that sold, at the end of each accounting period. A producer making claims about the percentage of responsibly produced content can do so on an allocated or average basis. A mass balance system preserves an aspect of physical traceability when a significant proportion of responsibly produced material is in the product. Such a system is used in the forestry, biofuels and bio-based chemicals sectors amongst others.

 A certificate sales or book and claim system decouples the physical material from the sustainability claim and is suited to physically disconnected or long, supply chains. Certificates are sold or transferred separately to the physical product. The top (primary producers) and bottom (final product suppliers) of a supply chain are united, bypassing any operators in the middle. It is used for renewable electricity, carbon credits and some agricultural commodities.

Sustainability schemes

The timber sector was one of the first to implement sustainability principles in response to the increase in illegal logging and deforestation. Sustainability schemes were set up with each member of the supply chain being certified by independent auditors to a production standard and/or a chain-of-custody standard. Certified material is passed from one certified operator to another. Mass balance or segregation systems are allowed. The external audits give a high level of assurance and confidentiality is maintained. However, the cost of auditing and administration is high. Costs are highest for individual producers of the raw material who ask a higher price for certified material.  The schemes can be too selective which makes it difficult to achieve the critical mass of adopters needed for effective penetration of the market. 

 Transparency platforms

As a lower cost alternative to sustainability schemes, transparency platforms are being set up in the agricultural sector. Upstream producers input key data about their processes into a central online, public, database. Mapping software presents information visually. A key requirement is that downstream operators identify their suppliers so confidentiality is lost. Only a percentage of data on the platform will be audited independently, which reduces the level of assurance, but also reduces operational costs. Some of the audit burden is effectively transferred to NGOs, and other stakeholders.  

 Traceability software

The developments in renewable electricity and carbon credits have led to new online systems to trace sales or transfers of goods between account holders. Volumes of responsibly produced or renewable material are put into the primary producer account and all transfers between account holders are logged. These types of systems are now being used in palm oil, cocoa, coffee, and soon forestry.

Compliance with US conflict minerals law has led to the development of software to facilitate the exclusion of high-risk material from a supply chain. Business software providers have developed systems to create, share and request product compliance declarations. Examples include the SAP Product Stewardship Network, and Oracle Agile Product. An apparel industry initiative backed by the UN Global Compact, to exclude factories with unsafe and exploitative practices recommends AmberRoad ChainPoint, GT Nexus, SourceTrace, and TraceTracker.

Organisations also want to track material through their own facilities and may wish to distinguish between responsibly produced or recycled material and material from other sources.  Software is available which uses a mobile phone app to input data as material arrives on site or is collected at a supplier site. Data is tagged with additional characteristics and given a digital file or 'passport'. Sales staff can then input data on outgoing consignments online. A mass balance of responsibly produced material can be calculated for each site. This software is particularly useful for internal use over a multi-site operation. Data can be shared confidentially by a cloud-hosted service for operators using the same software. Elements Software sells a particularly flexible system developed for the forestry and biofuels industries.

Blockchain technology, as invented for the virtual currency Bitcoin, has also been proposed for tracking commodities. It is currently being evaluated in the banking sector and its characteristics of verifiable shared transaction data would offer significant advantages.

Is traceability feasible for primary aluminium?

The manageable number of bauxite mines, primary smelters and the regional trade that links the two seems amenable to effective traceability.  It is currently possible to trace primary aluminium ingot in the LME and other warehouses back to the smelter. Also big purchasers buy direct from the smelter so it should be feasible to trace upstream to the bauxite mine. Purchasers of primary aluminium could reasonably expect to know where the bauxite used came from, on a mass balance basis, which can be input into their purchasing decision. 

Traceability downstream from the smelter could be a challenge initially due to the larger number of operators. In most commodity supply chains there are more downstream operators than those involved in primary production. Figures from FSC show how marked this difference is for the sustainable timber sector. There are 1,364 certified forests yet 30,249 certified operators involved in processing, trading and production.  Therefore international brands wishing to physically trace their aluminium will need to focus initially on shorter, fixed supply chains to make implementation easier. Alternatively, best-in-class smelters could start issuing certificates to sell/transfer to international brands, thereby removing the need to involve intermediate members of the supply chain. Physical traceability would be lost but general claims about supporting responsibly produced aluminium and reducing greenhouse gas emissions could be made.

How does recycled aluminium fit in?

Recycled aluminium has a sustainability status equal to or better than responsibly sourced primary aluminium. Not only does it have much lower greenhouse gas emissions and use less energy for production, it is also associated with fewer risk factors in terms of land use and people’s rights.  It also features strongly in the EC’s ‘Circular Economy’ proposals, which contains packaging recycling targets of 65% by 2025 and 75% by 2030 (85% for aluminium). Not surprisingly some companies are focussing on using recycled aluminium for some of their product range and using it to create a new recognisable brand identity. 

Conclusions

International brands are responding to their customers who want to know where the aluminium in their products comes from, with an assurance it has been responsibly produced. Traceability of responsibly produced aluminium could help top performers gain sales advantages and exclude high-risk sources.

Operators committed to physically traceable aluminium should move to simpler, fixed supply chains and implement tracking software. 

This article was first published in Aluminium International.

Published: 12 September 16

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