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A better business case for sustainable battery-cell production

They are a vital element of the green transition but struggle to deliver strong ESG scores


PA Europe

As demand for electric vehicles (EVs) in Europe continues to accelerate, the calls for better sustainability in the supply chain get louder.

But how does a sustainable business model make battery-cell manufacturing more attractive to investors, asks Benoit Lemaignan, the chief executive of battery-cell manufacturer Verkor.

The future is electric. Despite the covid-19 crisis, sales of EVs are booming, driven by strong new climate targets, government incentives, and the availability of more affordable models with better technology. And Europe is a hotspot – last year European market growth overtook China for the first time in five years, with an increase in sales of 137% to almost 1.4 million vehicles.

To meet this demand, Europe needs fast-expanding local battery cell manufacturing capacity, creating huge investment opportunities. In fact, the European Battery Alliance estimates that the European battery market will be a €250bn a year industry by 2030 and it’s expected that two to three battery-cell gigafactories will be needed in France alone to plug the gap between supply and demand.

A greener, smarter business model

At the same time, those investing in ‘greener’ driving choices are increasingly asking questions about the environmental and social sustainability of the batteries being used – from how the raw materials are mined to whether the finished product can be recycled. And rightly so. While the transition to EVs is rooted in sustainability, it is also very important for manufacturers to execute their role in a sustainable way.

This challenge opens up opportunities for a new kind of battery-cell manufacturing – one that incorporates product stewardship and ethics throughout the value chain to create a product with the smallest environmental footprint and most positive social impact. To win in this booming competitive market, businesses must optimise technological innovation while placing great value on human capital and strategic partnerships.

So what are the ingredients for this new business model and how can higher standards be achieved? 

Responsible sourcing

Manufacturers will increasingly need to show that their raw materials are sourced in a way that does not pollute the local environment or, for example, use unethical labour for mining.  A manufacturer who wants to ensure there is traceability and high ethical standards could either source the raw materials directly or work with an active materials supplier to guarantee the origin of the materials. This is where partnerships in the value chain become so important. Manufacturers that source materials with long term considerations in mind are typically rewarded with enhanced competitiveness resulting from improved sustainability, quality and reputation.

Go low-carbon, go local

A battery-cell manufacturer that powers its processes with affordable low-carbon electricity will benefit from a greatly reduced carbon footprint. The batteries Verkor plans to produce in France could have a carbon footprint nearly four times lower than those produced in China thanks to France’s low carbon energy mix as well as vertical integration and the use of in-house innovations in digitalization or recycling.

And localising production – basing cell manufacturing within the market it is serving – reduces imports and associated emissions whilst boosting the local economy with inward investment and jobs. Increasingly, battery supply infrastructure will need to fill geographical gaps in regions like southern Europe.

AI with green footprints

Leveraging the full potential of digital and data is a key tenet of this new generation of battery-cell gigafactories, underpinning a more efficient and productive process. To this end, Verkor has partnered with Schneider-Electric & Capgemini to refine its manufacturing process to reduce waste and improve its environmental and economic performance. Turning the traditional human expertise-based approach into automated, digitalised processes means that quality goes up and waste goes down. For example, employing smart machine learning can reduce the scrap rate significantly – currently one in every 10 batteries on the production line has to be scrapped because of defects.

Integrating conventional know-how with edge computing, data-mining, and artificial intelligence can reduce risk in what is a highly complex process. A streamlined production ensures consistently high standards and cost-competitiveness and improves the overall environmental footprint considerably. A case in point, Tesla has found that there was no need to arbitrate between competitiveness and sustainability. Both generated profits.

Re-use, recycle and close the loop

Finally, battery-cell manufacturers need to know – and be able to demonstrate to consumers and investors alike – where their battery-cell will be in 20 years’ time. Concerns about toxic waste, precious metals and recyclability are high and a manufacturer’s responsibility does not end when the product goes out the factory doors. The sustainable business models of the future will follow the whole life of a battery-cell – from use in a vehicle to a second life in stationary storage, through to recycling and back to the factory – closing the loop as part of a circular economy.

The human touch

But it’s not just about improving environmental governance. The battery-cell industry needs to build a different, better model when it comes to its people too. The scale-up challenge is huge and manufacturers are going to require the very best expertise, innovation, diversity and fresh thinking available. Attracting and retaining this top global talent comes from offering meaningful work and a supportive, inclusive workplace culture in which they can thrive. That means roles in which people have equal opportunities, where they can develop new skills (both hard and soft), for all (blue and white collar) and where they have autonomy to excel.  

Clever companies know that a diverse and motivated workforce is a productive one, which ultimately benefits the business bottom line. Teams that are highly qualified and experienced, agile and dynamic, with clear purpose, simple processes and shared values will lead the pack. It’s central to the success of start-ups in particular and something that Verkor excels at, with 26 employees from 13 countries to date.

Shared governance

And seizing the huge growth opportunities on the horizon just won’t be possible without a partnership approach, to leverage the insights of stakeholders and expertise of specialists with similar ambitions along the whole value chain. Cooperation with strategic partners helps ensure good governance within but also keeps a finger on the pulse of technological advances, regulatory changes and consumer trends in the world outside.

The time for change has come. The battery industry can be sustainable and indeed it must if it is to withstand the sharpening scrutiny of the energy transition. Those manufacturers that plug into this demand – and provide consumers with not just a high-quality product but a genuinely eco-efficient experience – offer the most attractive investment of all.

With that in mind, our intention at Verkor is to build the best battery company – not necessarily the biggest, nor the most innovative – but the most attractive for talent, for investors, and for customers alike.

This article was written for Expert Investor by Benoit Lemaignan, chief executive of Verkor.

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