DONG Energy's coal procurement practices

Our responsible exit from coal

In our efforts to help change the global energy systems to green energy, we decided to stop using coal as a fuel at our power stations by 2023. Since 2006, we have reduced our coal consumption by 73 per cent by replacing it with sustainable biomass and by reducing the number of power stations.

 

We will still need coal as fuel for some of our power stations until 2023 and it’s important to us to exit from coal in a responsible manner. Therefore, despite being a small player in the international coal market today, we will continuously use our leverage to maintain a responsible sourcing of coal.

 

Our coal supply chains

 

We import coal from several countries to achieve the optimal combination of price and quality as coal differs depending on its country of origin. Since 2011, DONG Energy has imported coal from Colombia, Norway, Poland, Russia, South Africa and the United States. Coal differs depending on its country of origin, and we need different qualities at our different power plants.

 

Through our Responsible Business Partner Programme, we perform risk-based due diligence on all our more than 20,000 suppliers to assess whether they can meet the expectations set out in our Code of Conduct for Business Partners. This involves the systematic screening of new and existing suppliers through background checks and evaluation of sector and country-specific risks. Our programme is aligned with relevant International Labour Organization conventions, the United Nations Global Compact principles, the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, the UK Bribery Act, and the UK Modern Slavery Act, and is founded on a collaborative approach that promotes continuous improvement on responsible practices of our business partners.

 

We are one of the only energy companies in Europe to assess all our coal suppliers through self-assessment questionnaires and/or site assessments prior to engaging with them commercially. We collaborate with our suppliers in the development of improvement plans to address areas of non-compliance with our code identified during the assessment and to promote opportunities for improved performance. We require our suppliers to participate actively and without reservation in these activities. However, if a supplier, explicitly or by neglect, refuses to participate in due diligence activities or shows a lack of interest in making improvements in areas that we consider necessary, we reserve the right to pursue a termination of the business relationship.

 

As a part of our work in this area, we are one of the founding members 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. Bettercoal conducts self-assessments and site assessments of coal suppliers based on the Bettercoal Code.

 

As members of Bettercoal, we review Bettercoal site assessment reports and evaluate the profile of the company, the results of the assessment report, and the proposed improvement plan before making a decision on commercial engagement. In addition, we conduct anti-corruption background checks on both the mining company and the parent company prior to entering any new commercial relationship with a supplier.

 

Coal from Colombia

 

Europe is a major importer of coal from Colombia. In 2016, we purchased approximately 11 per cent of our coal from Colombia.

 

Over the past years, there has been increased public attention on mining companies active in Colombia given the country’s long history of armed conflict. 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 seriously. We believe that the events related to historical events 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 reconciliation process for victims of past human rights violations. It is pleasing to note that since the ratification of the peace accord on 29-30 November 2016, the country now has a real opportunity for reconciliation through the expected peace treaty between the Colombian government and FARC.

 

We expect our Colombian suppliers to support the Colombian Government’s efforts for peace and reconciliation as well as to conduct their own due diligence to identify human rights risks and actions to address them in alignment with the UN Guiding Principles on Business and Human Rights.

 

In January 2016, we conducted an extended due-diligence on sourcing from Colombia. This included bilateral engagement with international NGOs and academics with specialised interest and knowledge in Colombia’s political context, the peace process, and the coal industry. It also included engagement in Colombia with social and environmental NGOs, labour unions; government officials; UN representatives; diplomatic representatives from Denmark, the Netherlands, and Switzerland, as well as Colombian experts on business and human rights in Colombia. We continuously discuss the issues raised in our extended due diligence directly with Colombian coal mining companies in view of encouraging them to become actively involved in cooperating with regional and national government peace initiatives, conducting their own due diligence and development of mitigation plans.

 

In leading to our exit from coal by 2023, we will continue to engage key stakeholders with an interest in Colombia on a continued basis to keep up to date on developments on the ground and to remain informed when engaging our suppliers.