raw material case study

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• Case Studies

The ‘Raw’ Case Approach

When Yale SOM developed the integrated curriculum, a case writing team was formed to create materials in support of this new approach to management education. In the subsequent years, the SOM Case Research and Development Team (CRDT) has contributed nearly two hundred pieces of material to the SOM curriculum on a wide variety of topics and from numerous global locales. CRDT has also pioneered a new type of case study, the “raw” case, that better reflects the new curriculum—and actual management practice. 

In 2007, the SOM faculty and CRDT began experimenting with using multi-media on the web to deliver case materials. These experiments led to an entirely new paradigm, the raw case, that improved upon the traditional case method and afforded new pedagogical opportunities.

Raw cases replicate the way that individuals access and use information in the real world: management dilemmas do not manifest themselves in neat 10–15 page narratives, but rely on an individual’s ability to synthesize information from a variety of channels. The web-based platform also allows students to view, search, absorb, and analyze the material in a non-linear manner. Determining what information is relevant and how it relates to the questions at hand is part of the learning experience. It also allows students to tailor their experience of the case to their own interests, in that they may choose to skim some topics while going into greater depth on other issues.

Consider the SELCO raw case. SELCO is an Indian company that specialized in bringing solar electric products to the poor. In 2009, the company needed a new growth strategy. As students consider the company’s dilemma, the raw case allows them to view video interviews with company leaders and customers, inspect maps of SELCO’s service areas, see videos describing how SELCO’s products were being used, consider articles on India’s electricity grid and socio-economic conditions, read about the company’s founding, consult the company’s organization charts, income statements and balance sheets, inspect the company’s innovative products, review the company’s business models, read news articles about the company’s success, and so on.

Raw cases are also designed to enable faculty to break through the traditionally “siloed” approach to business problems. In the SELCO case, students have to analyze marketing, design, financial, organizational, government relations, and financing problems in the context of a growth strategy. At Yale SOM, raw cases are often co-taught by faculty from different disciplines.

Global Reach

From the first, SOM case writers and film crews have ventured to numerous locations in the United States, as well as international settings that include India, South Africa, Sweden, and China. Casting a wide geographic net allows CRDT to bring back management dilemmas from a number of contexts and cultures, as well as to spotlight trends in emerging and established markets, all for the benefit of preparing SOM students to lead across sectors and regions. Launched in 2012, the Global Network for Advanced Management consists of 28 business schools from around the world.

The creation of the Global Network for Advanced Management has increased the ability of the CRDT to offer global content through case-writing collaborations with other schools. For example, the Yale SOM team collaborated with EGADE Business School (Tecnológico de Monterrey) to focus on Walmart of Mexico’s sustainability efforts and relationship with the Mexican electricity grid. In another Global Network collaboration, Yale CRDT collaborated with faculty at the National University of Singapore to produce a case about the burgeoning palm oil industry and its relationship to environmental regulation and the Indonesian labor market.

Traditional cases and teaching notes

For those management challenges that do call for a more discipline-focused approach to a particular topic, the CRDT has produced more than 75 traditional-format cases for use in Yale classrooms. Many of these cases have been adopted at other business schools in the United States and elsewhere. In addition to cases, the team has produced technical notes and other pedagogical materials to support the school’s curriculum.

Though initially developed for use only at Yale SOM, the majority of CRDT cases are now available to other accredited business schools and management programs. Some cases are available under Creative Commons licensing. Others are available for purchase through one of our  publishing partners  or the  Yale Management Media store . 

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A Case Study in Pharmacopoeia Compliance: Excipients and Raw Materials

The authors present a case study with raw materials and excipients, where a consistent, cross-functional approach is needed to ensure the appropriate selection, sourcing, testing, and filing of the materials used to manufacture bio/pharmaceutical products in a global environment, ensuring compliance with applicable compendial and regulatory requirements.

Throughout this series of articles, it has been emphasized that the bio/pharmaceutical industry must comply with requirements published by pharmacopoeias around the world. Several considerations have been presented to illustrate that pharmacopoeia compliance can be difficult. A previous article (1) highlighted compliance challenges resulting from the elaboration of monographs for drug substances and products. These challenges can be considered externally-based, driven by decisions made by the pharmacopoeias during the monograph development process. There are other compliance challenges that are internally-based, resulting from decisions made by one functional area in the company without consideration of the broader impact to other functional areas throughout the organization. One such example can be found with raw materials and excipients, where a consistent, cross-functional approach is needed to ensure the appropriate selection, sourcing, testing, and filing of the materials used to manufacture bio/pharmaceutical products in a global environment, ensuring compliance with applicable compendial and regulatory requirements. This case study is based on the experience of one of the authors (2) but is applicable to all companies across the broader industry, illustrating the potentially surprising point that some compliance difficulties may be of the company’s own making.

The challenge of compliance

During early development in the product lifecycle (3), various raw materials are used to prepare the drug substance, with the goal of consistently providing this active pharmaceutical ingredient (API) with appropriate quality and purity. Many of the raw materials are completely consumed during the manufacturing process, serving as building blocks that are converted into intermediate materials prior to the ultimate drug substance. Other materials may not be completely consumed, carrying over into the drug substance or drug product as residual materials or impurities. These residual materials may be an especially important consideration for complex biotherapeutic products (BTP). Continuing in the product lifecycle, the subsequent development of the dosage form involves the addition of excipients to the drug substance, with the goal of providing safe and effective delivery of the API in the drug product to achieve the intended therapeutic outcome. Appropriate product development information, along with safety, clinical, stability, and other data, are provided to regulatory agencies around the world to gain marketing approval for the drug product.

This article focuses on the raw materials and excipients used in the manufacture of drug substances and drug products. A company must comply with their approved product registrations and with appropriate compendial requirements, according to the expectations of regulatory agencies (3). The pharmacopoeias also provide information about the need for compendial compliance. For example, the General Notices in the European Pharmacopoeia ( Ph. Eur. ) indicate that drug substances and excipients must comply with all the requirements stated in the applicable monograph (4). The General Notices in the United States Pharmacopeia-National Formulary ( USP–NF ) state, “Official products are prepared … from ingredients that meet USP or NF standards, where standards for such ingredients exist” (5). Clearly, APIs and excipients used to manufacture the drug product must meet compendial requirements. The USP General Notices continue, stating that the drug substances and excipients are themselves prepared “from ingredients complying with specifications designed to ensure that the resultant substances meet the requirements of the compendial monographs.” Again, the active ingredients and excipients clearly must meet the monograph requirements. Information is lacking, however, as to the ingredients used to prepare the drug substances and excipients. In particular, what are the appropriate specifications for the raw materials that will ensure compendial compliance for the resultant APIs and excipients?

This lack of clarity about the control of the raw materials may lead to compliance challenges. The drug development/approval process takes many years and involves a large number of wide-ranging functional areas across the entire company, including research and development, procurement, supply, quality, and regulatory. It is essential for these groups to remain connected and aligned throughout the entire process, with sustained communication and appropriate documentation, to deliver an effective and efficient outcome for the company overall. It can be especially important for decisions made early in the development process to be communicated and understood across all departments. Equally important, the responsible groups making early decisions should have visibility, or line-of-sight, to the strategy and expectations of other groups involved later in the product lifecycle, as part of an end-to-end approach to the overall process (6). The situation is made even more complex as more bio/pharmaceutical companies outsource the production of drug substances, and contract manufacturers work with many customers having different material requirements.

There are important and fundamental questions about the materials used in product development and manufacturing that need to be considered throughout the product lifecycle. How does a company ensure the suitability and compliance of the raw materials and excipients used to support a broad product portfolio in a global environment? Are acceptable materials being used? Is appropriate testing being performed? How is this information communicated internally, across impacted functional areas? How is the information communicated externally, to external partners and suppliers, as needed? How is the information communicated externally to regulatory agencies around the world? These important questions can be expressed in simpler terms, as follows:

• What do you need?
• What do you buy?
• What do you test?
• What do you file?

These questions relate to the selection, sourcing, testing, and filing for excipients and raw materials, and the interplay among them is shown in Figure 1 . Each area is connected to, and impacts, the others, but one key aspect is the potential disconnect that can occur between what is sourced and what is filed for these materials. A consistent, cross-functional approach is necessary for a company to answer the questions in a way that ensures compliance with appropriate regulatory, compendial, functional, and quality requirements. Without a consistent approach that is understood and followed across the entire company, compliance problems can emerge.

Why differences emerge

The level of understanding about the materials used to prepare drug substances and drug products increases as a company moves through the product lifecycle ( Figure 2 ). Beginning in early development, the focus is on ensuring the materials are “fit for purpose”, with appropriate functionality of the materials (“what do you need?”) to support their intended use in the drug substance or product. At this stage, there are also questions about possible sourcing of the materials (“what do you buy?”) and appropriate quality (“what do you test?”). As development continues toward product registration, launch, and supply, the functionality of the material is better understood, and quality and compliance considerations now become most important. The situation is increasingly complicated in today’s global industry, with additional regulatory expectations arising in important markets. Appropriate sourcing and testing are still key considerations (“what do you buy?” and “what do you test?”) that bridge product development to supply, but a critical focus now surrounds the specific details that will be included in the product registration (“what do you file?”).

The differences that emerge in this case study are internal to the company, based on misalignment of expectations and requirements for raw materials and excipients between different functional areas. Without a line-of-sight or end-to-end perspective across the product lifecycle, different areas will likely have different understanding and definitions for the materials used during development, continuing into product launch and supply. Although a definition is provided in the International Council for Harmonization (ICH) Q6 guidelines for an excipient used in a drug product, there is no information about the ingredients that are used in the preparation of the drug substance (7). To enable a consistent process for the selection, sourcing, testing, and filing of excipients and raw materials, it is critical to have clear, practical, and specific definitions, not just for the materials themselves, but also for the grades that may be available. The definitions used for materials throughout this article are listed in Table I and are summarized as follows:

• Raw materials are used in the manufacture of the drug substance and should not be present in the final drug product.
• Residual materials may be used during the manufacture of the drug substance or drug product, but may not be completely removed, and as a result may still be present in the finished product.
• Excipients are ingredients added to the drug substance during manufacture of the drug product and intended to be present in the final product.

While these terms and definitions may differ between different companies, the important point is to have the discussion and reach a common understanding within a company to establish a consistent, cross-functional approach to compliance.

The definitions for materials are based on their use in the manufacture of the drug substance and drug product. The definitions for material grades are based on the materials that are purchased and the testing performed on them. The definitions for grades used in this article are listed in Table II and include compendial grade, multi-compendial grade, supply grade, and reagent grade. Compendial and multi-compendial grade relate to the availability of one or more monographs for the material in the pharmacopoeias. Supply grade is a term used when there is a need for a company to have visibility to the supply chain and change control for the material. As an example, for a material purchased from a distributor, a company may need to be notified if the distributor changes their supplier of the material, as this could have an impact on the drug product manufacture. Similarly, for a material purchased directly from a manufacturer, a company may need to be notified if changes are made to the manufacturing process of the material as this may also impact the manufacture and quality of the drug product. The notification from distributors and manufacturers can be very important for control of the materials used in the highly-regulated bio/pharmaceutical industry. Finally, reagent grade applies to materials not covered by the criteria above. The use of reagent grade materials should be carefully considered to ensure their acceptability in the manufacture of a drug substance or product, from a quality and regulatory perspective.

It is now possible to look at the four questions posed earlier in greater detail, with the common understanding provided by the definitions for materials and grades given above. The underlying questions will enable discussion and drive decisions that are consistent across the various functional areas. Many of the underlying questions are the same  but are examined from different perspectives by different functional areas. The goal is to align on the approach used throughout the product lifecycle for the selection, sourcing, testing, and filing of the materials.

Functionality: what do you need? The question, “what do you need?”, arises at the very beginning of development, and the answer depends on how the material will be used. Is it an excipient used in the drug product, or is it a raw material used in the drug substance? This is a fundamental question that should be easy to answer.

If the material is intended as an excipient, its safety must be confirmed. Is safety or toxicology data available in the literature? Does the material have generally recognized as safe (GRAS) status? Is it listed in the FDA Inactive Ingredient Database showing the maximum level that has been approved in drug products for a particular route of administration or dosage form? When looking at the functionality of the material, it is important to identify the unique characteristics that contribute to its suitability for the intended use. What specific materials and grades should be considered? Will the material support a quality-by-design approach to manufacturing? Is viscosity or particle size important? Are there impurities that can impact the overall quality of the material itself or the quality of the product that will be made from it? Are there residual solvents or elemental impurities present? Depending on its use, is there a need to consider microbiological quality or sterility?

The functional and quality requirements for the materials determined during development are important to other groups involved later in the product lifecycle. These requirements will be tested by the quality groups to ensure the identity, purity, and performance of the materials. The requirements may eventually be listed and justified in product registrations, with potential impact on post-approval change control. At a certain point, questions arise as to the availability of the material. These sourcing considerations are not necessarily fundamental during early development but are critical in late development and commercialization.

Sourcing: what do you buy? The question, “what do you buy?”, builds on the decisions made in new product development and evolves throughout the product lifecycle. Again, you start with the question of how it is used because that, in many ways, determines what you buy. The development scientist may pull a raw material or excipient off the laboratory shelf to start their work. The material may have been purchased through a chemical catalog or it could be a promotional sample from a potential supplier. The scientist might check what is available in the chemical stock or manufacturing area that can be used in development studies.

There is still a need to understand the critical quality attributes (CQAs) for the material to enable discussion with potential suppliers. At this stage, there is a focus on what is available. Is there only one supplier or are there multiple sources that can provide the material? Is visibility to the supply chain or change control necessary and possible for the material?

As product development proceeds, considerations of the cost and available quantities become important. If there are multiple sources for the material, what is the basis for choosing one supplier over others? Is there a need to qualify more than one supplier in case of material shortages? What experiments are needed to ensure suitability of materials from different suppliers for use in the specific formulation? Have the suppliers been previously audited by the company? Were the audit findings acceptable? Are specific materials with different characteristics available (e.g., hydroxypropyl cellulose with different molecular weight and viscosity properties) and is one better suited for the intended function? All of these questions lead to the ultimate determination of the materials and suppliers that will be used in the manufacture of the drug substance and product. These decisions also impact the testing performed and provide information about what may be filed in product registrations. Typically, the purchased materials should be compendial, multi-compendial, or supply grade. In some cases, reagent grade materials may be considered, although the ability to use reagent grade materials in drug product manufacture is fairly limited due to quality and regulatory concerns, in the authors’ experience.

Quality: what do you test? The question, “what do you test?”, depends again on how the material is used. If the material is used as an excipient and there are applicable monographs, the quality groups need to ask whether they will perform all tests in one or more pharmacopoeias. In which countries will the product be filed? This determines which pharmacopoeias may be applicable when ensuring compendial or multi-compendial compliance. What if the material is used as an excipient but is non-compendial, meaning there is no monograph for the material in the pharmacopoeia?

Understanding CQAs for the intended use is again important so that quality testing can be performed to control these characteristics in releasing the material. What tests are performed by the supplier? What are the supplier’s acceptance criteria? One key point in going through the exercise at this stage is that there must be discussion and agreement with the supplier for any additional tests or different limits that will be required based on the use of the material. A company making these decisions in a vacuum or without interaction with the supplier can put the availability of the material at risk and create potential challenges for the company. Release tests should include analytical and microbiological controls to evaluate overall quality, ensuring the identity, purity, and functional suitability of the material. Control of specified impurities is a key consideration. Some tests for the functionality-related characteristics of the material may be performed as “internal tests” and not included in the product registration. These internal tests are performed for release of the material but do not represent a regulatory commitment. This leads to the final question to be considered.

Registration: what do you file? The question, “what do you file?”, also depends on how the material is used because this determines what may be listed in the product registration. One key lesson is that the answers to the prior questions (“what do you need, buy, test?”) do not necessarily have to correlate with what you file. What is listed in the registration does not have to match what is sourced or even tested. This returns to the potential disconnect that was presented earlier in Figure 1 .

At a practical level, how the material is used determines which section of the Common Technical Document (CTD) will contain the information about the material that is provided to regulatory agencies. Recall that the bio/pharmaceutical company must comply with approved product registrations, including applicable compendial requirements. What is listed in the registration becomes a regulatory commitment. Based on how the material is used, does the company need to commit to compendial testing in the registration per the applicable monograph? If used as an excipient, the answer is “yes.” For which pharmacopoeias is the company claiming compliance? It is recommended that compliance with only one pharmacopoeia be listed in any product registration, according to which particular pharmacopoeia is applicable for the specific country to meet regulatory expectations in the filing. This idea will be further detailed in the following strategy section. Are there additional tests, such as quality attributes and functionality testing, that are critical to product manufacture and should be included in the registration?

In determining what to list in the product registration, a company must choose wisely because the decision essentially locks you in. Considering what may be an extreme example, imagine an ingredient used as a “raw material” as defined in this article, and that it is an important component in the preparation of the drug substance. Imagine further that the company wishes to control the particle size of this material, not as a CQA, but to aid in processability during manufacture of the active ingredient. In this example, because it is an important component in the manufacturing process, visibility is needed for the supply chain and change control of the raw material. This situation is consistent with the use of “supply grade” material.

Imagine, however, that the supplier will only assure supply chain visibility if the company purchases “compendial grade” material. It must be stressed that procuring compendial grade material does not mean that compendial compliance must be listed in the registration; nor would particle size testing necessarily need to be included. Perhaps the company has determined that only assurance of the identity of the material is required for quality testing and in the registration to support the material’s intended use in manufacturing. The particle size might be an additional internal test for control, while the company gains more experience with the manufacturing process. If, however, there are disconnects between the different functional groups in the company and in their decisions, it is conceivable that the registration might list compendial compliance (based on the material procured) and the particle size test (based on the testing performed) because a consistent approach was not followed.

The result is an unnecessary regulatory commitment with which the company must now comply. This situation can create challenges for many groups, including quality (“why do we now have to perform testing per the compendial monograph?”), manufacturing (“after scale-up, we no longer need to control particle size for the material”), and procurement (“we would like to change to a lower-cost supplier who provides supply chain visibility for the material without reference to the monograph”). Any changes to address these challenges will require that the company make updates to the product registrations, with the associated difficulties typical of the change control process. This situation illustrates the intersection of the four questions considered and enables discussion of principles and strategies that can help avoid the potential challenges.

Aligning on principles and strategies

The goal is for a company to establish a consistent, cross-functional approach for the selection, sourcing, testing, and filing of materials used to manufacture drug substances and products, in compliance with applicable compendial and regulatory requirements. Consistent principles and strategies should be established that will be followed throughout the product lifecycle by all functional areas in the company. Using the definitions provided earlier, the following principles are proposed:

• Principles for excipients
• An excipient should be compendial grade, unless a monograph for that material is not available in the pharmacopoeia.
• If there is more than one applicable monograph in the multiple pharmacopoeias, the material may be multi-compendial grade.
• An excipient without a compendial monograph should be supply grade.
• Principles for raw materials
• A raw material should be supply grade.
• Even if there is a monograph in the pharmacopoeia for the material, its use as a raw material does not require sourcing, testing, or filing as compendial grade.
• A raw material may be procured as compendial grade (to have supply-chain and change control visibility), but the filing should only include the minimum requirements to ensure the quality and suitability of the material. The filing should not reference the compendial monograph.
• Principles for residual materials
• A residual material may not be applicable in all small-molecule or complex biotherapeutic processes. Whether the material needs to be compendial grade or supply grade should be addressed on a case by case basis.
• The strategy for a residual material would generally align with the raw material strategy.
• Testing and filing should reflect appropriate, minimum requirements for the material.

As stressed before, in establishing the principles within a company, it is important to have the discussion with colleagues from all functional areas involved throughout the drug product lifecycle to develop a consistent approach for the appropriate selection, sourcing, testing, and filing for the materials used.

Strategies for excipients: compendial vs. multi-compendial

The principles given above enable a company to establish their strategy based on the fundamental use of the material as an excipient or raw material. Figure 3 shows an appropriate strategy for the case where the selection process determines an ingredient will be used as an excipient. The other functional area decisions for sourcing, testing, and filing are shown in the three columns, with the corresponding choices for material grade shown in the colored boxes. Assuming there is an applicable monograph in one or more pharmacopoeia, the sourcing decision for an excipient is either compendial or multi-compendial. The testing decision is also compendial or multi-compendial. The filing decision is compendial, with the recommendation that only one pharmacopoeia is referenced for the material in any registration. The decisions in this strategy can be better understood by looking more closely at specific situations.

It is instructive to look at the interplay of the decisions for sourcing and testing when considering whether compendial or multi-compendial grade is the better choice for an excipient used in a particular drug product. It will cost more for a company to purchase an excipient sold as multi-compendial grade because the supplier of the material must perform additional testing to ensure compliance with more than one monograph. The user of the excipient may be able to leverage the multi-compendial testing performed by the supplier to reduce their own testing of the material, by accepting some results from a qualified supplier’s certificate of analysis (COA). This can be done provided the user of the excipient performs at least one specific test to verify the identity of the material. Additionally, the user must establish “…the reliability of the supplier’s analyses through appropriate validation of the supplier’s test results at appropriate intervals”, as stipulated in the US Code of Federal Regulations (8).

Alternatively, the excipient user can perform all testing needed to ensure multi-compendial compliance for the material. This can be accomplished even if the material is purchased to comply with the monograph in only a single pharmacopoeia. This approach is not “testing into compliance”. To be considered compendial grade, a material must be prepared according to recognized principles of good manufacturing practice (GMP) and meet the requirements in the pharmacopoeia monograph, as noted in the USP General Notices (5). With this understanding, a material may be purchased, for example, as “ Ph. Eur. grade”, meaning it has been manufactured under appropriate GMPs and meets the Ph. Eur. monograph requirements. This material can be further tested by the user of the material according to the USP monograph. If the material meets the additional USP requirements, it can be considered to be multi-compendial, because it has been prepared under appropriate GMPs and complies with the monograph requirements in both Ph. Eur. and USP . With this approach, there is a potential business risk that must be understood by the quality and procurement functions in the company. The excipient user may be unable to return material to the supplier if they obtain a failing result for an additional test in the USP , when the supplier has not indicated that the material complies with the USP monograph requirements. Alternatively, there is no need to reject the material if it fails USP testing, but the company would need to control the material inventory, so it is not used where USP compliance is required.

There are, in fact, a wide range of options that a bio/pharmaceutical company may take to ensure multi-compendial compliance for an excipient intended to support global product registrations (9). The most conservative approach is to perform full testing according to the specific tests, methods, and acceptance criteria contained in each monograph. Full multi-compendial testing demands significant resources and time, and, accordingly, will not be the preferred approach in many instances, particularly once the product has reached the supply stage of the lifecycle. There are earlier times during the product lifecycle, however, where this might be a good approach to take. For an excipient used in a drug product biobatch or formal stability batch, demonstration that the material has been tested to comply with applicable pharmacopoeia monographs for the United States, Europe, Japan, and China markets, for example, enables this information to be communicated to regulatory agencies in these countries and may avoid delays in product approval. Obviously, testing would not be required for a national pharmacopoeia if there is no intention to file in that particular country.

Other approaches involve reduced testing as noted earlier, by accepting some results from a supplier’s COA or establishing an appropriate skip-lot testing program. A company may be able to leverage the outcome of excipient harmonization completed by the Pharmacopoeial Discussion Group (PDG) to perform testing per one monograph in the USP , Ph. Eur. , or Japanese Pharmacopoeia ( JP ) to ensure compliance with all three. There is also a strong case to be made for a company to leverage their own “internal harmonization” for excipient testing to ensure multi-compendial compliance. This concept was presented in a different context in the previous article for a drug substance (1), where a company demonstrates equivalency between their currently approved method and a different method published in a new monograph. In the case of excipients, internal harmonization would demonstrate and document that the same results would be obtained using different methods in the different monographs for a particular quality attribute, to reach the same overall accept/reject decision for the excipient. This determination of method equivalency between the different monographs enables a company to perform testing per one pharmacopoeia to ensure compliance with the others used in the equivalency studies. The use of a method other than the one in Ph. Eur. requires prior approval from regulatory agencies in Europe (10). In the case of internal harmonization of excipients, it is recommended that the Ph. Eur. test method be performed to ensure multi-compendial compliance while avoiding this regulatory burden.

Turning to the strategy for the regulatory decision, it is important to keep in mind that a company must comply with pharmacopoeia requirements to which they have committed in their product registrations. To ensure global acceptance for compendial grade excipients used in a drug product, a company should demonstrate compliance with USP and Ph. Eur. monograph requirements, at a minimum. These global pharmacopoeias are accepted by many regulatory agencies well beyond the geographical boundaries covered by the pharmacopoeia (11).

A few additional points are necessary. If the product will be marketed in Japan and there is a JP monograph for the excipient, then compliance with the JP is required for Japan. Filing USP or Ph. Eur. in this case would not be accepted by the Japanese health authority. A similar situation is now clear for China. If there is monograph for the excipient in the Chinese Pharmacopoeia ( ChP ), then compliance with the ChP is mandatory for the excipient used in product going to China. The situation for other countries with their own national pharmacopoeia should also be considered, although the broad acceptance of USP and Ph. Eur. standards may be suitable to regulators in these countries.

Looking more closely at multi-compendial compliance with USP and Ph. Eur. monographs for excipients, what should the company actually file in their product registration? This question relates to the pharmacopoeia reference listed for excipients in CTD section 3.2.P.1 for the composition of the drug product. In an effort to maintain a single product registration for use globally in 150 or more countries, some companies choose to indicate multi-compendial compliance by some combination of the applicable pharmacopoeias, such as “ USP/Ph. Eur .,” “ USP, Ph. Eur. ,” or even “ USP or Ph. Eur .,” perhaps with a footnote indicating compliance with one or the other “as applicable to the particular country”. While the meaning of this regulatory commitment may be apparent for the US and European countries, it is not as clear to regulators in many other countries around the world. Nor is the meaning necessarily clear to the quality group in a company that needs to test an excipient for use in a product intended for one of these countries. Recall that for Japan and China, compliance with the JP and ChP , respectively, is required if they contain a monograph for the excipient. This means the goal of a single registration is not possible for a global bio/pharmaceutical company.

As shown in Figure 3 , it is the authors’ recommendation that only one pharmacopoeia is referenced for the excipient in any registration. This means listing USP compliance for excipients in one registration, which may be filed in 75 or more countries that accept USP compliance. Another registration would list Ph. Eur. compliance for excipients, to be filed in another 75 or more countries, including all of Europe. The benefit of this approach becomes clear when considering the potential impact on global product registrations resulting from an update to the pharmacopoeia monograph. Executing the change control process to implement the monograph update typically requires some degree of regulatory impact assessment by the chemistry, manufacturing, and controls (CMC) function of a company to determine if any actions are necessary. Assume, for example, the update is to the USP monograph. If the company has filed the somewhat ambiguous “ USP/Ph. Eur .” compliance in 150 countries, then the company will need to complete regulatory impact assessment for product registrations in all 150 countries. By contrast, if the company has filed specific compliance to USP in 75 countries, then the impact assessment is only needed for the registrations in these 75 countries. No change control or impact assessment is needed for the other 75 countries where Ph. Eur . compliance has been filed. This approach reduces by half the number of regulatory impact assessments needed by a company as a result of compendial updates. This workload reduction is significant given the time and complexity of looking at so many individual product registrations. Adding the country-specific registration needed for Japan that lists JP excipient compliance and for China that lists ChP excipient compliance, there are a total of only four different registrations needed for global use, acceptable in essentially every country in the world.

There are other approaches that may be taken to ensure appropriate compliance for excipients with monographs in the pharmacopoeia. In Europe, the excipient supplier can apply for Certification of Suitability to the Monographs of the European Pharmacopoeia (CEP). The CEP procedure has been in place for more than 25 years to provide assessment of the manufacturing and quality controls used for an excipient (12). Another approach introduced by USP, the Ingredient Verification Program for Excipients, provides a complete evaluation of an excipient company’s quality system to ensure control of the material’s quality and includes review of manufacturing batch records and release data, a GMP audit, product testing, and continuous surveillance monitoring (13).

Strategies for excipients: Non-compendial

There are some instances where there is no monograph in the pharmacopoeia for an excipient that will be used in a drug product. These so-called “non-compendial” excipients could be novel materials that have not previously been approved in a drug product or simply a material where a pharmacopoeia monograph has not been established. Non-compendial excipients introduce another set of considerations to help guide a company’s strategy. As noted previously, the safety, toxicology, and/or GRAS status must be assessed for the non-compendial excipient. Because compendial grade is not an option, the sourcing decision defaults to supply grade to ensure visibility to the supply chain and change control for the excipient.

The questions now center on the appropriate testing and filing for the material. Looking first at testing, how does the excipient user establish appropriate specifications when there is no compendial monograph for the material? The starting point is the supplier’s specifications, but there are additional questions to be considered. Should the excipient user include all tests from the supplier’s specifications? Should the same methods be used, if they are available from the supplier? Are there tests or methods in the general chapters of the pharmacopoeia that could be used for the material? Should the company apply the same acceptance criteria to the material, or is there a particular range for a quality attribute that is needed for their manufacturing process? Are there other functional requirements that should be added to ensure appropriate control for the excipient? Because the excipient supplier will likely have no visibility to the specific use of the excipient in the drug product, the user must ensure agreement with the supplier on any additional tests or limits for the material. Not doing so could result in the supplier being unable to consistently provide material that meets the user’s specifications, putting the supply of the drug product at risk. The ultimate goal, as emphasized previously, is to establish overall testing requirements that ensure the excipient has appropriate quality, is fit for purpose in the drug product, and can be procured on an ongoing basis.

Once the specifications have been established for the non-compendial excipient, consideration turns to the product registration. In this case, there is not the ability to make the simple but specific reference to quality requirements listed in a monograph for the material. Which of the tests established for the non-compendial excipient should be included in the filing? Clearly, there are tests that are required for the excipient that should be listed, becoming regulatory commitments to control the quality of the material. There may also be some tests that can be maintained as internal tests, as described earlier. Additional information, beyond quality requirements, will also be needed in the registration for a novel excipient.

An interesting situation experienced by one of the authors helps to illustrate the subtlety of the considerations that can enter into a company’s strategy for excipient testing and filing. A new product under development included an excipient that had not been previously used by the company. On searching, the CMC group found there were no monographs for the material in either the USP or Ph. Eur. , but there was a monograph in the French Pharmacopoeia ( Ph. Fr. ). The CMC scientist wanted to take the simple and seemingly appropriate action of filing the excipient to comply with the Ph. Fr. monograph. In discussion with the compendial affairs group, however, it was pointed out that the Ph. Fr . was not included in the company’s pharmacopoeia surveillance process, for a variety of reasons, including available resources and the need for translation. This raised the risk that any future change to the Ph. Fr. excipient monograph could jeopardize the company’s compliance for the material, as committed in the registration. Should the material be filed with the Ph. Fr. reference, which would likely be acceptable throughout Europe, but perhaps not as widely accepted by other countries? Is there another approach that could be taken? The compendial affairs group recommended the material be filed as a non-compendial excipient to avoid the compliance risk. However, the specifications listed in the Ph. Fr. monograph at the time of filing would be used to establish the tests, methods, and acceptance criteria to control the material, becoming manufacturer’s specifications rather than compendial specifications. If questioned upon review by a health authority, the alignment with the Ph. Fr. monograph could be shown. By listing the requirements as manufacturer’s specifications, however, the compliance risk was removed with no additional surveillance activities required by the company to monitor potential changes to the Ph. Fr. monograph. It is conceivable that another company would have made a different decision and filed the excipient to meet the Ph. Fr. requirements. This points to the reality that, taking all considerations into account, there is not always a single decision that is best for all companies. The lesson is that the affected groups should come together and discuss the functional requirements, quality requirements, and regulatory expectations for the material to determine the appropriate strategy.

Strategies for raw materials

The strategies and functional area decisions for the case where the selection process determines an ingredient will be used as a raw material for the preparation of the drug substance are presented in Figure 4. As shown in the columns, the recommended sourcing decision is supply grade or compendial grade, either of which can provide the desired supply chain and change control visibility for the material. Sourcing compendial grade for the raw material does not mean it would be tested or filed as compendial grade. It is unnecessary to consider multi-compendial grade material as this will simply be more costly to purchase. If compendial- or supply-grade material is not available, or if it is otherwise suitable for the material to be purchased as a commodity, then reagent-grade material can be considered, with the cautions mentioned earlier taken into account. The testing decision is to include only the minimum requirements that are needed to ensure the raw material is fit for purpose, in terms of its quality and functional attributes. The filing decision is also to include only the minimum requirements necessary, with no reference made to a compendial monograph, if one is available for the material. In establishing the specifications for the material, some tests from an available monograph or from general chapters in the pharmacopoeia might be included, since these can be useful. There should be no commitment to comply with the monograph, however, because that is neither necessary nor appropriate for the intended use of the raw material in drug substance manufacture. Recall the product lifecycle can span many years from development to registration to supply, with many functional areas involved in decision-making throughout the process. With this in mind, in the authors’ experience, the decisions made for raw materials pose the greatest risk of internal disconnects between what is filed and what is sourced or tested, as represented in Figure 1 . Committing to more than is necessary for the raw material in the product registration has unfortunate practical and long-lasting impact to other functional groups in the company.

Strategies for residual materials

As noted in Figure 4, the strategy for a residual material would generally align with the raw material strategy. Similar to raw materials, the decisions made for residual materials pose a risk of disconnects between what is filed and what is sourced or tested. Consistent application of the principles and strategies described in this article can help avoid these disconnects, ensure appropriate testing, and reduce the potential compliance burden and risk.

Principles and strategies have been provided to help companies develop a consistent, cross-functional approach for the appropriate selection, sourcing, testing, and filing of raw materials used in the preparation of drug substances and excipients used in drug products. Having a common understanding of definitions based on how the materials are used and for material grades based on what is purchased and how it is tested can facilitate appropriate decisions by impacted groups across the product lifecycle. The decision of what is included in the product registration is particularly critical. The often-complex answers to seemingly simple questions-What do you need? What do you buy? What do you test? What do you file?-help guide a company’s decisions that can provide less complexity and ensure compliance with applicable compendial and regulatory requirements.

Acknowledgment

The authors gratefully acknowledge the contribution of Susan J. Schniepp for her technical review and helpful suggestions during the preparation of this series of articles. Sincere appreciation also goes to representatives from the development, quality, regulatory, and compendial affairs functions at Merck & Co., Inc. for valuable discussions over many years that helped shape the concepts, principles, and strategies described in this article.

1. J.M. Wiggins and J.A. Albanese, “ A Practical Approach to Pharmacopoeia Compliance,” Pharmaceutical Technology Regulatory Sourcebook eBook , 24-32 (March 2020).

2. J. M. Wiggins, “Excipients: Appropriate Selection, Sourcing, Testing, and Filing in a Global Environment,” Presentation at Excipient World Conference, National Harbor, MD (May 6–7, 2019).

3. J.M. Wiggins and J.A. Albanese, “Why Pharmacopoeia Compliance Is Necessary,” Pharmaceutical Technology Regulatory Sourcebook eBook , 28–34 (September 2019).

4. EDQM, General Notices, Section 1.1 General Statements-Demonstration of Compliance with the Pharmacopoeia, Ph. Eur. 10th Edition (Jan. 1, 2020).

5. USP, General Notices, Section 3.10 Conformance to Standards-Applicability of Standards, Second Supplement to USP42-NF37 (Dec. 1, 2019).

6. J.M. Wiggins and J.A. Albanese, “Why Pharmacopoeia Compliance Is Difficult,” Pharmaceutical Technology Regulatory Sourcebook eBook , 36–42 (September 2019).

7. ICH, Quality Guidelines, ICH.org .

8. Code of Federal Regulations , Title 21, Chapter I, Subchapter C, Part 211, Subpart E, Section 211.84 (d), “Testing and approval or rejection of components, drug product containers, and closures” .

9. J. M. Wiggins, American Pharmaceutical Review 6 (3), 10–14 (Fall 2003).

10. EDQM, General Notices, Section 1.1 General Statements-Alternative Methods, Ph. Eur. 10th Edition (Jan. 1, 2020).

11. J.M. Wiggins and J.A. Albanese, “Revision Process for Global/National Pharmacopoeias,” Pharmaceutical Technology Regulatory Sourcebook eBook , 17–25 (December 2019).

12. EDQM, “Certification of Suitability-About the Procedure-Background & Legal Framework,” EDQM.eu .

13. USP, “Ingredient Verification Program for Excipients,” USP.org .

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Measuring raw-material criticality of product systems through an economic product importance indicator: a case study of battery-electric vehicles

• LIFE CYCLE SUSTAINABILITY ASSESSMENT
• Open access
• Published: 04 December 2021
• Volume 27 , pages 122–137, ( 2022 )

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• Hauke Lütkehaus 1 ,
• Christian Pade 1 ,
• Matthias Oswald 1 ,
• Urte Brand 1 ,
• Tobias Naegler 1 &
• Thomas Vogt 1  

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The concept of criticality concerns the probability and the possible impacts of shortages in raw-material supply and is usually applied to regional economies or specific industries. With more and more products being highly dependent on potentially critical raw materials, efforts are being made to also incorporate criticality into the framework of life cycle sustainability assessment (LCSA). However, there is still some need for methodological development of indicators to measure raw-material criticality in LCSA.

We therefore introduce ‘economic product importance’ (EPI) as a novel parameter for the product-specific evaluation of the relevance and significance of a certain raw material for a particular product system. We thereby consider both the actual raw-material flows (life cycle inventories) and the life cycle cost. The EPI thus represents a measure for the material-specific product-system vulnerability (another component being the substitutability). Combining the product-system vulnerability of a specific product system towards a certain raw material with the supply disruption probability of that same raw material then yields the product-system specific overall criticality with regard to that raw material. In order to demonstrate our novel approach, we apply it to a case study on a battery-electric vehicle.

Since our approach accounts for the actual amounts of raw materials used in a product and relates their total share of costs to the overall costs of the product, no under- or over-estimation of the mere presence of the raw materials with respect to their relevance for the product system occurs. Consequently, raw materials, e.g. rare earth elements, which are regularly rated highly critical, do not necessarily reach higher criticality ranks within our approach, if they are either needed in very small amounts only or if their share in total costs of the respective product system is very low. Accordingly, in our case study on a battery-electric vehicle product system, most rare earth elements are ranked less critical than bulk materials such as copper or aluminium.

Our EPI approach constitutes a step forward towards a methodology for the raw-material criticality assessment within the LCSA framework, mainly because it allows a product-specific evaluation of product-system vulnerability. Furthermore, it is compatible with common methods for the supply disruption probability calculation — such as GeoPolRisk, ESP or ESSENZ — as well as with available substitutability evaluations. The practicability and usefulness of our approach has been shown by applying it to a battery-electric vehicle.

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1 Introduction and background

A well-informed decision between technology options and alternatives, especially with regard to novel and supposedly ‘green’ technologies, requires some kind of comprehensive multidimensional assessment in order to check for the multitude of possible environmental, economic and social — or sustainability — impacts that the respective technologies actually or potentially may have along their life cycles (i.e. including the stages of raw-material provision , manufacturing and use as well as re-use , recycling , and/or disposal ). Then, based on the results of such an assessment, the various positive and/or negative impacts may be weighed against each other, eventually leading to a decision in favour of one technology option that combines a maximum of positive with a minimum of negative impacts. Furthermore, the assessment results may foster the systematic technological improvement of a technology option, first and foremost, by specifically addressing the technology-immanent causes of possible negative impacts.

Several approaches and methodologies for such a sustainability assessment have been developed, varying in scope, detail, and comprehensiveness (Lu et al. 2019 ; Sala et al. 2015 , 2013a ), with the life cycle sustainability assessment (LCSA) framework (Finkbeiner et al. 2010 ; Kloepffer 2008 ) being one rather comprehensive approach, which is frequently applied and focuses on products and processes while taking a life cycle perspective (Onat et al. 2017 ; Sala et al. 2013b ; Wulf et al. 2019 ). Originating from the environmentally focussed life cycle assessment (LCA) methodology, developmental efforts with regard to LCSA have been — and still are — to a large extent concerned with the extension and operationalisation as well as integration of economic (e.g. Bachmann 2013 ; Onat et al. 2014 ; Wood and Hertwich 2013 ) and social indicators (e.g. Benoît et al. 2010 ; Kühnen and Hahn 2017 ) into the LCSA framework. Despite the considerable progress that has been achieved in this regard during only one decade, quite a few methodological challenges remain to be tackled (Costa et al. 2019 ; Dantas and Soares 2021 ; Fauzi et al. 2019 ). One issue of continuing high interest among the LC(S)A community refers to the question of how to evaluate — in an LC(S)A context — the mineral resources (or abiotic raw materials) that are being used by the assessed products or processes throughout their life cycles (Drielsma et al. 2016a ; Sonderegger et al. 2020 ; Sonnemann et al. 2015 ).

Answering the question of how to treat raw-material use in LC(S)A methodology constitutes a still ongoing process, which is in particular due to the fact that there are a wide range of different aspects and partly diverging perspectives to the topic, resulting in a high overall complexity (André and Ljunggren 2021 ; Berger et al. 2020 ; Drielsma et al. 2016b ). One major point in this regard concerns the ‘area of protection’ (AOP), which would be affected through raw-material use, and how exactly the impacts on that AOP are to be characterised and evaluated (Sonderegger et al. 2017 ). In this respect, the original approach has been to measure the ‘abiotic depletion potential’ (ADP) as one of the impact categories referring to the AOP of ‘natural resources’ (van Oers and Guinée 2016 ). However, there has not only been quite a debate (and some confusion) on how to define and measure the reservoir , so to speak, from which the natural resources, including abiotic raw materials, are being extracted and which would eventually be exhausted, thereby referring to (and sometimes mixing up) terms and definitions regularly used in geology and resource economics, such as ‘crustal content’, ‘resources’ or ‘reserves’ (Drielsma et al. 2016b ). Also, the very idea of especially mineral resources being depleted and thus at some point in the future being completely used up has been contested, arguing that all mineral material will always be present (physically) within the earth’s geochemical system and just be made available (techno-economically) for use in society as long and to the extent demand creates the respective market forces and technology provides the technical means of extracting and processing the respective materials (Bradshaw et al. 2013 ; Northey et al. 2018 ). This latter argument constitutes a shift or widening in perspectives in at least two ways: First, the question of physical existence and ultimate physical depletion of natural stocks of mineral resources is complemented through a much broader analysis of techno-economic availability of raw-material commodities; second, additionally to the natural resources as the (only) AOP relevant for abiotic raw-material use, the assessed technology or product system itself and how it could be affected by (un-)availability of raw materials becomes a focal point of assessment (André and Ljunggren 2021 ; Berger et al. 2020 ; Sonderegger et al. 2020 ).

Analysing and evaluating the impacts of mineral resource use by — as well as mineral raw-material needs of — product systems has thus become a rather complex, i.e. multi-aspect and multi-perspective, endeavour that considers a multitude of geological, geo-, macro- and techno-economic as well as political and even social issues and dynamics of raw-material supply and demand, thereby paying particular attention to actual or potential causes and effects of situations, where demand cannot (sufficiently) be met. This topic is generally referred to as ‘criticality of raw materials’, or just ‘criticality’ (Dewulf et al. 2016 ; Erdmann and Graedel 2011 ; Graedel and Reck 2016 ; Graedel et al. 2015b ; Jin et al. 2016 ; Northey et al. 2018 ; Schrijvers et al. 2020 ), and therefore efforts within LC(S)A development aiming at the life cycle assessment of raw-material usage are currently also dealing with the evaluation of raw-material criticality as well as with its integration into, or complementation to, LC(S)A methodology (Drielsma et al. 2016b ; Koch et al. 2019 ; Mancini et al. 2018 ; Santillán-Saldivar et al. 2020 ; Sonnemann et al. 2015 ).

In general, criticality of raw materials is assessed on different levels (for reviews see: Achzet and Helbig 2013 ; Erdmann and Graedel 2011 ; Graedel and Reck 2016 ; Helbig et al. 2016a ; Jin et al. 2016 ; Schrijvers et al. 2020 ), mainly on (national or regional) economy (e.g. for the European Union or the USA, respectively: European Commission 2020 ; Schulz et al. 2017 ) or sector level (e.g. for various industrial sectors in the European Union: Bobba et al. 2020 ; for the automobile industry: Knobloch et al. 2018 ), but also technology-specific (e.g. for various low-carbon energy technologies: Junne et al. 2020 ; for electric vehicles: Busch et al. 2014 ; Jones et al. 2020 ) as well as down to component level (e.g. for a specific spintronic device used in information and communication technologies: Palomino et al. 2021 ). Due to distinct goals and perspectives of studies, there is no common methodology or harmonized definition that would constitute a standard raw-material criticality assessment procedure for all cases (Dewulf et al. 2016 ; Mancini et al. 2018 ; Schrijvers et al. 2020 ). However, on a very general level, criticality assessment studies can be related to classical risk theory (Frenzel et al. 2017 ; Glöser et al. 2015 ). In this respect, the common approach is characterised by the application of two main dimensions within the assessment, which resemble the exposure and hazard — or likelihood of occurrence and damage — dichotomy of ‘risk’ (cf. André and Ljunggren 2021 ; Bradshaw et al. 2013 ; Glöser et al. 2015 ; Habib and Wenzel 2016 ): (1) the supply disruption probability Footnote 1 (SDP) of the raw material(s) assessed; and (2) the vulnerability of the system under study to a decrease in or a disruption of supply of the respective raw material(s) (e.g. Blengini et al. 2017 ; Cimprich et al. 2018 ; Miyamoto et al. 2019 ).

In most raw-material criticality assessment studies, the SDP of a material is evaluated as the likelihood of a decrease in its supply, an increase in its demand or both (Schrijvers et al. 2020 ). In this context, different sets of numerous criteria or indicators are being used in order to account for the various technological, geological, economic, political, environmental and social factors that influence both parameters, i.e. the amounts of demand and/or supply of a raw material. For example, to evaluate the likelihood of a decrease in supply , common criteria/indicators include some measures of concentration of mining/processing sites in a single or only very few countries worldwide; a monopoly/oligopoly of mining/processing companies; geological abundance/scarcity; political, regulatory and social conditions/stability in the mining/processing countries/regions (governance); recyclability; substitutability (André and Ljunggren 2021 ; Buijs et al. 2012 ; Schrijvers et al. 2020 ). The evaluation of the likelihood of an increase in demand is less often pursued (Schrijvers et al. 2020 ) and usually includes some kind of measure derived from forecasting of (emerging) technologies and markets (Buijs et al. 2012 ; Schrijvers et al. 2020 ). To give an example, Gemechu et al. ( 2016 ) build their ‘GeoPolRisk’ SDP-assessment method on the criteria ‘production concentration’, ‘import shares’ and ‘domestic production’, focussing on geopolitical indicators that are highly dependent on the geographical area in question. Another example would be Bach et al. ( 2016 ), who use — apart from various other criteria in the categories ‘physical availability’, ‘environmental impacts’ and ‘social acceptance’ — a set of no less than eleven indicators in the category ‘socio-economic availability’ (i.e. ‘concentration of reserves’, ‘concentration of mine production’, ‘price variation’, ‘occurrence of co-products’, ‘political stability’, ‘demand growth’, ‘feasibility of exploration projects’, ‘company concentration’, ‘primary material use’, ‘mining capacity’ and ‘trade barriers’), which are — to a large extent — independent of the geographical location of the product system under study (‘ESSENZ’ method).

Vulnerability of a system or entity (such as a regional economy, a nation state, an industry, or a product) — within the raw-material criticality context — generally refers to the type as well as the severity of the potential impact that a disruption or shortage of supply of a certain raw material could have on that system or entity (Helbig et al. 2016a ). This usually includes both the disturbances or damages the supply disruption or shortage could cause to the affected system (such as a curtailment or total halt in industrial production) as well as the available options for that system to counteract (such as substituting the material that has become scarce or unavailable by an alternative one). Accordingly, vulnerability in raw-material criticality assessment is usually described as the (un-)availability of substitutes and/or other possibilities to adapt demand and supply to anticipated changes as well as some measure of the economic value of the affected industry branches, technologies, or products relative to the overall national or regional economy (Helbig et al. 2016a ; Schrijvers et al. 2020 ).

This study aims to contribute to the methodological development of a raw-material criticality evaluation that could be operationalised through an indicator, which could then be integrated into the indicator sets applied within the LCSA framework. In doing so, we would like to support and complement efforts already made by others to include raw-material criticality in LCA (Koch et al. 2019 ; Pell et al. 2019 ) and LCSA (Bach et al. 2016 ; Cimprich et al. 2017 , 2018 ; Sonnemann et al. 2015 ). Unlike stand-alone criticality assessments, which usually refer to the criticality of materials on a global, regional or national level, LCSA-integration of criticality requires certain methodological adaptations as well as specifications in order to harmonise the raw-material criticality approach with the general LC(S)A approach. In this regard, a number of applicable methods have already been proposed elsewhere (Berger et al. 2020 ; Sonderegger et al. 2020 ), and we think that these methods form a good basis as well as show a high potential for further refinement in at least two respects: The first issue refers to the specificity in the level of analysis that is particularly chosen for the vulnerability assessment. In our opinion, the object of the vulnerability assessment should as far as possible match the object of the overall raw-material criticality assessment because a raw material may be of high importance for a certain regional economy (e.g. for the European Union: Blengini et al. 2017 ; Deloitte Sustainability et al. 2017 ), but not necessarily for a specific product being produced in that same region (e.g. for a dental X-ray equipment: Cimprich et al. 2018 ). Therefore, in our view, the evaluation of vulnerability within LCSA studies, which do have a life cycle–oriented product -system focus, could be pursued on a more product -specific level than is usually done within typical raw-material criticality assessments.

The second issue regards the number and types of aspects that are considered within the vulnerability assessment of a product system. In this regard, substitutability is regularly used as (the) one constituting factor of vulnerability in raw-material criticality assessments in general (André and Ljunggren 2021 ; Schrijvers et al. 2020 ). This is also the case for many life cycle–oriented raw-material criticality assessments of products, such as the studies by Cimprich et al. ( 2018 ) and Habib and Wenzel ( 2016 ), where vulnerability is operationalised on product level through a ‘substitutability’ factor. However, apart from a (sudden and complete) physical raw-material unavailability (termed ‘type 2’-events of criticality by Frenzel et al. 2017 , p. 6), which would either lead to the (forced) substitution of that raw material by another one in the already existing product system or bring the production to a halt altogether, there are other scenarios of less severe supply shortages, which would, first of all, lead to price hikes of the respective raw material (called ‘type 1’ events of criticality by Frenzel et al. 2017 , p. 6), which the affected product system would then have to bear. In fact, it is mainly these price spikes and volatilities that spurred the growing interest into the study of raw-material criticality (Buijs et al. 2012 ; Frenzel et al. 2017 ; Leader et al. 2019 ; Malala and Adachi 2021 ). While some studies and methodologies include price fluctuations in their assessment of the SDP , e.g. Bach et al. ( 2016 ) and Arendt et al. ( 2020 ), in our view, raw-material prices or raw-material costs should also be incorporated into the vulnerability assessment of the affected product systems. The reasoning behind would be that the higher or more severe a price increase of a certain raw material would be for a certain product system, the more vulnerable this product system would be with respect to that raw material. This is in line with other authors who, for instance, analysed price spike probabilities of raw materials and their impacts on national economy (Malala and Adachi 2021 ) or the competitiveness of certain clean energy technologies (Leader et al. 2019 ).

In the following, we will first introduce our proposed method for the assessment of raw-material criticality of product systems in an LCSA context. Then, we will apply our method to a case study and present its results. In the subsequent Sect.  4 , the benefits as well as shortcomings of our novel approach will be explained in detail, and our results will be compared to the results of others. Finally, this article concludes with major implications and a brief outlook to further research needs.

As already outlined in Sect.  1 , we propose a novel method for the criticality assessment in the context of the life cycle (sustainability) assessment framework, LC(S)A (Kloeppfer 2008 ; Finkbeiner et al. 2010 ). Figure  1 shows a schematic representation of our approach and depicts the various factors that are to be included for the criticality calculation and will be explained in this section step by step.

General set-up of the proposed assessment approach for raw-material criticality of product systems. This article focuses on the introduction and detailed description of the economic product importance (EPI) factor (coloured in dark blue). All other elements are referred to more generally (light blue)

Aiming at a differentiated assessment of raw-material criticality of product systems, we define an ‘economic product importance’ (EPI) factor. Within our approach, the EPI constitutes the first of two factors that determine the ‘product-system vulnerability’, with substitutability being the second one. Combining then the product-system vulnerability score with a value for the SDP, eventually results in a measure of the raw-material criticality for a given raw material used in a specific product system.

For the calculation of raw-material criticality, we developed the following formula:

where PSV x,p represents the product-system vulnerability of raw material x for product p , with the EPI specifically being calculated as:

where c x represents the amount or mass specific cost of raw material x (in e.g. €/kg), m x,p represents the inventory flow (e.g. amount or mass) of raw material x for product p (in e.g. kg), and C p represents the total cost of the product p (in e.g. €).

2.1 Product system vulnerability

The proposed EPI indicates the economic vulnerability of a product system with regard to price hikes for a certain raw material. As such, the EPI complements the frequently stated argument (e.g. Cimprich et al. 2017 , 2018 ; Habib and Wenzel 2016 ) that each and every raw material used for a product system is in principle essentially needed for the functionality of that system and is therefore in principle equally important to that system. This argument holds, in our opinion, in all those cases, where the material in question would — all of a sudden — be completely physically unavailable (type 2 events; Frenzel et al. 2017 ). However, since the SDP is based on supply decrease and/or demand increase (Schrijvers et al. 2020 ), imbalances — to varying degrees — of supply and demand in the raw-material markets can be expected, resulting, first and foremost, in price changes — also of varying degrees (cf. in general: Bustamante et al. 2019 ; for the example of rare earth elements: Binnemans et al. 2018 ; some historical examples of significant price hikes due to short-term supply decrease and/or demand increase are given in Leader et al. 2019 ; Malala and Adachi 2021 ). In this respect, physical non-availability can be regarded as being only the upper end, or most extreme case, on a rather continuous scale of price hikes: ‘prohibitively high cost, equivalent to no availability’ (Frenzel et al. 2017 , p. 6). Therefore, in all other than the most extreme case, varying degrees (low to medium to high) of price hikes for raw materials (type 1 events; Frenzel et al. 2017 , p. 6) constitute the prevalent effect of SDP materialisation, which must and will be borne — at least in the short to medium run — by the manufacturing companies themselves (lower margins) and/or passed through to intermediate customers and/or to end-consumers (higher prices) (Smith and Eggert 2016 ). But cost absorption or pass-through will have its limits, since it adversely affects the competitiveness of the producer and the product-system, respectively. Thus, in order to adequately reflect this mainly economically driven raw material–specific vulnerability of product systems, we propose the product-system–specific EPI factor that does not treat all raw materials used by the product system equally, but differentiates their importance with regard to the product system via their share in total cost, which is dependent on the raw-material price and on the amounts of raw material used in the product system.

For the determination of the EPI as described in Eq. ( 2 ), some measure of ‘total product cost’ is needed to adequately calculate the cost shares of the raw materials used. In this respect, a number of cost indicators can in principle be considered: (a) production cost or market price, (b) purchase cost or total-cost-of-ownership and (c) life cycle cost.

From the perspective of a company, an adequate choice could be (a) production costs or market price. A company’s margin is determined by the difference between product price and production costs. As such, cost increases due to price increases for raw materials must either be borne by the company in form of lower margins or passed through to customers by price increases. However, there are also factors limiting a company’s price setting like customers’ willingness-to-pay or market prices. A raw-material price increase in many cases not only affects a single company but also competitors, which might result in an adjusted market price. Therefore, of high importance from a company perspective might not only be the potential impact of raw-material price changes on own production cost but also on market price.

Taking a consumer perspective, (b) purchase cost or total-cost-of-ownership might be an adequate choice as this cost must be borne by the owner of the respective technology or product. The purchase cost might be equal, but is not necessarily congruent with, market prices, for there might be supporting schemes (e.g. subsidies), various types of discounts as well as additional costs directly related to the acquisition (e.g. purchase tax). Total-cost-of-ownership additionally includes operational expenditures, which come along with the utilisation of the product and give a comprehensive assessment of user cost. However, which cost is considered by a consumer is likely subject to the respective consumer and product. As such, both measures might generate valuable insights.

Most favourable — from a life cycle perspective — would, in our opinion, be the use of (c) life cycle costs (LCC), as these include all costs related to all (physical) activities along the whole life cycle of a product, irrespectively of which actor bears the costs (Moreau and Weidema 2015 ; Swarr et al. 2011 ). Since we generally adhere to the principle of whole life cycle coverage, which is also at the heart of LC(S)A, we would strongly suggest to apply this principle in LC(S)A-based raw-material criticality assessment, too. Thus, in our view, (environmental) LCC should be preferred for the calculation of the overall product costs to determine the EPI. However, with the elaboration of (a) and (b), we would also like to point out that the choice of how to measure the overall costs of a technology or a product system for the EPI calculation highly depends on the particular motivation and perspective as well as data availability of the respective study.

In any case — (a), (b), or (c) — we would like to stress that the raw-material flows considered in the EPI-calculation need to match the chosen product-system cost indicator. For example, taking the whole life cycle perspective, it would not be sufficient to solely consider those raw materials that are used for the production stage. Instead, raw-material flows in all life cycle stages that are within the scope of the study’s system boundaries have to be taken into consideration. In this respect, Eq. ( 2 ) could easily be extended and/or refined to allow for a life cycle stage–specific examination of the EPI.

2.1.2 Substitutability

Bearing costs is not the only option to cope with supply disruptions. Scarce materials might also be substituted (Goddin 2020 ; Graedel et al. 2015b ). Indeed, substitutability is the most commonly used indicator to assess vulnerability to material supply disruption on various levels (Helbig et al. 2016a ; Schrijvers et al. 2020 ), including product level (Cimprich et al. 2018 , 2019 ). Since, in our opinion, substitutability is very application- or product-specific, we propose substitutability as the other, second factor to be considered within the product-system vulnerability assessment of the product system evaluated. Hereby, substitution can in principle take place at different product stages or levels, such as ‘element-for-element’ (referring to chemical elements), ‘technology-for-element’, ‘grade-for-grade’, component-for-component Footnote 2 and ‘system-for-system’ substitution (Smith and Eggert 2016 ; cf. also: Habib and Wenzel 2016 ; Pavel et al. 2017 ). Which levels of substitutability should in the end be considered is dependent on the specific motivation and goal of the respective study. Since the substitution potential is highly use-case–specific (i.e. product- or application-specific), there is no generic approach available yet to objectively and quantitatively evaluate (raw-material) substitutability. Therefore, substitution potentials can presently only be evaluated through qualitative expert ratings (Helbig et al. 2016a ). Conducting interviews or surveys among experts, however, presents some severe challenges with regard to time and effort (Graedel et al. 2012 ) as well as objectivity and transparency. Despite these challenges of ‘measuring’ substitutability, it should, in our opinion, be considered as one of the main factors that determine vulnerability in criticality assessments. To this end, we would suggest to draw on as much secondary data and intermediate results as possible in order to minimise the necessary time and effort needed for the evaluation of substitutability.

One relatively well-elaborated method to assess direct substitutability is provided as part of the Yale approach to criticality assessment (Graedel et al. 2012 , 2015a , 2015b ), which not only features a relatively high level of transparency but also includes a lot of qualitative data on functional performances of primary substitutes for a large number of different use cases. That method particularly excels by explicitly evaluating substitutability not only on the basis of technical performance but also with regard to substitute availability as well as environmental impact ratio and price ratio (the latter two comparing the performance of the original material with the one of the substitutes). Even though a product -level substitutability is not explicitly considered by Graedel et al. ( 2015a ) and Graedel et al. ( 2012 ), their set of sub-indicators on corporate level might, in our opinion, be transferred to product-level evaluations through reasonable adjustments. Cimprich et al. ( 2018 ), in their criticality assessment of electric vehicles and dental X-ray equipment, do refer to Graedel et al. ( 2015b ) in order to include substitutability into their GeoPolRisk-approach.

In the context of LCSA, different methodologies for SDP determination are applicable, whereby the choice should, in our opinion, be made with regard to the specific perspective of the respective study. While the GeoPolRisk method (Gemechu et al. 2016 ) appears rather appropriate for a national short-term perspective, for the perspective of a globally operating enterprise, the ESP/ESSENZ method (Bach et al. 2016 ) is deemed superior (Berger et al. 2020 ; Cimprich et al. 2019 ). Since the LCSA does not impose a requirement for a particular SDP method, further approaches might also be suitable and applicable with regard to the respective study’s goal and scope (see e.g.: Blengini et al. 2017 ; Graedel et al. 2012 , 2015a ; Helbig et al. 2016b , 2018 ).These are, in our opinion, quite elaborated and well-suited for raw-material criticality assessments, which is why we generally refer to these methods for the SDP calculation within our own approach.

It should be noted that — when applying our criticality assessment approach — the value of the SDP term has in any case to be smaller for a lower SDP and bigger for a higher SDP, regardless of the specific SDP-calculation method being used. This is because the product-system vulnerability score does also show smaller values for less vulnerable product systems and bigger values for more vulnerable ones. In this way, the overall raw-material criticality result will show large values for high SDP and high vulnerability scores. In cases where the SDP score is high, but the vulnerability score is low — or vice versa — the SDP and vulnerability scores will balance each other and result in medium high/low overall criticality values. Mathematically, this outcome is intended, since it does reflect the actual situation: a material with a relatively high potential of becoming scarce (i.e. having a high SDP) would be less problematic for a product system that shows only relatively little vulnerability to that material, but more problematic for a product system that is highly vulnerable to that same material.

3 Case study

3.1 case study methodology.

In order to demonstrate the functionality as well as the usefulness of our approach, we will, in the following, present a case study, in which we apply our approach to the product system of battery-electric vehicles (BEVs). Adhering to the general life cycle sustainability assessment (LCSA) approach (Kloepffer 2008 ), we take a life cycle perspective by including not only the manufacturing of the vehicle itself, but also considering the provision of raw materials, the use phase and — to some extent — the end-of-life stage. Furthermore, a systems view is applied in that also the necessary infrastructure (e.g. for the provision of electricity) is included.

Since the purpose of this paper is primarily to introduce and describe our novel EPI-based raw-material criticality assessment approach, we build our case study mainly around the data provided in two studies published by other groups: Cimprich et al. ( 2019 ), on the one hand, compared three (i.e. focused on regional or global supply disruption probability, SDP) criticality approaches (GeoPolRisk, ESP and ESSENZ) and tested them on the material life cycle inventory of a BEV. From that study, we use the GeoPolRisk-EU-28 characterisation factors for the materials as well as the life cycle inventory flows of the BEV. The work of Bekel and Pauliuk ( 2019 ), on the other hand, combined a life cycle assessment (LCA) of a BEV with a life cycle costing (LCC). Since their basic assumptions regarding the BEV, e.g. lifetime performance and vehicle weight, fit the assumptions made by Cimprich et al. ( 2019 ) quite well, and both studies refer to a similar time-horizon and have a comparable regional scope, we also use the LCC data provided in the publication by Bekel and Pauliuk ( 2019 ). In order to calculate the EPI, we complemented the data from Cimprich et al. ( 2019 ) and Bekel and Pauliuk ( 2019 ) with data on raw-material prices from DERA ( 2018 ). All background data as well as assumptions made for the case study are provided in the Supplementary file . Please note that we did not include the substitutability term into the product-system vulnerability assessment. Therefore, in the case study we present here, the product-system vulnerability is represented through the EPI only. The reason for omitting substitutability for the case study is twofold: First, the main focus of this article is on the theory and methodology of the EPI, the relevance and usefulness of which we would like to emphasise in the case study. Second, as already explained in Sect.  2.1.2 , the determination of substitutability is not a simple matter. For a product system as complex as a BEV, evaluating substitutability is particularly challenging, because the product system is made up of many components that contain the same material(s), but have different functionalities. Thus, assessing the substitutability of such multi-functionate materials with respect to technical performance alone would require quite some efforts in a highly integrated product system such as a BEV. Within the scope of this paper, incorporating substitutability would thus not have been feasible.

3.2 Case study results

Figure  2 summarises the results of our raw-material criticality assessment approach being applied to a selection of raw materials used within a BEV product system.

taken from Cimprich et al. ( 2019 ) (GeoPolRisk characterisation factors EU-28)

Economic product importance (EPI), supply disruption probability (SDP) and raw-material criticality of a selection of seventeen raw materials from a life cycle inventory of a battery-electric vehicle (BEV) product system. For the EPI calculation, data have been used from Cimprich et al. ( 2019 ) (life cycle inventory data of BEV), from Bekel and Pauliuk ( 2019 ) (life cycle cost data of BEV) and from DERA ( 2018 ) (raw-material price data; average prices for the time period 2013–2017). The EPI values are equivalent to the raw materials’ cost shares (dimensionless) of the total cost of the product system. SDP values are dimensionless and have been

The diagram clearly shows that the overall criticality of any of the raw materials is neither dominated by the raw materials’ individual SDP nor by the raw materials’ individual EPI. Therefore, the overall ranking of the raw materials’ criticality is neither equivalent to the rankings with respect to the SDP nor with respect to the EPI alone. Instead, among those raw materials that show the highest overall criticality are raw materials that combine a very high EPI with an only moderate SDP (copper, aluminium, nickel and gold) as well as one raw material that combines an only medium high EPI with a very high SDP (neodymium). Among the raw materials that show a medium high criticality, we see mainly two combinations of SDP and EPI values: medium high EPI combined with medium high SDP (silver and zinc) as well as relatively high SDP combined with relatively low EPI (fluorspar, cerium, palladium, lanthanum, praseodymium and tin). Amongst the raw materials that have a rather low overall criticality are two raw materials showing a relatively high SDP but very low EPI (europium and samarium) and one with both medium low SDP and EPI. Titanium dioxide, finally, reaches the lowest criticality, because it combines a relatively high EPI with an extremely low SDP.

Having a closer and more differentiated look at these results reveals that three main types of raw materials can be distinguished with respect to the raw-material criticality of a BEV product system. Figure  3 plots the EPI of all raw materials assessed against their SDP, which yields three distinct clusters of raw materials.

Economic product importance (EPI) and supply disruption probability (SDP) of a selection of seventeen raw materials from a life cycle inventory of a battery-electric vehicle (BEV) product system. The EPI values ( x -axis) are dimensionless and equivalent to the raw materials’ cost shares of the total cost of the product system. The SDP values are dimensionless ( y -axis). Data sources are equivalent to those given in the capture of Fig.  2

The first one can be found in the upper left corner, containing all rare earth elements of the studied set of raw materials. They show by far the highest SDP of all raw materials in the set. (Please note that the GeoPolRisk framework, which is used here as the measure of SDP, assigns one and the same value to all rare earth elements.) But their EPI values are among the lowest of all raw materials assessed. Thus, except for neodymium, the raw materials of this cluster show only medium to very low overall raw-material criticality values for the BEV product system assessed (cf. Figure  2 ). This is in line with the view of Habib and Wenzel ( 2016 , p. 3854), who note on ‘specialty metals’ that these ‘can be essential to a technology, but still used in very small quantities, and hence contribute insignificantly to the overall cost of the product. In such cases, an unexpected price hike for these speciality metals is often improbable to result in significant overall production cost increase or in any significant rollback of the overall technology’.

The second cluster can be found in the lower left corner of the diagram of Fig.  3 . The cluster is made up of a number of raw materials the SDP and EPI of which show low to very low values. Therefore, all raw materials contained in this cluster are ranked low to very low with regard to their overall criticality (cf. Figure  2 ).

The third cluster contains three elements, namely gold, nickel and copper, all of which are situated in the lower right corner of the diagram (Fig.  3 ). The EPI of these three raw materials is high to very high (compared to all other raw materials of the set). Since, at the same time, their SDP is low, but not very low, their overall criticality reaches the highest values among all materials of the set, making copper the most critical raw material, nickel the third and gold the fourth critical one (for the BEV product system) of all raw materials assessed (cf. Figure  2 ).

The raw material that is ranked second with respect to its overall raw-material criticality is aluminium (cf. Figure  2 ). In case of aluminium, both SDP and EPI are medium high/low, which is why it does not fall into one of the three clusters presented above (cf. Figure  3 ). However, neither its SDP nor its EPI is low or very low, and thus aluminium is valued the second most critical raw material used in a BEV product system according to our assessment approach.

4 Discussion

As we have outlined in Sect.  1 , raw-material criticality for technologies or product systems in the context of LCSA (Finkbeiner et al. 2010 ; Kloepffer 2008 ) is not only dependent on the raw materials’ SDP, but also on the product-specific vulnerability of the assessed technology or product system to the SDP of these raw materials. Particularly with regard to this product-system–specific vulnerability assessment, we see the potential as well as the possibility for a further methodological differentiation and refinement, which is why we suggest our EPI-factor as a complementary indicator within life cycle–oriented criticality assessments of product systems, as they have already been proposed by others.

Cimprich et al. ( 2017 ), for instance, introduced their ‘economic importance’ factor for each material assessed in order to measure vulnerability on product level (also comparing conventional with electric vehicles). However, by arguing that every input was equally important for the product system’s functionality, regardless of the specific amounts of materials actually used for the product, they eventually cancelled out the amounts (i.e. masses) of all material inventory flows. In this way, Cimprich et al. ( 2017 ) indeed avoid the mass-dominance problem typically observed with life cycle inventories of products (Mancini et al. 2018 ). Similarly, Cimprich et al. ( 2018 ) as well as Habib and Wenzel ( 2016 ) base their vulnerability assessments primarily on the raw-material substitutability, also not considering the actual amounts of the raw materials used for the assessed products. The approaches just mentioned may be deemed sufficient in all ‘type 2’ events of criticality (Frenzel et al. 2017 , p. 6), where physical supply of a certain raw material is completely interrupted and e.g. a manufacturer of a certain product will have no other choice than substituting the unavailable material or stop production altogether — regardless of how small the quantity of material needed was. But, as mentioned by Cimprich et al. ( 2018 ) too, supply disruption can manifest in different ways, with price increases (rather than total physical unavailability) of raw materials being another probable and frequently observed scenario (called ‘type 1’ events by Frenzel et al. 2017 , p. 6; cf. also Buijs et al. 2012 ; Leader et al. 2019 ; Malala and Adachi 2021 ). Therefore, we propose our EPI, which does take into consideration both the amount (e.g. the mass) of a certain raw material used within a product system as well as the raw material’s cost (per unit). The core logic of the EPI follows the argument that, from an economic perspective, the vulnerability of a product system to supply shortages of a certain raw material is determined by that raw material’s share of overall product system costs. This is based on the fact that the higher the cost share of a raw material is, the higher will be its relative impact on overall product system costs when the price (per unit) of that raw material increases (cf. Leader et al. 2019 ). Consequently, through the application of the EPI, a product system’s vulnerability and thus its criticality with regard to a certain raw material is neither fully driven by that material’s total amount used within the product system (Bach et al. 2016 ; Cimprich et al. 2017 ; Mancini et al. 2018 ) nor is the vulnerability more or less entirely determined by the material’s mere presence in the product system (regardless of the actual amounts of the material used in the product system), which would result in an overall criticality value that is proportional to that of the material’s SDP (Cimprich et al. 2017 ). Footnote 3 Instead, the EPI relates the physical weight of a raw material to its economic weight by considering both the absolute amount (i.e. mass) of a raw material used in a product system and the corresponding cost imposed by that raw material’s total amount used on the overall costs of the product system. The EPI, therefore, mitigates the mass-related conflict in LCA-based criticality evaluations: avoiding mass-dominance by not considering mass at all (Mancini et al. 2018 ) against promoting resource efficiency by putting particularly strong emphasis on the amounts of raw materials used (Cimprich et al. 2017 ).

Since the EPI represents essentially the total cost of the total amount of a raw material used in a product system relative to the overall cost of that system, it gives back values between [0] and [1] (with zero for all cases in which a raw material is not part of a product or its life cycle, and one if the raw material in focus makes up for all of the product cost — the latter arguably being a rather theoretical case). It should be noted that relatively low scores do not necessarily signal insignificance with respect to the economic product importance of the respective material (i.e. low EPI values do not necessarily mean low ‘importance’ with respect to product-related economic values). Especially when assessing hi-tech products, relatively low EPI scores are to be commonly expected, since raw-material costs usually account only for a minor share of total costs in processing industries (Wilting and Hanemaaijer 2014 ) and might, furthermore, be distributed across a broad range of different raw materials. Still, relatively low costs for raw materials within a certain product system may very well become highly relevant, depending on the specific case and perspective. If, for instance, a product system that is already marketed with a very low profit margin for the producer sees a significant price increase for one or more raw materials essentially needed for the production of that product (i.e. if a typical criticality scenario occurs), the resulting increase in the raw materials’ related cost of production could lead to an increase in the total cost of production, making the respective product eventually unprofitable for the producer. Therefore, meaningful thresholds for (in-)significance can, in our opinion, not be defined on a general basis for the specific values of EPI calculated in real case studies for particular products.

Comparing the results of our case study (cf. Sect.  3 ) to other raw-material criticality assessments demonstrates in which way our approach stands out against others and what kind of insights can be gained through an application of our method. Most obvious, in this regard, is the fact that the raw materials’ relative level of criticality (i.e. the ranking of the raw materials), which we calculated using our approach, significantly differs from the criticality rankings generated by other authors. Cimprich et al. ( 2017 ), for instance, assessed the criticality of a large set of materials for a BEV, thereby also applying the GeoPolRisk factors for the SDP calculation. However, since they did not account for any concrete amounts of materials present in the life cycle inventory of the BEV (their formula ‘cancels out’ the inventory flows; Cimprich et al. 2017 , p. 758), their results resemble the GeoPolRisk-SDP values for the materials assessed (Cimprich et al. 2017 ). Consequently, in the study by Cimprich et al. ( 2017 ), neodymium, as one of the rare earth elements that usually show very high SDPs, is rated as the most critical raw material (with a GeoPolRisk EU-28 value of 0.5181), followed by magnesium (with a value of 0.4435) and all other materials assessed with considerably lower values (below 0.2318) (Cimprich et al 2017 , Table S1 , Supplementary Material, p. 1). In our study, neodymium is only ranked fifth (with a criticality-value of 1.1242*10 −4 , with gold, nickel, aluminium and copper showing considerably higher values for overall criticality (2.6827*10 −4 , 2.9466*10 −4 , 3.1681*10 −4 and 8.1204*10 −4 respectively; cf. Figure  2 and sheet ‘Critic Calc’ in Supplement ). This is due to the fact that we do consider the total amounts of raw materials used in the product system, which are relatively large for nickel, aluminium and copper (in kg/vehicle-km: 2.78422*10 −4 , 6.79816*10 −4 , and 7.81613*10 −4 , respectively; cf. sheet ‘EPI Calc’ in Supplement ) as well as the total cost share of the materials used with regard to the overall cost of the product system, which is relatively high for gold (0.521%; cf. sheet EPI Calc in Supplement ). Since Cimprich et al. ( 2017 ) — in their study on a BEV — do not take these factors into consideration, they value the criticality of aluminium and copper rather low (0.0820 and 0.0713, respectively) and the criticality of nickel and gold even very low (0.0505 and 0.0198, respectively, as compared to neodymium that receives a value of 0.5181; Cimprich et al 2017 , Table S1 , Supplementary Material, p. 1).

One further advantage of our approach can be seen in its ability to capture the dynamics of raw-material supply and its impact on cost developments, as can be demonstrated with copper and samarium. In our case study, the raw-material criticality of copper was ranked highest (8.1204*10 −4 ), because it combines the highest EPI value (8.6951*10 −3 ) with a still considerably high SDP value (ranked 6th with a value of 0.093; cf. Figure  2 and sheet ‘Critic Calc’ in Supplement ). Footnote 4 Since the EPI value equals the cost share of the raw material relative to the overall cost of the product system (cf. Figures  2 and 3 ), it can be seen that the amounts of copper used over the life cycle of a BEV product system result in a cost share of about 0.9% (assuming the copper average-price for the time period 2013–2017). Therefore, a cost increase of the raw-material price of copper of about 10%, which occurred for the time period July 2017–June 2018 as compared to the time period 2013–2017 (DERA 2018 ), or of about 52% (increase in average price of copper in April 2021 as compared to 2013–2017 average; DERA 2021 ) translates into an increase in overall cost of the BEV product system of about 0.09% or about 0.47%, respectively. Whether or not such a (relatively small) increase in overall cost of a product system would (already) be valued problematic will certainly depend on many factors, such as the companies’ profit margins or the customers’ willingness to pay. However, such cost impacts are probably not negligible, a view also articulated by Leader et al. ( 2019 ), who analysed potential cost impacts of price increases in cobalt, lithium, manganese and nickel as well as a number of rare earth elements on components of clean energy technologies such as fuel-cell stacks for fuel-cell vehicles, permanent-magnet generators for wind turbines and lithium-ion batteries for electric vehicles. They used, on the one hand, historic price-spike data and, on the other hand, generally assumed a doubling in raw-material prices, which resulted in total price increases of up to 17% for the fuel-cell stack and up to 41% for the permanent-magnet generators (both based on historic raw-material price-spike data) as well as up to 27% for certain lithium-ion battery types (assuming a doubling in raw-material prices) (Leader et al. 2019 ).

Turning to samarium, on the other hand, gives quite another picture. Since samarium belongs to the rare earth elements (which are treated as one single group of materials in the GeoPolRisk SDP-calculation method), it shows by far the highest SDP value (0.4268, as compared to the 2nd ranked fluorspar with a value of only 0.1498; cf. Figures  2 and 3 as well as sheet ‘Critic Calc’ in Supplement ). However, due to the extremely small amounts needed in the BEV product system, its EPI is by far the lowest (about 0.0006%, followed by 2nd-ranked europium with a value of 0.0025%; cf. Figures  2 and 3 as well as sheet ‘EPI Calc’ in Supplement ) of all materials assessed. Consequently, either the total amount of samarium needed in the product system or its raw-material price would have to increase more than 1.000-fold in order to reach an overall criticality that would be comparable to that of copper. Although rare earth elements do indeed show quite remarkable fluctuations in price — the average price of samarium dropped 32.5% for the period July 2017–June 2018 (DERA 2018 ) and even 41.8% for the period May 2020–April 2021 as compared to the average price for the period 2013–2017 (DERA 2021 ), respectively —, price increases or decreases over several orders of magnitude can be deemed highly improbable even for rare earth elements (at least over such time periods that are relevant for the life cycles of product systems). To allow for a broader and more detailed interpretation, the changes in average prices for all raw materials for the time period July 2017–June 2018 as compared to the average prices for the period 2013–2017 have been analysed (cf. Fig.  S1 in the Supplement) and their impact on overall criticality calculated (cf. Fig. S2 in the Supplement). It turns out that price changes occurred within limits of −84.9% (for europium) and 44.8% for zinc). These price changes, in turn, led to very few changes in the ranking of the materials with respect to overall criticality: the top five (copper, aluminium, nickel, gold, and neodymium; in descending order) did not change at all; in the mid-tier, a few materials changed places by ‘climbing up’ or ‘falling down’ up to three ranks; the bottom four ranks changed only slightly by switching ranks ( from europium, lead, samarium, titanium dioxide to lead, samarium, europium, titanium dioxide; in descending order). Since the SDP-data used have been the same (there were no updated data for the GeoPolRisk factors available), the calculated percentual changes in overall criticality resemble the percentual changes in raw-material prices, with the biggest changes shown by europium (−84%) and zinc (44.8%).

Although the proposed methodology is quite straight forward, it should be applied with caution because our approach can certainly not fully display the complexity of the scarcity-price-relationship of raw materials. Although the general idea borrowed from market economy, which implies that a decreasing supply of a good at steady or increasing demand leads to higher prices for that good, may be plausible and generally apply to raw materials too, there is more to it than that. For instance, as Gleich et al. ( 2013 ) in their statistical analysis of prices for 42 commodities over a time-span of 26 years have shown, there are at least eleven factors influencing commodity prices — to varying extents and in different ways for different commodities. Another aspect in this regard constitutes the fact that there are dynamic inter dependencies between supply increase/decrease and price increase/decrease, which work in both directions: not only can a decrease in supply lead to price increases, but also higher prices may lead to increases in supply (Achzet and Helbig 2013 ; Bradshaw et al. 2013 ; Fu et al. 2019 ; Ioannidou et al. 2019 ), e.g. through driving efforts to mine lower-grade ores, which would not have been economical at lower raw-material prices.

Moreover, the application of our approach to real cases, as can be seen in the case study above, poses a number of challenges that should be subject to further research efforts. Firstly, depending on the specific product system that is to be assessed, compiling the necessary life cycle inventories of all raw materials used may be a quite difficult a task to accomplish, because many modern, especially hi-tech products are of high complexity and contain hundreds to thousands of deeply integrated components incorporating almost all elements from the periodic table. Additionally, confidentiality issues at the side of the manufacturers of the products more often than not significantly hinder data acquisition with regard to raw-material inventories. For similar reasons, it may, secondly, be quite difficult to acquire the data on raw-material prices necessary for the cost calculations. In this respect, there are serious constraints to both the raw-material prices used in the product system at the time of assessment as well as to the future changes in these raw-material prices due to supply shortages or disruptions. The biggest challenge of all, however, probably lies, thirdly, in the evaluation of substitutability. Here, substitute performance appears to be particularly hard to determine, since it can usually not simply be derived from a material itself, i.e. its physical and chemical properties, but is very much product and application specific and may even differ for different components and/or different functions of these components within or across product systems. Consequently, the determination of substitutability requires a great deal of highly specific expert knowledge, the acquisition of which is extremely resource consuming with regard to time and effort needed.

5 Conclusion and outlook

In the preceding sections of this article, we introduce and describe a novel approach to assess raw-material criticality on product-system level. The proposed methodology thereby combines common criticality assessments, which typically evaluate SDPs for a broad spectrum of materials on a global, regional or national scale, with a LC(S)A perspective and methodology, which characteristically determines the ‘cradle-to-grave’ resource demands and other environmental (as well as economic and social) impacts of products via detailed and comprehensive life cycle inventories of materials and energy needed. Although there have already been attempts by others to integrate raw-material criticality into LC(S)A, the approach presented here does, to the best of our knowledge, for the first time define and apply a raw-material- and product-specific economic product importance (EPI) indicator that directly relates the SDP as well as the usage of a certain (amount of a) raw material within a product system to the raw material’s share of total cost of that product system along its life cycle. Since our framework, at the same time, allows in theory to integrate raw-material substitutability including its various sub-dimensions, it enables a differentiated evaluation of a product system’s vulnerability to decreases or disruptions in raw-material supplies. As a result, our approach allows raw-material criticality assessments on product-system level. This is mainly due to the fact that the functions applied within our approach moderate between, on the one hand, the raw material’s SDP and, on the other hand, the amounts of a raw material present in a product system as well as the relative cost of the raw material to the product system. Therefore, the danger that one or more of the aforementioned factors could be overestimated or underestimated is reduced. However, as mentioned in the Sect.  4 , our approach still simplifies the complexity of supply/demand and price relations, and there are still some challenges in applying the proposed criticality assessment methodology to real cases, e.g. with regard to the collection of inventory data or material price data. Also, determining substitutability remains one of the biggest challenges for conducting a criticality assessment, as this requires a lot of time and expert knowledge particularly for complex products.

However, since we deem none of the just mentioned methodological hurdles impossible to be overcome through further research, we regard our approach for product-level criticality assessment feasible in the short to medium run. Moreover, we hope that the distinct features of our approach, which we have explained and discussed in detail throughout the previous sections of this article, could be of good use and value to LC(S)A-integrated raw-material criticality assessments of products, as they will help to identify ‘critical’ issues related to the raw-material base of products and thus foster the improvement of existing as well as the design of novel products towards a greener and more sustainable future.

Data availability

All data generated or analysed during this study are included in this published article and its supplementary information file.

Supply disruption probability is regularly referred to as supply ‘risk’ (e.g. Blengini et al. 2017 ; Graedel et al. 2012 ; Helbig et al. 2016b ). As the underlying conceptualisations are not in accordance with classical risk theory, the term supply risk is highly misleading (Frenzel et al. 2017 ). Therefore, in this study, the term supply disruption probability is used instead (in accordance with e.g. Cimprich et al. 2019 ).

Smith and Eggert ( 2016 ) develop their framework of material substitution on the example of permanent magnets, which is why they actually refer to ‘magnet-for-magnet’ substitution. In their study, the magnets are discussed as components in wind turbines and electric vehicles, so the more general term for the ‘magnet-for-magnet’ substitution would translate into ‘component-for-component’ substitution, if the framework of Smith and Eggert ( 2016 ) was transferred to other products or applications.

Please note that Cimprich et al. ( 2018 ) also assessed the substitutability of a raw material as part of the vulnerability assessment, which we also value as an essential part of such an assessment, even though we did not demonstrate this ourselves in this article.

Rare earth elements are treated as one single group of materials in the GeoPolRisk SDP-calculation method.

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Lütkehaus, H., Pade, C., Oswald, M. et al. Measuring raw-material criticality of product systems through an economic product importance indicator: a case study of battery-electric vehicles. Int J Life Cycle Assess 27 , 122–137 (2022). https://doi.org/10.1007/s11367-021-02002-z

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Challenges for critical raw material recovery from WEEE - The case study of gallium

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• 1 Technische Universität Berlin, Institute of Environmental Technology, Sekr. Z2, Chair of Circular Economy and Recycling Technology, Straβe des 17. Juni 135, D-10623 Berlin, Germany. Electronic address: http://www.circulareconomy.tu-berlin.de.
• 2 Technische Universität Berlin, Institute of Environmental Technology, Sekr. Z2, Chair of Circular Economy and Recycling Technology, Straβe des 17. Juni 135, D-10623 Berlin, Germany. Electronic address: [email protected].
• PMID: 28089397
• DOI: 10.1016/j.wasman.2016.12.035

Gallium and gallium compounds are more frequently used in future oriented technologies such as photovoltaics, light diodes and semiconductor technology. In the long term the supply risk is estimated to be critical. Germany is one of the major primary gallium producer, recycler of gallium from new scrap and GaAs wafer producer. Therefore, new concepts for a resource saving handling of gallium and appropriate recycling strategies have to be designed. This study focus on options for a possible recycling of gallium from waste electric and electronic equipment. To identify first starting points, a substance flow analysis was carried out for gallium applied in integrated circuits applied on printed circuit boards and for LEDs used for background lighting in Germany in 2012. Moreover, integrated circuits (radio amplifier chips) were investigated in detail to deduce first approaches for a recycling of such components. An analysis of recycling barriers was carried out in order to investigate general opportunities and risks for the recycling of gallium from chips and LEDs. Results show, that significant gallium losses arose in primary production and in waste management. 93±11%, equivalent to 43,000±4700kg of the total gallium potential was lost over the whole primary production process until applied in electronic goods. The largest share of 14,000±2300kggallium was lost in the production process of primary raw materials. The subsequent refining process was related to additional 6900±3700kg and the chip and wafer production to 21,700±3200kg lost gallium. Results for the waste management revealed only low collection rates for related end-of-life devices. Not collected devices held 300 ± 200 kg gallium. Due to the fact, that current waste management processes do not recover gallium, further 80 ± 10 kg gallium were lost. A thermal pre-treatment of the chips, followed by a manual separation allowed an isolation of gallium rich fractions, with gallium mass fractions up to 35%. Here, gallium loads per chip were between 0.9 and 1.3mg. Copper, gold and arsenic were determined as well. Further treatment options for this gallium rich fraction were assessed. The conventional pyrometallurgical copper route might be feasible. A recovery of gold and gallium in combination with copper is possible due to a compatibility with this base-metal. But, a selective separation prior to this process is necessary. Diluted with other materials, the gallium content would be too low. The recycling of gallium from chips applied on printed circuit boards and LEDs used for background lighting is technically complex. Recycling barriers exist over the whole recycling chain. A forthcoming commercial implementation is not expected in nearer future. This applies in particular for chips carrying gallium.

Keywords: Critical metals; Gallium; Material flow analysis; Recovery; Recycling; Recycling barriers; Substance flow analysis (SFA); Waste Electric and Electronic Equipment (WEEE).

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How Lumi helped a textile manufacturer reduce raw material procurement costs by 38%

Lumi AI provided a crucial advantage for a textile manufacturer by identifying significant price discrepancies across raw material suppliers

In the competitive textile landscape, managing procurement costs efficiently is crucial for maintaining profitability.

Using Lumi, the team implemented a two-step analytical approach to find suppliers charging more for the same raw materials.

Through strategic supplier consolidation, the company saw a remarkable 38% reduction in procurement costs!

In the competitive textile manufacturing landscape, managing procurement costs efficiently is crucial for maintaining profitability.

The challenge for our client was twofold: managing a vast portfolio of approximately 20,000 raw materials and navigating a complex network of suppliers through their SAP ERP system.

The lack of insight into price variances for identical materials resulted in missed opportunities for cost savings, compounded by the sheer volume and complexity of procurement transactions.

To tackle these challenges, the manufacturer user Lumi AI, an advanced analytics solution designed to streamline data analysis and uncover hidden savings opportunities within procurement operations using plain language prompts.

Lumi's integration with the client's SAP ERP system enabled real-time access to procurement data, providing a comprehensive view of purchasing activities.

Using Lumi, the team implemented a two-step analytical approach:

1. Comprehensive Analysis of Purchasing Data

Lumi first identified top-purchased items in 2023 that were sourced from multiple suppliers.

2. Comprehensive Analysis of Purchasing Data

Lumi then analyzed the average unit cost by supplier, focusing on identifying inefficiencies and opportunities for cost optimization.

The strategic insights provided by Lumi AI optimized the textile manufacturer's procurement strategy.

By consolidating their purchases of materials to suppliers with more favorable prices, the client realized a dramatic reduction in raw material procurement costs by approximately 38%. This significant cost saving directly improved their bottom line, enhancing competitiveness in a challenging market.

Lumi allowed us to identify those items purchased in same month from different suppliers. This helped us negotiate better with our vendor and improve procurement efficiency by ordering more from cost effective vendors.

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Raw Material Supplier and Detergent Manufacturer Cooperate in Environmental Safety Assessment of a New Detergent Raw Material – A Case Study

• N. Stelter , D. Lee , +1 author J. Tolls
• Published 2019
• Environmental Science

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Biodegradability of polyvinyl alcohol based film used for liquid detergent capsules, 4 references, related papers.

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Case spotlight: Boeing’s Strategic Initiative: Raw Material Supply Chain Risk Mitigation

This case was featured in  Connect , issue 43, January 2020 .

Author perspective

Who – the protagonist.

Andrew Burgess, Senior Manager of supplier performance for aircraft materials and structures at The Boeing Company .

Boeing is a global leader in the design, manufacture and sale of commercial and military aerospace equipment.

Aluminium and titanium are key to Boeing’s raw material production, so if they couldn’t obtain the material they needed to produce parts, airplanes couldn’t be built.

The risks urgently needed to be mitigated as Boeing were at risk of losing supply from one of its largest titanium mills in Russia, with the US Government looking to ramp up trade sanctions on the country.

In 2014 and 2015 Boeing paid over $2.6 million in penalty charges for failing to meet minimum mill scrap recycling requirements.

By 2017, Boeing was collecting almost all of its recoverable titanium scrap, but around 60% of the scrap was classified as non-recoverable.

Boeing is the top US manufacturer exporter, supporting airlines and government customers in 150 countries.

“Boeing relied on suppliers to deliver millions of parts on time and at an acceptable quality standard to assemble airplanes for timely delivery. If even one part was missing, planes could not be delivered, making supply chain risk assessment a critical part of Boeing’s strategy.” Excerpt from the case.

Andrew faced a number of questions. How could the company better forecast its raw material needs? How could it rework its PRA process to better suit raw material mills? Could it better limit errors in the ordering, processing and shipment steps of the supply chain?

AUTHOR PERSPECTIVE 

Placing things into context

Prakash said: “Students really enjoy the realistic context of the case study. This case provides adequate facts and data, so that students can quickly grasp the serious threat to Boeing of raw material supply disruption from aluminium and titanium mills. They appreciate how a large, global, high technology company like Boeing can be quite vulnerable to basic metal supply and demand. Also, the name “Boeing” itself adds to the cache of the case.”

Perfect case

Prakash continued: “The case was written and published prior to the public disclosure of the full extent of the 737 Max problems. In retrospect, I think it is a perfect case to analyse.

“The analysis reveals that Boeing is an extremely well-run company and has good management systems in place to run their business, albeit these management processes can always be improved. The case provides students opportunities to identify these improvements.”

He concluded: “I think cases in the Production and Operations Management field have certain vigour and vitality. They are data rich and usually describe real life situations that students can relate to.

“Personally, I am biased towards Production and Operations management issues because this is where “all the action is.” This is where companies produce products, provide services and contribute to the well-being of society.” 

The protagonist

Educators can login to view a free educator preview copy of this case and its teaching note.

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Global Materials Perspective 2024

The global metals and mining industry is entering a new era. Historically, the industry has been driven by economic growth and the development of the middle class, resulting in major demand growth for materials such as steel, aluminum, and coal. While 80 percent of the industry today primarily consists of five materials—steel, coal, gold, copper, and aluminum—the landscape is rapidly changing as a result of the energy transition.

Indeed, the energy transition is first and foremost a physical transformation and the key challenges are therefore mostly physical, including the timely availability of materials embedded in low-carbon technologies (as detailed in McKinsey Global Institute’s 2024 report, The hard stuff: Navigating the physical realities of the energy transition ). The energy transition is changing the materials landscape in three ways:

• It accelerates demand growth for materials that are embedded in low-carbon technologies as these technologies typically require more embedded materials than their conventional counterparts. For example, battery electric vehicles (BEVs) are typically 15 to 20 percent heavier than comparable internal combustion engine (ICE) vehicles.
• It triggers a long-term shift of the materials demand profile as low-carbon technologies require a different set of energy transition materials, which is gradually increasing the relative importance of these materials in the overall metals and mining portfolio.
• It drives a long-term reduction of thermal coal in the energy system, currently the second largest material in metals and mining measured by revenue (2023).

Key materials for the energy transition are crucial to achieve decarbonization in the global energy system—and a lack of sufficient and affordable supply would therefore risk hindering the at-speed deployment of crucial low-carbon technologies. This report aims to provide a fact base and perspective on the need to scale these materials sustainably and affordably. We present a view of the possible road ahead, based on data from approved, publicly available sources, checking this view against three energy transition scenarios differentiated by the speed of the transition as well as two supply scenarios modeled by McKinsey Metal&MineSpans and based on asset level insights.

The road ahead will inevitably bring challenges, including how to accelerate the scaling of supply to meet new demand patterns, how to keep materials affordable so they can continue to support the energy transition and fuel economic growth, and how to improve the sustainability of the industry. This is not simple, especially in the context of an evolving global policy landscape that further increases uncertainty for investors.

However, we are hopeful that the industry’s response to the energy transition also presents substantial business opportunities for incumbents and new entrants alike, whether from conscious portfolio shifts, disruptive innovation, new business models, or the next wave of operational and capital expenditure (capex) advances, in some cases enabled by AI.

Despite a turbulent environment, finances were healthy until 2023—yet 2024 has a gloomier outlook

The materials industry has grown revenue by 6 percent per annum since 2000

The past two to three years have posed some challenges for the materials industry, with high price volatility driven by increased supply chain disruptions and volatility in energy prices, among other factors. While the industry has experienced previous cycles of boom and bust, these recent fluctuations are unprecedented in scale.

Despite the challenges, the materials industry has shown strong financial results over the past few years when compared with historical averages. Revenues grew by approximately $2.4 trillion (more than 40 percent) from 2020 to 2023, primarily driven by metals and mining, which grew by $1.7 trillion (an increase of approximately 75 percent). During the same period, EBITDA in metals and mining nearly doubled, increasing from $500 billion to $900 billion.

Overall, balance sheets are healthy, with net debt over EBITDA ratios of 1.3 times—well below the through-cycle average of 1.8 times—providing companies with more investment capacity.

However, 2024 is projected to be a more challenging year for the industry as overall economic growth slows down and the shift toward low-carbon technologies unfolds more slowly than expected, both of which are putting downward pressure on price levels, especially for battery materials such as nickel and lithium.

In metals and mining, around 80 percent of revenues stem from just five materials

Steel, thermal coal, copper, gold, and aluminum dominate the sector

The $4 trillion metals and mining industry is largely composed of just five materials: steel (including iron ore and metallurgical coal), thermal coal, copper, gold, and aluminum. Of these, thermal coal and steel account for approximately 60 to 70 percent of revenues, with production volumes more than 30 times higher than all other materials combined. Gold, copper, and aluminum make up another 15 to 20 percent. 1 Thermal coal at approximately 7,000 megatons (Mt) and steel at approximately 2,000 Mt. Remaining materials are in the order of magnitude of 200 to 300 Mt, with aluminum being the third largest by volume at around 100 Mt.

Other materials often associated with the energy transition, such as battery and magnet materials, remain small in terms of revenue but are growing in sync with the shift toward low-carbon technologies.

Supply is scaling faster than expected for several materials key to the transition

Lithium and nickel are ramping up faster, while copper lags behind

Comparing Metal&MineSpans’ first quarter 2020 projection for announced supply with actual production in 2023 shows that production for lithium and nickel was underestimated by nearly 20 percent.

For lithium, the difference is driven by assets funded by Australian and US investors coming online faster than expected, as well as an unanticipated scale-up of lepidolite assets in China in response to elevated lithium prices. And for nickel, the ramp-up stems almost solely from integrated high-pressure acid leach (HPAL) laterite assets in Indonesia. This accelerated supply buildup—in combination with a slowdown in electric vehicle (EV) sales—partly explains recent downward price corrections and why some projects have been called back.

By contrast, copper supply lags projections not only because of expected projects not coming online but also because several assets decreased production faster than anticipated.

Accelerated technological innovation is creating increasing uncertainty for demand outlooks

OEMs in automotive are rapidly shifting toward alternative technologies

As supply has scaled up faster than expected for some materials, demand patterns have adjusted in response to anticipated supply shortages.

For example, the chemistry mix for batteries used in EVs is increasingly moving away from nickel-manganese-cobalt (NMC) to lithium-iron-phosphate (LFP). As another example, the share of leading OEMs stating they would shift toward electric motors that are less reliant on REEs increased from 30 percent in 2022 to 40 percent in 2023.

These trends, however, are not consistent across materials. For instance, the move from iridium-intensive electrolyzers in anticipation of a potential iridium shortage is not yet apparent. This could be partially explained by the fact that hydrogen developers may still have flexibility to change electrolyzer designs at a later stage in the project development cycle.

Demand projections remain strong, with the majority of materials outpacing absolute historical growth

The highest relative growth will come from copper and lithium

Demand projections remain strong from now until 2035. In fact, except for steel and thermal coal, demand is expected to outpace absolute historical growth in the coming decade compared with the previous decade for all materials considered in this report, with lithium and copper in particular standing out.

Nickel and rare earth elements (REEs) are also projected to grow faster than in the previous decade, yet outlooks for both have been adjusted downward over the past nine months as demand from the automotive sector is shifting away from high-nickel batteries and REE-intensive electric-vehicle motors.

Expected supply-demand in 2035 is more balanced compared with our 2023 perspective, but shortages are still anticipated for several materials

REEs, lithium, sulfur, uranium, iridium, and copper may face shortages

Recent changes in supply and demand have altered the projected supply–demand gap, especially after 2030. In the past 24 months, both nickel and cobalt have moved from expected undersupply to oversupply, as an example.

That said, shortages are still anticipated for several materials key to the energy transition, in particular REEs, lithium, sulfur, uranium, iridium, and copper.

For materials where timelines for project development are fairly limited (in some cases less than five years), the supply–demand gap is likely to close by further scaling up supply once demand signals become strong enough. This is the case for uranium, for which scaling challenges depend mainly on the uncertain future of nuclear power as opposed to the scarcity of reserves or a sufficient number of potential projects. A similar example is seen in lithium, where reserves are abundant and mines have relatively short development timelines.

For other materials, the supply–demand gap is less likely to close through the accelerated scale-up of supply because of long project timelines or limited high-quality reserves and projects. In such cases, given that supply and demand must match, demand adaptation or reduction is expected to take place to balance the market. The most notable example in this category is copper.

As much as $5.4 trillion in capex and 270 gigawatts of power is needed by 2035 to scale up supply to meet expected demand

A third of a million new jobs may also be needed, as well as infrastructure build-out

Scaling up will be challenging. Meeting projected demand will require an efficient and timely deployment of investments, energy, and logistics infrastructure and equipment, as well as the proper capabilities and steady freshwater availability.

• Capex: On a global level, $5.4 trillion 1 Capex covers exploration, sustaining existing projects, and new projects for both mining and refining. is needed for supply to match current demand outlooks by 2035, an approximate 10 percent increase compared with the previous decade.
• Energy: As much as 270 GW power is needed (with another 1,100 GW needed to decarbonize) by 2035. That said, the power required, although significant, does not constitute more than 3 percent of projected demand for renewables in 2035.
• Labor: 340,000 new jobs globally could be needed in the industry to scale supply, while 1.25 million jobs are at risk in the thermal coal industry.

Local challenges regarding skilled labor, steady energy supply, water availability, logistics infrastructure, and equipment supply may hinder deployment, alongside project affordability.

Price increases will likely be required to incentivize sufficient supply to come online

Current copper prices will need to increase by 20 percent to drive sufficient supply

Since 2022, lithium prices have dropped by approximately 80 percent to $14,500 per ton lithium carbonate equivalent (LCE) and prices for nickel have dropped by approximately 20 percent to $20,000 per ton. 1 Comparing the annual average price of 2022 with year-to-date prices in May 2024. These decreases represent a “normalization” rather than a drastic shift in industry dynamics, as prices moved closer to typical production costs.

To incentivize sufficient supply, nickel prices would need to increase by around $1,000 per ton, a 5 percent increase, assuming that the most economical projects would be prioritized and delivered on time. For lithium and copper, the pipeline of announced projects is smaller, and the demand increase is higher. Therefore, a higher price increase would be needed to incentivize sufficient supply to meet demand. For copper, an approximate 20 percent increase from current prices would be needed, and for lithium, the approximate required price increase is 30 percent, provided all announced projects come online.

However, history has shown that the most economical projects are not always the first to be realized, given the range of barriers aside from profitability that can impact project execution, such as permitting delays. Moreover, individual projects may also have different required rates of return to be approved by owners and investors, which would in turn mean different levels of required incentive prices.

All in all, if some of the more profitable projects were not to advance—whether due to barriers or higher return rates required—a further price increase would be needed to bring new supply online.

Over the next decade, total metal and mining emissions are estimated to decrease by a modest 15 percent

The metals and mining industry could contribute 13 percent of global emissions in 2035

In 2023, total production emissions from the metals and mining industry accounted for approximately 15 percent of global emissions. Assuming no external shifts, the share is estimated to decrease to approximately 13 percent by 2035—a 15 percent decline.

This decrease in emissions is driven by the net effect of several factors:

• Changes in demand: Net impact from decreasing emissions from thermal coal production, offset by increasing emissions from other materials that will see demand growth.
• Grid decarbonization: The global grid is projected to decarbonize by close to 50 percent as the share of renewable energy increases, reducing emissions for those assets that are reliant on grid power for their operations. 1 Global energy perspective 2024 , McKinsey, September, 2024.
• Improved circularity: The share of recycled materials, which have a lower carbon footprint, will increase, driven by the higher availability of scrap and improved collection and recovery rates.
• Efficiency improvements: Continued efficiency improvements estimated at 0.5 percentage point per annum.
• Announced net-zero production: In addition to incremental decarbonization, there have been several announcements of asset-level transitions toward new technologies. In steel alone, approximately 40 Mt capacity of such transitions have already been announced by 2035, which would lower global emissions by as much as 60 MtCO 2 .

Research shows less than 15 percent of customers indicate a willingness to pay premiums of around 10 percent for low-carbon materials

However, regulatory measures could change the outlook

Our recent survey with leading industry players shows a limited willingness to pay for greener materials. In fact, less than 15 percent of surveyed decision makers indicate they would be willing to pay a premium of around 10 percent if there was a scarcity of green materials by 2030.

However, increasing publicly announced measures, such as the EU Emissions Trading System (EU ETS) and Carbon Border Adjustment Mechanism (CBAM), could significantly change this outlook by imposing higher costs on companies based on their carbon emissions. In response, companies might seek to either switch to sourcing low carbon footprint materials or invest in innovative solutions to reduce process emissions.