March 31, 2025
As the world shifts toward cleaner energy and more sustainability in business practices, the conversation around Environmental, Social, and Governance (ESG) is evolving. While organizations are under pressure to reduce carbon footprints and embrace green technology, they must also contend with complex supply chain dependencies and geopolitical tensions especially when it comes to securing the critical materials that make sustainability possible. With the Trump administration’s focus on energy independence and securing domestic access to critical minerals, there has been a shift from eco-driven practices to supply chain security including foreign dependencies, trade restrictions, and ethical sourcing concerns.
Rare earth minerals are the foundation for many clean energy technologies, including wind turbines, electric vehicle (EV) batteries, and solar panels. Elements such as neodymium, dysprosium, and lithium enable the production of high-efficiency magnets, energy storage systems, and advanced electronics that drive the clean energy revolution. However, their extraction and refinement present significant challenges. China currently dominates the global supply of rare earth minerals, controlling over 69% of their mining and 90% creating a supply chain choke point for organizations and governments committed to ESG principles. Without stable and ethical sourcing, organizations risk:
- Supply chain disruptions due to geopolitical conflicts or trade restrictions.
- Regulatory scrutiny from ESG-driven compliance measures.
- Reputational damage if materials are linked to unethical labor practices or environmental harm
As ESG expectations and standards become more rigorous, organizations will be required to enhance supply chain transparency and ensure materials are mined and processed under responsible labor and environmental conditions. This means implementing greater traceability, diversifying supplier networks, and aligning with regulations such as the EU’s Critical Raw Materials Act.
On a personal note, having spent years conducting internal audits for manufacturing and technology companies, I have witnessed firsthand the critical importance of supply chain resilience. The Fukushima disaster on March 11, 2011, was a stark reminder of the vulnerabilities created by single sourcing, particularly in the microchip industry, where global supply chain disruptions sent shockwaves across multiple sectors.
During my time as manager of internal audit at a major jewelry conglomerate, our team reviewed for compliance with the Kimberley Process to verify diamonds were sourced from conflict-free zones. This reinforced the understanding that supply chain integrity is not only a compliance issue but also an essential part of reputation risk management. After all, no one wants a wedding ring sourced from a conflict zone! Have you seen the movie Blood Diamond starring Leonardo DiCaprio, Jennifer Connelly, and Djimon Hounsou? If not, you should! The film, set in Kimberley, South Africa, played a significant role in raising awareness and ultimately led to the development of the Kimberley Process Certification Scheme.
The key lesson here? These challenges are not new, but the velocity and global impact of these risks are growing. The need for supply chain security, ESG alignment, and geopolitical risk management has never been more urgent. To successfully navigate these risks, organizations must adopt a proactive, structured approach. The following strategies can help organizations integrate these priorities into their procurement, ESG goals, and Enterprise Risk Management (ERM) frameworks:
Strengthen Supply Chain Due Diligence
- Map supply chains to identify dependencies on high-risk regions
- Implement supplier scorecards evaluating ESG compliance, cybersecurity risks, and regulatory alignment.
- Conduct third-party audits (such as SOC for Supply Chain or ISO certifications) to verify supplier security and sustainability claims.
Embed ESG Criteria into Procurement and Contracting
- Prioritize sustainable, ethical, and resilient sourcing by requiring:
- Carbon footprint reductions
- Fair labor practices
- Conflict-free mineral sourcing
- Develop long-term supplier agreements that align with both sustainability goals and risk mitigation strategies.
- Explore local and diversified supplier networks to reduce reliance on politically unstable regions.
Integrate Supply Chain Security into Enterprise Risk Management (ERM)
- Align supply chain risk assessments with ERM frameworks for cross-functional oversight.
- Conduct scenario planning exercises for supply chain disruptions (e.g., trade bans, cyberattacks, natural disasters).
- Establish business continuity plans that include alternative sourcing strategies and strategic stockpiling of critical materials.
Monitor Geopolitical and Regulatory Developments
- Stay informed on trade policies, tariffs, and sanctions that could impact supply chains.
- Engage in industry alliances and advocacy efforts to shape ESG and supply chain transparency policies.
- Adapt compliance programs to emerging due diligence laws, such as:
Invest in Innovation and Circular Economy Solutions
- Reduce reliance on geopolitically sensitive materials by:
- Investing in recycling and material recovery for rare earth minerals and EV batteries.
- Supporting R&D in alternative materials and green manufacturing.
- Partnering with startups and universities to develop next-generation sustainable technologies.
Can individuals help?
Yes! Even though large corporations play a significant role in material recovery, individuals can also contribute to the recycling and responsible sourcing of rare earth minerals and EV batteries. By taking small but impactful steps, you can help reduce e-waste, conserve critical materials, and support a more sustainable supply chain.
One of the easiest ways to get involved is by recycling old electronics with trusted recycling or trade-in programs. For those who own an electric vehicle (EV) or e-bike, recycling batteries is another crucial step. Many manufacturers, including Tesla, Ford, and GM, offer take-back programs for EV batteries, ensuring they are processed safely and efficiently.
You can look for municipal recycling options in your community, or special events hosted by local agencies. Many organizations have special events planned around Earth Day. For example, the Cleveland Zoological Society partnered with a local company to organize Earth Day E-Recycling, an electronics recycling event at the Zoo in honor of Earth Day.
By participating in these recycling efforts, individuals can help reduce reliance on newly mined materials, minimize environmental harm, and support the transition to a circular economy.
Want to learn more?
As the intersection of ESG, supply chain resilience, and geopolitics continues to shape the future of corporate and social responsibility, it’s critical for organizations to stay proactive. We invite you to join us at our upcoming ESG Summit on April 24, 2025, from 12:00 PM to 3:00 PM EST. This summit will explore vital topics and provide actionable insights to help you navigate the changing landscape. Register today!
