Sheffield Hallam and Partners Offer Supply Chain Tracing Advice for Solar and EV Sectors

The authors said they hope the report will "serve as a basis for constructive engagement to promote respect for human rights in all business activities."

The authors reiterated that 35% of the world's solar-grade polysilicon comes from Xinjiang, and said that even since the detentions of solar panels under the Uyghur Forced Labor Prevention Act, solar cell manufacturers have not divested from Xinjiang supplies. Solar panels appear to be the most detained good, by value, under UFLPA, though CBP data only report broad categories, not specific products.

They referred to a follow-up report, Overexposed, to Sheffield Hallam's initial identification of polysilicon as a high-risk commodity for Uyghur forced labor. The research "revealed that at least three of the world’s largest solar manufacturers continue to source inputs likely made with Uyghur forced labour," the new report said, after combing through corporate disclosures and shipping records.

The authors said most solar manufacturers have bifurcated supply chains, with one or more forced-labor-free supply chain or chains, and other production continuing with the same suppliers.

"Research has found that some of the world’s largest solar module manufacturers appear to have created designated product lines that they claim to be free from inputs produced using Uyghur forced labour. They suggest that these supply chains are dedicated to the US market or designed with UFLPA compliance in mind. Meanwhile, these same companies continue to use inputs made with Uyghur forced labour in products for other markets," they wrote.

The authors argue that is not sufficient to avoid legal risk, given the upcoming ban on goods made with forced labor in the EU.

Although the report is aimed at investors, rather than importers or buyers, some of the advice referenced in the report could be useful for those firms' compliance departments.

They wrote that firms should:

• Prioritize mapping inputs that are highest-risk, such as polysilicon and metallurgical-grade silicon for solar, lithium, lithium-ion batteries, copper, graphite and ultra-low-carbon steel and aluminum for electric vehicles.
• Consult public datasets that detail which companies have been identified as linked to Uyghur forced labor in media reports.
• Invest in expertise to identify local language names of companies, parent companies and subsidiaries and Chinese language sources on company sourcing relationships.
• Research corporate annual reports for all suppliers, back to raw materials.
• Search in English and the local language of a company for press releases about supply contracts or investor call transcripts.
• Use Sheffield Hallam's advice on desk-based research strategies to identify Uyghur region exposure, including what search terms to use to look for labor transfer programs.

The report also recommended a Sayari webinar on improving UFLPA risk assessments.

The authors acknowledged that there may not be sources that are as cheap as Chinese sources for the early-stage inputs for either EV batteries or solar panels.

"China’s dominance of the global market for processing and manufacturing inputs for solar panels and lithium-ion batteries has reduced the competitiveness of potential alternative sources of these inputs over the course of the past decade," the report said.

"According to Benchmark Mineral Intelligence, as of 2022 China processed 44% of the world’s chemical lithium and 70% of lithium-ion battery cells. The percentage of these processes performed in the Uyghur Region is growing. The Region is also becoming a global hub for the processing of many of the other minerals used in EV batteries, including nickel, copper and manganese."

The report cited Sheffield Hallam's Driving Force report, saying that one of the largest lithium producers in the Uyghur Region has been receiving Uyghur transferred laborers since at least 2017.

However, the authors argued that although EV manufacturing is getting more reliant on Xinjiang, there is still time to find other supply chains, so the battery supply chain is not as tied to Xinjiang as it is in the solar panel industry.

"Governments and investors must learn from the mistakes of the solar sector and seize this opportunity to redirect investment into companies with clean supply chains," they wrote.

The researchers talked to investors in the responsible investing space, who said they have tried to uncover forced labor in China through carefully worded questions and have asked firms outside of China to ensure they do not buy from firms with ties to Uyghur labor.

"Despite some positive outcomes, participants told us that companies based outside China have a track record of blaming due diligence failures on the opacity of China-based supply chains. They explained that these non-Chinese companies tend to require a high burden of proof to trigger action. Furthermore, investors noted that buyers in the solar supply chain appear willing to accept information provided by suppliers with scant due diligence or verification," the report said.

The authors complained that some investors said that divestment from Xinjiang would be harmful to Uyghurs, as they would face job losses. "The affected communities and their representatives -- survivors of the persecution, family and friends of detained Uyghur, and the Uyghur diaspora -- and expert organisations are united in their demand for full divestment from the Uyghur Region," they wrote.