Can Australia's SunShot program help reduce risk of forced labour?
Fiona David and Shannon Hobbs
Australia's billion dollar SunShot Solar Program, which will support the manufacturing of solar panels in this country, is a critical part of building green industry in Australia
While the economic and environmental benefits have received the most attention, the program also offers benefits for Australia's ability to meet its international human rights commitments.
While rejected by the Government of China, the risk of state-imposed forced labour in solar supply chains that originate in Xinjiang, China, has been documented in UN reports and independent research. The US government has introduced import restrictions specific to this region, resulting in the withholding of billions of dollars worth of products at the US border. The EU has recently introduced a forced labour import ban. While Australia is yet to impose similar restrictions, the Attorney-General Mark Dreyfus has noted import bans will be on the agenda for Australia's newly created Anti-Slavery Commissioner.
As the world scrambles to meet urgent net zero targets, responding to the risk of forced labour in global solar supply chains occupies the time of many a procurement professional. And well it should. Forced labour is an egregious abuse of human rights, and the supply chains involved are increasingly opaque.
From a human rights perspective, the SunShot Programs offers a welcome new direction: the potential for Australian-made solar panels. If the right design principles are put in place, the SunShot program can reduce Australia's current reliance on opaque supply chains, and give Australian businesses entry points to increasingly regulated EU and US markets. This will speed up the energy transition while also ensuring labour protections are in place.
The SunShot Solar Program has requested public feedback on its design. As set out below, we have made three recommendations that will enable the program to achieve its existing goals, while also addressing a major human rights risk that currently afflicts solar panel supply chains globally.
Background
SunShot program
The Federal Government has released details of its $22.7 billion package to maximise the economic and industrial benefits of Australia’s move to net zero. As part of this, $1 billion will go to the SunShot Solar Program, aimed at developing Australia’s solar manufacturing industry. The SunShot program is an exciting opportunity that will help build Australia’s industrial capability, while progressing our economic and environmental goals.
Forced labour risk in global solar supply chains
At present, the world faces a considerable challenge in that we need to urgently scale up the roll-out of renewable energy sources, such as solar PV, to meet 2030 and 2050 targets. However, there are significant human rights concerns, including risk of forced labour, in key stages of global solar supply chains. The risk has been traced back to the very beginning of the solar supply chain, where quartz is first mined and then transformed to metallurgical grade silicon, before being again transformed to polysilicon. These risks relate to concerns regarding state-sponsored forced labour programs that target Uyghur communities in Xinjiang in Western China. Forced labour has been reported to be used in the mining of quartz, and production of metallurgical-grade silicon and solar-grade polysilicon.
The scale of production that is linked to these inputs is significant. Solar-grade polysilicon is the primary material in 95% of solar modules, of which up to 32% of the world's metallurgical-grade silicon and 35% of solar-grade silicon comes from Xinjiang. Traceability of the inputs used by Chinese module suppliers is increasingly difficult, following the introduction of anti-sanctions laws in China. The report which informed the SunShot program's design highlighted Australia's dependence on Chinese solar panels, alongside human rights violations in the solar value chain, as reasons for developing Australia’s industry.
Building the alternative: "fair and green" supply chains
Australia has a unique opportunity to become a supplier of choice in the growing market for solar panels that meet rigorous ESG standards. Specifically, if delivered in ways that take account of this ambition, the SunShot program provides a unique opportunity for Australia to build integrated silicon to solar cell supply chains, that meet the commitments required by the United Nations Guiding Principles on Business and Human Rights (UNGP BHR) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (OECD Guidelines). This will increase supply to Australian businesses and indeed government buyers, of solar panels that meet both environmental and human rights and labour standards. As EU and US markets close their doors to "high risk" products in the sense of forced labour, Australian businesses will have increasing opportunities to trade into the these markets.
Design principles
The SunShot Solar Program has requested public feedback on key elements of its design. We have responded with three recommendations that will enable the program to contribute to building Australia’s renewable energy economy, while also addressing a major human rights risk that currently afflicts solar panel supply chains globally.
Recommendation 1: Go back to the source
We recommend the SunShot Program consider supporting the development of solar value chains, right back to the source: that is, the extraction and supply of quartz and transformation to metallurgical grade silicon.
As presently framed, the SunShot program seeks to intervene in the solar value chain, starting with the production of polysilicon and going through to the manufacture of modules. However, in terms of global supply chains, the risk of forced labour starts at the point of mining quartz, and transformation to metallurgical silicon, which is then transformed into polysilicon. CSIRO has outlined numerous practical steps that industry policy could put in place to support the development of Australian supply chains for solar, right back to initial extraction. We recommend these are considered by ARENA in the design of the SunShot program.
Recommendation 2: Make human rights a focus
We recommend adding a new objective to the SunShot program, that is, to “Create an Australian solar supply chain that competes on the basis of strong environmental, social and labour credentials”. We recommend that ARENA consider adding language to make it clear that its “economic, social and environmental sustainability” objective includes human rights and labour rights.
As presently framed, the program refers to an “economic, social, and environmental sustainability” objective, the meaning of which is open to interpretation. However, we believe the meaning of this phrase would be clearer if language was added to include explicit mention of “human rights and labour” considerations.
Australia cannot compete with China in terms of labour costs, but we can compete on the basis of our strong environmental, social, and labour credentials. These credentials could enable Australia to target exporting to US and European markets, who have stringent laws around forced labour in supply chains.
Recommendation 3: Require human rights due diligence
We recommend that the SunShot program require applicants to commit to taking reasonable steps to give effect to key international business and human rights standards, such as the UNGP BHRs, and OECD Guidelines.
As presently framed, entities who want to be part of the program must adhere to modern slavery obligations, such as the Modern Slavery Act. However, this is a reporting regime which does not mandate or require due diligence. Also, the regime does not apply to companies with a turnover of less than $100M AUD. Given the risk of forced labour in solar supply chains globally, any company wanting to access government support through the SunShot program should be required to show that they will take reasonable steps to give effect to key international business and human rights standards. This will be particularly important if manufacturing under the SunShot program relies on inputs that are sourced further up the supply chain (critical minerals, mg-Si, Poly-Si, wafers, and cells).
Our full submission, prepared by Shannon Hobbs and myself, can be found here.
