The Solar Energy Industries Association (SEIA) launched Thursday a new traceability tool aimed at helping manufacturers and importers of solar products identify the source of a solar product's material inputs and trace the movement of these inputs throughout the supply chain.
This new tool, the Solar Supply Chain Traceability Protocol, is in response to reports of human rights abuses in Xinjiang, China, and the hope is that companies that implement the protocol's key principles will be better placed to navigate U.S. import compliance obligations as well as provide customers with greater supply chain transparency, SEIA said. The new protocol includes an independent third-party audit mechanism to measure a company's implementation of traceability policies and procedures.
In conjunction with the release of the protocol, SEIA also released a Solar Equipment Buyers' Guide for Supply Chain Traceability and it updated its Solar Industry Commitment to Environmental and Social Responsibility participant handbook.
SEIA has released early-stage guidance aimed at helping manufacturers and importers of solar products demonstrate the provenance of solar products and implement a traceability program so that they can ensure their solar products are ethically produced.
Much of the world's polysilicon comes from Xinjiang, a region where the Chinese government has been accused of human rights abuses against the area's Uyghur Muslim population.
The best way to overcome these supply chain issues would be an alternative supply chain outside China, said Johannes Bernreuter, a polysilicon market analyst and head of Bernreuter Research. "But this is very hard to establish as the Chinese solar industry has developed a huge advantage with its economies of scale," he added. In the short term, the only option is tracing and rearranging the supply chain, he said.
For the solar industry, concerns that solar products produced in Xinjiang could have links to forced labor and the fact that solar energy deployment is essential for achieving a carbon neutral future explain why providing assurance that solar products are free from forced labor is so important, officials said.
"Customers want assurances that the [solar] products that they are purchasing don't include forced labor or that their manufacturers are taking steps to prevent forced labor. And transparency is a key element of that," John Smirnow, SEIA's vice president of market strategy said during a webinar introducing the supply chain protocol that SEIA developed with Clean Energy Associates and Senergy Technical Services.
The new traceability protocol is also intended to help importers meet their U.S. customs law reasonable care obligations and improve an importer's ability to respond to U.S. Customs and Border Protection requests for information and audit inquires, according to SEIA.
Additionally, in the U.S., the Uighur Forced Labor Prevention Act, which requires an importer to establish by clear and convincing evidence that any good that includes materials from Xinjiang contains no forced labor in its supply chain, is circulating in Congress. If this bill becomes law, a company might not be able to import products into the U.S., Smirnow said.
"And that's just a risk profile that is unacceptable from an industry perspective," he added. "Clear and convincing evidence" is a very high standard, and it requires an independent third-party audit, he said. To measure a company's implementation of traceability policies and procedures, the new traceability protocol includes an independent third-party audit mechanism.
"Certainly, we are hearing about potential enforcement action on polysilicon from Xinjiang," Smirnow said. SEIA does not have specifics on that, but the U.S. government has already taken significant action against imports of tomato products from the region, he pointed out.
Even in the absence of new laws, supply chain transparency can be a key competitive differentiator for solar companies, which often pride themselves as being at the forefront of the sustainability movement. In its transparency protocol, SEIA noted that transparency in a solar company's supply chain could increase an organization's rating by independent agencies and attract investment.
According to SEIA, most companies across the solar modular supply chain already have advanced systems in place to track materials through the various manufacturing processes. This protocol envisions organizations' integrating product traceability to upstream suppliers into the applicable management system in such a way that will allow customers to determine the provenance of material inputs from a specific module all the way back to the plant that produced the raw materials.
Weaving product traceability into the entirety of the solar module supply chain will require organizations at each level to cooperate and share sensitive information, SEIA said.
In addition to launching the solar supply chain traceability protocol, SEIA has updated its solar commitment handbook, which defines common labor, health and safety, environmental, and ethical standards and expectations for solar companies, and it has created a solar buyers' guide on traceability that solar companies and other stakeholders can use to ask suppliers about ethical sourcing in their solar and storage value chain.
Demand for polysilicon from non-Xinjiang suppliers has been growing, and new capacities have been announced for Chinese regions outside Xinjiang, but according to Bernreuter, China's share of the world's polysilicon capacity, including electronic grade for semiconductors, will increase to more than 80% this year.