So far in 21st century energy transitions, we've talked primarily about energy production, discovering that there are many different ways to generate and deliver energy to people around the world. Now we're going to start digging deeper into other issues that are equally important in using diverse energy sources to power a sustainable future. The first of these is supply chains. We're joined now by Allan To, a supply chain specialist who will introduce us to supply chains and supply chain management. Thanks, Brad. Every supply chain starts with the extraction of raw materials, and each link in the supply chain processes that materials or supports this processing in some way. The supply chain extends from the raw materials to the ultimate sale or delivery to the final consumer, whether goods or services. It also includes the disposal of associated waste. Supply chain Management or SCM is the management of all activities aimed at satisfying the end consumer. It represents a holistic approach to the operation of the organization. The global economy relies on supply chain functioning smoothly, and disruptions can have significant impact on the global economy. According to the International Labor Organization, COVID-19-related disruptions wiped out over $3.5 trillion of global income, far surpassing the combined impact for major disruptive events to the supply chain over the last 20 years. By comparison, the 2011 Japanese earthquake and tsunami destroyed $210 billion of income. Only six percent of the COVID total. Researchers Singhal from Georgia Institute of Technology and Hendricks from the University of Western Ontario studied 800 announcements of supply chain problems over an eight-year period between 1992 and 1999, and found that even relatively minor glitches to supply chains results in inventory write-offs, parts shortages, shipping delays, and other issues. These problems still occur today and are further exasperated by the increasing complexity and length of present-day supply chains. Thanks, Allan, for your introduction to supply chain principles. Allan will be back later in the lesson to talk about supply chain sustainability. We're now joined by Dr. Steve Piercey, a University Research Professor at Memorial University in St. John's, Newfoundland and Labrador. Steve is a specialist in economic geology and the supply of metals required to build many alternative energy sources. He's going to talk about supply chain challenges in supplying these metals during the 21st century energy transition. Thanks, Allan and Brad. The coming shift to green energy will require significant new technologies, many of which will have significant demand on metals, and a key challenge will be putting in place secure and stable supply chains. New technologies such as windmills, electric vehicles, solar panels, communications technology will all require metals that we've used for millennia, things like copper, zinc, lead, and iron. However, it will also require significantly increased amounts of technology metals, including elements that we call the critical elements. Things like cobalt, lithium, tellurium, indium, and rare earth elements. Various elements required for these technologies are shown here in fantastic infographics created by the Mining Association of Canada. Even though many of the elements required for these technologies have been mined for hundreds of years and have relatively stable supply chains right now, demand will generally increase for all of these metals. For example, an electric vehicle requires about three times as much copper as what a standard internal combustion engine requires. Furthermore, other elements like cobalt, lithium, and rare earth elements have really limited supply chains, often subject to geopolitical risk. For example, the February 2022 Russian invasion of Ukraine. In additions, much of the communications and information technology systems that are the backbone of our modern economy are based on computers, server systems, and portable electronic devices, like mobile phones and tablets, which use a lot of electricity and an abundance of metals. The knowledge economy and the artificial intelligence framework that will underpin much of this green energy transition also requires abundant energy, thus requiring new technologies to replace energy systems that were generally founded upon hydrocarbon sources. Some of the metals we will need for green technology can come from recycling. However, the European Union has suggested that the demand for most metals will far exceed supply. As a result, numerous countries classify these metals we need for green technology as critical metals or minerals. Shown here is Canadian critical metals list which builds off of the long-term list of the United States Geological Survey. These minerals and metals are critical to the economic and social well-being of Canada and, from which, if there were supply chain disruptions, could have significant negative economic and potentially political consequences. Many have relatively reliable supply chains, even within Canada. For example, Canada has significant reserves of copper, nickel, and zinc, and a long history of production of these commodities across the country. However, there are a number of critical elements like cobalt, lithium, and rare earth elements for which we do not have significant resources. This leads to questions such as, where do we get these metals? Are these sources reliable? Can we produce them in Canada? More importantly, should we? Let's look at three critical metals that are important for green technology: lithium, cobalt, and rare earth elements. I will focus primarily on where these come from, current supply chain challenges and supply chain challenges that may exist in the future. Lithium is a key element required for next-generation battery storage technology. It's a fundamental component of existing lithium-ion batteries. These batteries have become more important in an expanding green economy, resulting in greater demand for lithium. The main geological reservoirs for lithium are lithium salts in salt and solars or salt flats as shown on the left, where lithium-rich brines are processed to extract lithium. The second source is from the lithium mineral spodumene shown on the right that is typically formed in certain types of granites called pegmatites. Lithium in spodumene is much harder to extract than lithium salts and solars. But despite these challenges, spodumene is mined in Australia, the Greenbushes lithium operation, and makes up about 44 percent of global lithium production. Chile and Argentina produced 34 and 14 percent of global lithium respectively from solars that occur in the Atacama Desert. While Canada has good trade relationships with Australia, Argentina, and Chile, future demand for lithium may require additional supplies and demand may outstrip supply in Daydream supply chains. Cobalt is another critical element required for next-generation battery technology. Cobalt globally comes from deposits in sedimentary rocks, as well as those hosted in igneous rocks, such as the Voisey's Bay deposit in the Canadian province of Newfoundland and Labrador. Sometimes cobalt is a primary mine commodity, whereas in other cases it is mined as a byproduct associated with metals such as nickel and copper. More than 60 percent of global supply for cobalt comes from the Democratic Republic of Congo, with lesser supplies from Cuba, Russia, Australia, and Canada. There are also significant undeveloped resources on the sea floor. However, these are inaccessible at present. This situation poses significant potential supply chain risks. Mining environmental regulations and labor standards in the Democratic Republic of Congo have also been questioned by global media and human rights organizations. They also questioned how much of the current green tech has cobalt source using child minors. Should people accept such sources of cobalt, will they be willing to consume more and more cobalt and new alternative energy technologies coming from sources which such poor human rights, environmental and labor records? Rare earth elements are important for high strength magnets, battery technology, catalytic converters, and additives in glasses and screens used in telecommunications. The vast majority of rare earth elements globally are mined from the Bayan Obo deposit in China, with much smaller sources in Australia, US, and Myanmar. China also controls the processing for more than 90 percent of rare earth elements supply globally. Our overreliance on a single supplier is very problematic for supply chains to Western nations like Canada, given our sometimes chilly relationships with China. The rare earth elements suite is arguably one of the most susceptible to geopolitical supply restriction, which underlies the need for diversification of rare earth elements supply. Many countries are, therefore, working to find local or more stable rare earth elements supplies. For example, in Canada, the Nechalacho rare earth element mine in the Northwest Territories went into production in 2021. Canadians are investing extensively in developing homegrown mineral processing technology to process and refine rare earth elements. For example, the Saskatchewan government has invested about 30 million into the Saskatchewan Research Council to develop a Canadian rare earth element processing facility. To quote WP Kinsella from Field of Dreams, "Build it and they will come." The SRC facility has already led the Canadian companies like Search Minerals, who have the foxtrot rare earth element deposit in Labrador, signing agreements to utilize domestic processing capacity. These type of R&D investments will likely help create more reliable domestic supply chains of critical elements into the future. While many of the metals for the green economy have good supply chains built on good trading relationships, supply chains for other resources are more problematic, depending on nations where there are geopolitical uncertainties. What do we do to make our supply chains more robust and reliable while recognizing important societal and economic issues? Some people have argued that we need to have a plan for Canada equivalent to the Marshall Plan that rebuilt much of Western Europe and Japan after World War II, but focusing on securing domestic critical metal supply chains for Canada rather than relying on external suppliers. Supply chain considerations ultimately may provide opportunities for countries like Canada with high labor, human rights, and environmental standards, as well as a highly skilled workforce and taxation that ensures redistribution of wealth to benefit all citizens. A push for domestic supply chains might usher in an era of local metals, where we consider domestic and local metal supplies the same way we consider local food, craft beer, and buying goods from local suppliers. Thank you for your attention. I'm going to turn it back to my colleague Allan To to talk about sustainability and its role in supply chain management. Thanks, Steve. Prior to the global pandemic in 2020, many companies were recognizing the need to shift from a shareholder view that focus exclusively on maximizing shareholder return to a view of capitalism that recognizes the need of a range of stakeholders, including employees, customers, suppliers, and local communities. They were implementing concepts like triple bottom line, thinking of shared values. Despite this, the last few years and more recent events have highlighted the need for companies to view their operations as part of a nested system bounded by and embedded within the environmental, social, and economic systems in which they operate. In other words, a systems view. Almost 40 years ago, companies were told to look beyond their corporate borders by factoring their industry environment into their strategy-making processes. Fast-forward to the present, where increasing resource scarcity, heightened social uncertainty, and continued instability in financial markets are driving boards to strengthen their understanding of systemic issues and the constraints they place on their businesses. As illustrated here, companies will need to consider two additional forces in their strategy-making: social resilience and environmental resilience. For businesses in all sectors of the economy, sustainability is a strategy for building long-term shareholder value, managing environmental and social risks, and improving competitiveness. Environmental and social sustainability issues actually impact the corporate bottom line. They pose risks and offer opportunities that will drive corporate successes. They are ever-increasing expectations from investors, customers, employees, and communities to solve environmental and social challenges and to be transparent in doing so. The need to jump from business strategies to sustainable business strategy is urgent. From raw materials to manufacturing and packaging, a company's supply chain can have significant environmental and social impacts and can provide challenges. However, the extension of social and environmental standards, goals, and programs across global supply chains can help improve the bottom line, addressing the environmental and social concerns, within supplier factories can improve worker morale, retention, and productivity, which in turn can contribute to improvements in supply chain efficiency, reliability, and resilience. Production in modern economies is organized around supply chains. The performance of supply chains is driven by the behavior of multiple stakeholders such as manufacturers, logistic service providers, and technology suppliers and enabled by public policies. A number of business trends have emerged in the last three decades including process and product specialization, outsourcing, offshoring, just-in-time production, and consumer-driven production. With design, production, and distribution processes scattered among a variety of parties, companies no longer compete in isolation, but rather as participants in interconnected supply chains. The efficient performance of supply chain requires a high degree of visibility, defined as the capability of sharing on-time and accurate data throughout the entire supply chain and coordination among supply chain partners. The technologies generated by the Fourth Industrial Revolution can take supply chain visibility, coordination, and performance to new levels. Potential benefits include better inventory control, fewer barriers and less waste of resources, increased functional and procedural synergies between participants, better monitoring of customer behavior and faster response to changing market demands, shorter product realization cycles and lower product development costs, shorter order fulfillment lead times, greater logistics flexibility, and lower capital investment in excess capacity. The increasing interdependence of supply chain processes and the different parties involved in them suggests that the full benefits of the Fourth Industrial Revolution technology adoption can only be captured if all supply chain stakeholders are aligned in their effort towards digitally transforming the system. In this way, economic gains can be obtained for both actors in the supply chain and the countries in which they operate. In the context of the Fourth Industrial Revolution, supply chains exhibit a high degree of cyber-physical interconnections enabled by the Internet of Things sensors that collect big data for real-time decisions to optimize supply chain performance. Large-scale deployment of these sensors and big data analytics prevent disruptions from unexpected failures. In addition, the use of Internet of Things sensors together with artificial intelligence enables automated inventory management, thus diminishing human errors, input shortages, and the high cost of carrying unnecessary inventory. Likewise, the Internet of Things, big data, and artificial intelligence in transport operations and infrastructure management improves reliability and efficiency. The Fourth Industrial Revolution transformation of energy transition supply chains is driven by many stakeholders, including technology developers, logistics service providers, manufacturers, infrastructure, and gateway operators. Carriers in government who exercise or influence through policies and regulations due to process fragmentation and the multistakeholder nature of the supply chains, its full Fourth Industrial Revolution transformation requires a high degree of collaboration. Public policy intervention can help stakeholders be better aligned. Supply chain megatrends can be extremely disruptive to the energy supply chain and can also be a source of great opportunity. The energy transition will require firms to build greater resilience, drive greater sustainability performance, and leverage emerging technologies and supply chain partners to accelerate innovation. Thanks to both Allan To and Steve Piercey for their insights on the importance of reliable supply chains for supporting sustainable energy production. Next lesson, we're going to move on to energy storage, another topic key to the energy transition and where supply chain management is critically important.
