Global supply networks for solar and energy storage products have grown increasingly complex. These now span dozens of raw material sources, multiple tiers of suppliers, and shifting regulatory regimes across different regions.
Without robust traceability and due-diligence frameworks, project stakeholders potentially face more than paperwork headaches: They risk reputational damage, financing delays, customs detentions, and exposure to import bans.
The first step toward building ESG-compliant supply chains is to understand the core risk categories that commonly arise in solar and storage components. Supply chain traceability is very important as lack of transparency and limited visibility into sub-supplier layers leaves gaps where human rights issues, environmental malpractice, or other issues can occur. Tracing key materials such as silicon, lithium, and graphite is critical, as they may originate from regions with poor labor or environmental practices.
The manufacturing processes themselves – from polysilicon refinement to module assembly – are also under scrutiny, as they often rely on fossil-fuel-intensive energy, inflating lifecycle carbon footprints.
Waste management practices are important, since certain stages of PV and battery manufacturing generate toxic by-products that require strict handling, recycling, or disposal protocols.
Last but not least, stakeholders must ensure there are safe working conditions, adequate protective equipment, and formal grievance channels for workers within the solar and storage components’ supply chain factories, among other conditions. All the above requirements point to an ever-increasing need for specialized audits and professional due diligence conducted by reputable independent agencies.
Patchwork regulation
ESG regulations remain inconsistent across global markets and often lag industry expectations. In the European Union, developers must navigate the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), as well as due diligence obligations under the EU Battery Regulation (EUBR), all of which have been delayed but are still expected to be implemented.
Developers should also keep an eye on the Carbon Border Adjustment Mechanism (CBAM), which will come into effect in 2026 and will initially impose carbon fees on selected carbon-intensive imports such as cement, steel, and aluminum. PV modules are not currently included, though future expansions of CBAM may bring solar components into scope.
In the United States, the Uyghur Forced Labor Prevention Act (UFLPA), enforced since June 2022, bans the import of goods from the Xinjiang region of China, including polysilicon used in PV modules – which is produced at scale in this region. Importers must provide clear and convincing evidence of supply-chain integrity to avoid shipment detentions. Lithium and copper were also recently added as priority sectors for UFLPA enforcement, which may trigger detentions of battery energy storage systems (BESS) in the near future.
Financing plays a significant role in enforcing ESG compliance. Development finance institutions (DFIs) and regional development banks are increasingly integrating supply chain risk assessments into their ESG due diligence frameworks. While full chain-of-custody mapping is not universally mandated, it is often required or strongly encouraged. Commercial lenders interpret ESG covenants variably, fueling uncertainty for project financing.
ESG risks can derail construction schedules and impact margins. Proactive traceability measures are no longer optional, they are essential to secure financing and stakeholder buy-in.
Market adapts
In the last few years, we have seen an increasing number of market leaders adopt robust due diligence frameworks. These are often mandated by shareholders, financiers and regulations to ensure the supply chain for solar and storage components is ESG compliant.
It is critical that developers include detailed ESG and traceability clauses in their procurement contracts. A third party can provide invaluable expert advice by reviewing and suggesting improvements to the exhibits and providing support during negotiations with the supplier.
Before the production of the components of a solar or storage project, the supply chain of components all the way upstream should be audited by reviewing and screening direct and indirect suppliers across multiple nodes, by leveraging purchase contracts, public records, and supplier interviews to chart material flows.
Typical due diligence includes ESG audits that check environmental policies and practices, waste management, recycling practices, code of conduct, employee management, health and safety, business integrity, and responsible sourcing. Carbon footprint audits review independent verifications and state mandated benchmarks and limitations, as well as emissions across scopes 1, 2, and 3.
Finally, before going ahead with production, the suppliers and manufacturing facilities should be audited to ensure that traceability systems are in place and functioning. This includes performing checks of standard operating procedures (SOPs), enterprise resource planning (ERP) data, and warehouse logs across purchasing, warehousing, production, and shipping, as well as verifying unique traceability identifiers (e.g., batch or serial numbers).
During the production of the components that will be installed in a developer’s project, project-specific traceability audits are typically performed. These audits verify that the agreed supply chain has been used by sampling modules or battery cells during manufacturing, tracing each sample’s origin back to agreed midstream and upstream suppliers (quartz or lithium mines) and issuing a certificate verifying supply chain compliance.
In certain cases when the project’s components have already been produced, it can be possible to perform serial number checks matching them to supply-chain records, provided that the records exist. By blending remote document reviews with targeted on-site inspections, stakeholders can gain both breadth and depth of visibility without undue cost escalation.
Case studies
Real-world projects underscore the tangible benefits of structured traceability. In a recent case, a rigorous supply chain mapping exercise revealed concentrations of polysilicon purchases in high-risk jurisdictions. Armed with a detailed supply chain map, the developer rebalanced orders to diversified sources, reducing import-ban exposure and promoting compliance.
In another case, by negotiating audit rights in supply contracts, a European independent power producer was able to carry out random sampling of battery cells. This end-to-end chain-of-custody audit covered aluminum, copper, graphite, and lithium streams, satisfying lender due-diligence and unlocking a 1 GWh storage order for a financed portfolio with strict ESG mandates.
More recently, buyers acquiring solar assets discovered there were no traceability records for the solar modules. A tailored post-production audit on behalf of the buyer provided documentary evidence confirming acceptable polysilicon origins, enabling lenders to clear financing conditions and prompting sellers to strengthen procurement guidelines for future deployments.
Tomorrow’s world
As the PV and BESS markets mature, ESG diligence will increasingly distinguish industry leaders from laggards. Key actions that investors and other project stakeholders can take include:
- Embed traceability clauses in supply contracts at the outset.
- Maintain dynamic supply chain maps to capture entity-list changes and policy shifts.
- Enact a robust periodic ESG and sustainability audit program to ensure that all stakeholders within the supply chain remain compliant.
- Leverage compliance scoring frameworks to manage corrective actions and promptly revisit high-severity findings.
- Perform shipment-level traceability audits during production to ensure that components follow the supply chain agreed to be used for specific projects.
By adopting systematic ESG and traceability practices, stakeholders can protect project economics, safeguard reputations, and build a genuinely sustainable renewables ecosystem. Continuous monitoring, digital record-keeping, and dynamic audit strategies will be indispensable tools in navigating the next wave of regulatory milestones.
About the author
George Touloupas is vice president, ESG and new services at Clean Energy Associates (CEA). Since 2010, he has been active in technical consulting for PV and energy storage projects, as well as in PV manufacturing, EPC and project development. He joined CEA in 2015 and has previously led the tech and quality team for solar and storage. He has also held positions as chief operating and technical officer at Philadelphia Solar in Jordan, as technical operations director at Recom, and as an EPC and project developer in Greece.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.