Europe is accelerating the shift towards renewable energy and batteries are becoming critical infrastructure for the continent’s transition. However, as battery production scales, so too does scrutiny of the supply chains underpinning it.
Arthur D Little’s latest report — ESG risks in lithium-ion battery supply chains — warns that some of the most significant environmental, social, and governance (ESG) risks sit at the upstream end of the lithium-ion battery value chain, particularly across mining and material processing.
Those risks span greenhouse gas emissions, pollution, water consumption, unsafe working conditions, forced and child labour, and impacts on local communities.
Speaking to Mining.com.au, Principal at Arthur D. Little Philipp Seidel says binding more of the battery value chain to Europe does not make those risks disappear.
“Lithium extraction can create significant water and ecosystem pressures, while cobalt and other mining activities can expose companies to human rights, worker safety, and community risks,” Seidel tells this news service.
“Expanding processing and cell manufacturing in Europe brings its own challenges, particularly around energy use, water consumption, and local acceptance.”
Europe may be relatively well prepared from a regulatory perspective, but the bigger challenge is turning those rules into measurable outcomes across complex, mid-tier supply chains.
For example, the EU Battery Regulation and Critical Raw Materials Act (CRMA) establishes a framework around sustainability, traceability, circularity, and supply diversification. However, the postponement of the Battery Regulation’s due diligence obligations until August 2027 illustrates the practical gap.
“The next challenge is therefore turning regulation into reliable supplier data, traceability, independent verification, and effective mitigation across multi-tier global supply chains,” Seidel adds.
For Europe-focused mining companies, that challenge could ultimately become an opportunity.
From obligation to advantage
As Europe seeks to build a more secure and sustainable battery supply chain, ESG performance is becoming a commercial differentiator rather than simply a reporting requirement.
The question for mining companies is no longer whether a project is prospective for minerals. It is whether those minerals can be produced responsibly, traced through the supply chain, and sold into markets demanding greater transparency.
According to Arthur D Little, ESG performance is becoming a core business requirement, influencing market access, financing conditions, and competitive positioning.
“That is particularly important for Europe because sustainability requirements are progressively becoming embedded in the rules for putting batteries on the EU market, including requirements around carbon footprint, recycled content, and product information, alongside due diligence obligations from 2027,” Seidel explains.
Seidel adds that getting ESG wrong carries consequences far beyond reputational damage, including penalties, supply disruption, higher financing risks, and a loss of market trust.
For companies developing Europe’s future critical minerals supply, that makes responsible mining part of the commercial proposition.
Speaking to Mining.com.au, Elementos (ASX:ELT) Managing Director Joe David views ESG expectations as a standard required to earn the trust of local communities, regulators, and investors rather than as a burden.
“Europe is a region where fewer people have lived near a modern, responsibly operated mine, so there is naturally a higher need for early engagement, transparency, and education,” David tells this news service.
“Communities want to understand what modern mining looks like, how impacts are managed, and how benefits flow locally.”
Latitude 66 (ASX:LAT) Managing Director Grant Coyle shares a similar sentiment, saying one of the biggest challenges is demonstrating that modern mining can coexist with communities and other industries.
“Europe has high environmental and regulatory standards, which provides an opportunity for well-designed projects to demonstrate what responsible mining can look like,” Coyle says.
For Latitude 66’s Kuusamo Schist Belt (KSB) Project in Finland, that means demonstrating the economic and social benefits of a proposed gold–cobalt operation through local employment, investment, and procurement.
Elementos is taking a similar approach at its Oropesa Tin Project in the Guadiato Valley of Andalucía, Spain, where the company is operating in a region with a long history of coal and base metal mining.
David says the community understands the economic benefits mining once delivered, as well as the consequences of mine closures between 1990 and 2012.
“As a result, many residents are strongly supportive of responsible mining returning to the region, and we are committed to exceeding the standards they expect,” David adds.
That history makes community engagement particularly important, but it could also provide a foundation for responsible mining to demonstrate its value.
Traceability is the new currency
If ESG is becoming a competitive advantage, traceability could be the mechanism that allows companies to prove it.
Traceability — maintaining a detailed record of a material from extraction from processing to delivery — is a key requirement for projects operating in mature, highly regulated jurisdictions.
Dalaroo Metals (ASX:DAL) CEO John Morgan believes traceability will soon become a commercial requirement rather than an ESG preference.
“European manufacturers will increasingly need reliable information about where materials originated, how they were produced, their carbon footprint and whether appropriate environmental and human rights standards were followed,” Morgan tells Mining.com.au.
Earlier this year, the European Commission introduced a melt-and-pour proposal that serves as a transparency and traceability obligation. From 1 October 2026, importers are required to provide evidence of the country of melt-and-pour, such as a mill test certification.
This means that mining companies may need to think about traceability long before a mine reaches production.
For Dalaroo, this includes maintaining reliable sample custody and technical records while recognising that environmental baseline studies, stakeholder engagement, and auditable supply chain information will need to become detailed as the Blue Lagoon Project in Southern Greenland advances.
“Establishing good systems early is significantly easier than attempting to retrofit traceability later,” Morgan adds.
However, for some European projects, traceability could become more than a compliance exercise — it could become a selling point.
Latitude 66’s KSB Project is positioned within Finland’s established cobalt refining industry.
“Finland is the largest refiner of cobalt outside China and already has an established downstream cobalt industry,” Coyle says.
“The opportunity to potentially mine cobalt at KSB, refine it within Finland and then supply it directly into European markets creates a highly traceable, European mine-to-market supply chain.”
That mine-to-market model illustrated the broader direction Europe is trying to move: not towards complete self-sufficiency, but towards greater visibility and control over where minerals and materials come from and how they are produced.
From critical minerals to supply chains
The need for that control is amplified by the global shift towards renewable energy and e-mobility, driving demand for batteries and the minerals needed to manufacture them.
For mining companies, sometimes discovering a critical mineral is only the beginning.
Elementos is seeking to highlight this through Oropesa, which is being developed alongside a domestic processing solution.
“Oropesa is not simply a discovery, it is an advanced development project paired with a domestic smelting solution that will deliver Europe’s first mine-to-metal tin production in decades,” David says.
Earlier this month, Elementos satisfied all conditions under an option agreement to acquire 50% of Iberian Smelting, owner of the Robledollano tin smelting and refining facility in Spain.
The smelter provides a pathway for the Oropesa tin concentrate to be converted into refined tin metal and sold into European and North American markets, where Elementos says customers currently pay significant delivery premiums above benchmark tin prices.
Tin is a critical metal to the global energy transition, serving as the electronic ‘glue’ in solar panels, EVs, wind power, and smart grids, with no economic substitute.
David says Oropesa and the Robledollano Smelter could ultimately form Europe’s first modern mine-to-metal tin supply chain, producing primary tin metal within the EU for batteries, semiconductors, electronics, and other critical industries.
Latitude 66 is pursuing a similar European supply chain opportunity through KSB.
A March 2025 Scoping Study outlines a post-tax net present value of US$310 million ($435.14 million), a 74% internal rate of return, and capital expenditure of US$101 million.
Over its 7.2-year mine life, KSB is expected to produce 65,000 ounces of gold and 465 tonnes of cobalt annually.
Coyle says that KSB is well advanced, with a Prefeasibility Study and permitting process currently underway.
“KSB could potentially contribute around 25% of the cobalt currently extracted within the EU, with that material potentially feeding directly into Finland’s established cobalt refining industry,” he explains.
Meanwhile, Dalaroo’s Blue Lagoon Project in Southern Greenland hosts zirconium, hafnium, rare earths, and niobium mineralisation, which Morgan says has the potential to produce materials relevant to Europe’s broader critical minerals and advanced manufacturing industries.
“Rare earths, in particular, are important to permanent magnets used in electric vehicles, renewable energy systems, and other strategic technologies,” the CEO says.
The company’s immediate priority is to show the scale, continuity, and metallurgical characteristics of the mineralisation through continued exploration, resource definition, and technical studies.
“While the project remains at an early exploration stage and no mineral resource or ore reserve has yet been defined, we are highly encouraged by the opportunity and see a clear pathway for systematically advancing it,” Morgan adds.
All three of these projects are at very different stages of development, but illustrate the same broader challenge. Europe needs more than mineral discoveries — it needs mines, processing capacity, refining, manufacturing, and recycling to work together.
Policy needs projects
Governments worldwide are introducing policies and incentives to provide the framework for that development.
“Europe has done a lot of work creating the policy framework to support a domestic critical minerals industry,” Latitude 66’s Grant Coyle says.
The EU’s CRMA sets out clear domestic production benchmarks for 2030. These include meeting at least 10% of the EU’s annual consumption through extraction, 40% through processing, and 25% through recycling. No more than 65% of the EU’s annual consumption of any strategic raw material at any relevant stage of processing should come from a single non-EU country.
In mid-July 2026, the EU’s Electrification Action Plan was also published, adding another layer to the strategy by seeking to accelerate the transition towards electricity-based technologies, including EVs, batteries, and heat pumps.
According to the European Commission, the plan aims to increase electrification from 23% of energy use to 46% by 2040. Reaching this goal could cut the EU’s fossil fuel import bill by €260 billion ($426.56 billion) per year by 2040.
Despite these policy targets, regulatory frameworks do not automatically translate into mines and processing plants. That is perhaps where Europe’s critical minerals strategy faces its biggest test.
“The CRMA is an important step, but achieving that will require projects to move through permitting, financing, and development much more efficiently,” Latitude 66’s Coyle says.
Similarly, Dalaroo’s Morgan says Europe needs to move beyond identifying geological potential and focus on building complete value chains.
“Developing a mine is only one part of the equation — competitive processing, separation, refining, manufacturing, and recycling capacity must also be available,” Morgan says.
For developers, that means access to capital, predictable permitting, long-term offtake agreements, and greater alignment between government policy, industrial demand, and project financing will therefore be critical.
If Europe wants to compete with established global supply chains, projects may need to demonstrate not only that they can produce critical minerals but also that they can do so with the ESG credentials demanded by European customers and investors.
Turning potential into supply
Across Europe and neighbouring regions, there are signs that this transition is beginning to take shape.
In Spain, Elementos’ David says momentum is building on the ground in Andalucía.
“More projects are progressing through permitting, more governments are recognising the strategic importance of domestic supply chains, and more downstream industries are actively seeking European-sourced materials,” David says.
Further north, Greenland is attracting growing potential as a potential source of critical minerals.
As previously reported, Greenland hosts occurrences of at least 24 of the 34 rare metals and materials included on the EU’s critical raw materials list. However, mining activity in the territory remains relatively modest as of early 2026.
For Dalaroo, Morgan expects increasing international investor interest will bring additional explorers, investment, technical expertise, and service providers into the region.
“This could create opportunities for companies to collaborate on infrastructure, logistics, processing and energy solutions, as well as pursue joint ventures, corporate consolidation or other strategic combinations where appropriate,” Morgan says.
Morgan adds that this has the potential to create greater long-term value for Dalaroo while helping Europe build a more competitive, diversified, and secure source of critical minerals.
Meanwhile, Sweden has elevated critical minerals mining as a national security interest. Sweden’s new mineral strategy aims to accelerate planning and permitting, as well as attract investment.
Latitude 66’s Coule believes Finland could take a similar approach by recognising strategically important critical mineral projects as part of the country’s security of supply.
These developments point to a broader shift: Europe is treating critical minerals as strategic infrastructure underpinning its industrial and energy ambitions.
However, that strategy will succeed only if geological potential can be converted into commercially viable projects and those projects can meet environmental and social expectations attached to operating in Europe.
“A genuinely sustainable European battery supply chain does not necessarily mean that every raw material must be mined in Europe,” Arthur D Little’s Philipp Seidel says.
“Europe will continue to depend on international supply, so the objective should be a diversified, traceable, and resilient chain in which high ESG standards apply equally to domestic production and imported materials.”
Write to Aaliyah Rogan at Mining.com.au
Images: Mining.com.au, Elementos, iStock, European Commission, Latitude 66
