DONG Energy's coal procurement practices

We have an ambitious strategy for reducing coal consumption. Since 2006, we have actually cut coal consumption by 74%, and we are continuing our work on reducing it. This principally takes the form of converting our coal-fired CHP plants to enable them to operate on sustainable biomass rather than coal. We are currently working on several major CHP plant conversions, and we are well on the way to achieving our goal of ensuring that 50% of production from our Danish CHP plants in 2020 is based on sustainable biomass. As a result of our decision to switch from coal to biomass, we are just a small player on the international coal market today.

Even though we have significantly reduced our coal consumption since 2006, we still need coal as fuel for some of our power stations. We import coal from several countries to achieve the optimal combination of price and quality. Coal differs depending on its country of origin, and we need different qualities at our different power plants. Since 2011, DONG Energy has imported coal from Colombia, Norway, Poland, Russia, South Africa and the United States. 

We check all our coal suppliers
A few years ago, we ramped up our CSR demands for coal suppliers. This means that we are now one of the few companies in the world to perform specific assessments of whether our coal suppliers satisfactorily live up to our expectations before agreeing to deal with them. On more than one occasion, we have chosen not to deal with suppliers, either because they refused to participate in an assessment of the relevant conditions, or because we could not be sufficiently certain that they were interested in a constructive dialogue about improving their practice.

For all our suppliers – not just coal suppliers – we perform risk-based due diligence investigations to assess whether the supplier complies with our code of conduct. This involves the systematic screening of new and existing suppliers through background checks and evaluation of sector and country-specific risks.

If we identify areas with non-compliance, we work with the supplier in question to prepare an action plan for the application of suitable remedial measures. These are designed to limit and rectify the negative impact caused by the non-compliance identified, and to give the supplier the opportunity to pinpoint and prevent recurrence of similar incidents. We require our suppliers to participate actively and without reservation in these activities.

Our work on assessing and improving conditions in and around suppliers' mines is dependent on a high level of confidentiality. When we perform an inspection, we ask the supplier to lay bare his practice and procedures, and to be prepared to accept criticism and work with us to improve various conditions.

We continuously push our suppliers to improve, we make demands, and we engage in dialogue with them regarding possible improvements and initiatives. We believe that the best approach is to attempt to encourage suppliers to improve their practice rather than simply give up on the relationship. Otherwise, it is impossible to play an active part in the suppliers' improvement work.

However, if a supplier breaches our code of conduct explicitly or grossly, or consistently refuses to participate in due diligence activities, or shows a marked lack of interest in making improvements in areas that we consider necessary on the basis of specific assessments, we reserve the right to terminate the business relationship.

As a part of our work in this area, we are one of the initiators of the Bettercoal initiative. Bettercoal is an association of 13 European energy companies with the shared objective of improving practice among coal suppliers in the fields of human and labour rights, the environment and anti-corruption. Working closely with a number of international stakeholders, Bettercoal has developed a code of conduct for the mining of coal, backed by a range of tools designed to improve practice among suppliers. 

Why does DONG Energy buy coal from Colombia?
We import coal from several countries to achieve the optimal combination of price and quality. Coal differs depending on its country of origin, and we need different qualities at our different power plants. In 2015, we purchased 16 per cent of our coal from Colombia.

Unfortunately, Colombia has been in the grip of civil war and political instability for many years. The civil war has had a terrible impact on the lives of many people, and we take the historical and current social and environmental conditions in Colombia extremely seriously. We believe that the events related to historical conditions dating back 10–20 years should be addressed as part of the political process, such as the ongoing peace process between the government and the Revolutionary Armed Forces of Colombia (FARC) as well as in the legal system in Columbia. It is pleasing to note that for the first time, the country now has a real opportunity for reconciliation through the expected peace treaty between the Colombian government and FARC.

We expect our suppliers in Colombia to work constructively with the Colombian government on the peace process. We are tracking the process to establish what contribution the mining companies are making to it. 

Criticism of the Prodeco mine
PAX, a Dutch NGO, has expressed concern in a report from 2014 and in a letter addressed directly to us, about the Prodeco mining company's role in the Colombian civil war, and the fact that the mining company is not sufficiently involved in the peace process in Colombia.

DONG Energy is not currently purchasing coal from the Prodeco mine. We placed our last order with Prodeco in May 2015, as our business needs for coal are currently being met by other suppliers.

Yet we still take PAX' concerns very seriously, and we fully support the goal that the victims of the conflict receive redress. Our reply letter to PAX can be read in full here.

If we need to buy coal from the Prodeco mine again in the future, it is important that Prodeco complies with our code of conduct. Within the framework of our Responsible Partner Programme, we have therefore launched an investigation into the circumstances, to get more information about PAX' concerns.

The investigation consists of two parts: 1) A review of the conditions in and around the mine today, which is an integrated part of our Responsible Partner Programme.2) A study of developments in the Colombian peace process, which is an extra measure to clarify the extremely complex situation in Colombia.

As part of our Responsible Partner Programme, we inspected the Prodeco mine in March. We reviewed the mining company's policies and practices in relation to human rights, labour rights, the environment and anti-corruption together with external auditors. Based on the inspection, we are now working out an action plan together with the mine. The action plan aims at ensuring that the mine addresses any breaches of our guidelines.

In its letter to us, one of the concerns PAX expresses is over the Prodeco mine's role during the civil war in the 1990s and early 2000s. We believe it is the coming peace process which must handle the past conflicts and ensure that the victims of the civil war receive redress and help.

However, we expect our suppliers to collaborate constructively with the Colombian government in connection with the legal investigations of the peace process, where mining companies will also be examined. We will continue to follow the peace process and the mining companies' contribution to it.

We have also launched a number of further initiatives to gain a better understanding of the influence of mining companies on the political situation, the peace process and the possibilities for redress. The initiatives include:

1. An investigation in January where we visited Colombia to talk to a number of different authorities (both national and international), organisations and NGOs and other relevant parties in Colombia. This has given us an impression of the situation in Colombia and a better overview of the civil war's complexity.

2. We have asked to have a number of reports prepared. The Danish embassy in Colombia will prepare a report going into more detail about what is happening in the ongoing peace process efforts in Colombia. The International Work Group for Indigenous Affairs (IWGIA) will also prepare a report on the rights of indigenous people and the coal mining sector in Colombia.

3. We will continue to monitor the situation in Colombia, and specifically the mining companies' involvement in the coming peace process. We will also continue our dialogue with NGOs and experts, and we will continue to work with Prodeco on formulating an action plan aimed at improving conditions in and around the Prodeco mine.

Should the need arise for us to buy coal from the Prodeco mine again for commercial reasons, we will carry out an overall assessment of the situation based on the initiatives we have launched. Based on this, we will decide whether we will buy coal from Prodeco.