Supply Chain

As an energy Group, we see responsibility for a sustainable supply chain as an integral part of our business. In the case of coal, EnBW is at the end of a global value chain that begins with mining operations in source countries. We are aware that all forms of mining have impacts on people and the environment. Resource extraction must always take place in accordance with national laws and internationally accepted standards. We take preventive measures to avoid or minimise negative impacts.

We have adopted a wide variety of measures in recent years to ensure responsible coal procurement and respect for human rights:

• Adoption of the EnBW Principles of Conduct referencing key national and international standards such as the UN Guiding Principles on Business and Human Rights
• Introduction of a clearly defined business partner screening process that, in addition to financial creditworthiness, also verifies compliance with minimum social and environmental criteria taking risk management aspects into account
• Introduction of an EnBW sustainability register covering all major coal producers worldwide from which EnBW sources coal
• Establishment of a Committee for the Responsible Procurement of Coal and Other Raw Materials, which meets regularly and makes recommendations on working with relevant business partners
• Regular dialogue with our coal producers and with other governmental and non-governmental stakeholders to ensure a responsible value chain in coal-fired power generation

EnBW sources coal from various continents. Following the end of German coal mining in 2019, Germany is wholly import-dependent. Our procurement volumes in 2021 by country of origin are as follows:

Russia has extended its leading position on the Western European market in recent years and is also one of the most important producer countries for EnBW. The volumes accounted for by other producer countries vary with coal prices.

The Russian coal was sourced from the mining region of the Kuznetsk Basin (Kuzbass) and was primarily mined by the producers SUEK and Kuzbassrazrezugol (KRU). The American coal was sourced from underground mines in the Illinois Basin, mainly by producer Murray Energy. The Colombian coal was was sourced from the producer Cerrejón.

EnBW had already begun to further diversity its procurement portfolio in order to reduce its dependence on deliveries of Russian coal. It will be possible to fully switch to alternative sources in the medium term at higher cost while continuing to guarantee the security of supply.

EnBW attaches importance to a balanced procurement portfolio to avoid dependence on individual producer countries, producers or traders. Increasingly, EnBW meets its coal requirements under direct supply contracts with business partners. In addition, coal is purchased through intermediaries, where a standard quality is usually specified but not the origin of the coal.

Coal mining is a complex process that encroaches on the environment. Ensuring good working and living conditions in coal mining is consequently always a special challenge. EnBW has long maintained direct contact for this purpose with mining companies and also all other stakeholders who contribute to improving working and living conditions in line with internationally recognised standards, from trade union and civil society representatives to governmental and non-governmental organisations.

Stakeholder dialogue centres on respect for human rights, compliance with occupational health and safety standards, safeguarding freedom of association, environment and climate protection and, in particular, reducing negative health impacts on local populations.

In line with the requirements of responsible corporate governance, EnBW assumes responsibility for the entire supply chain. We take allegations of non-compliance with sustainability standards very seriously and implement targeted action involving all relevant stakeholders to secure improvements in coal mining countries and continuously improve standards for responsible coal procurement.

We believe that sanctions-only approaches have only limited effect and do not help improve local living and working conditions in the medium to long term. This makes it all the more important for us to collaborate and engage in dialogue with our suppliers and other local stakeholders (communities, employees, trade unions, NGOs, etc.) in order to identify structural problems at an early stage and work together on solutions.

In our procurement process, we assume responsibility for the entire supply chain, from extraction at source to the power plant. We therefore work to comply with key sustainability standards at all stages of our value chain. This is based on our Principles of Conduct for the Responsible Procurement of Coal and Other Raw Materials , which set out all key requirements relating to responsible business conduct, human rights, labour standards and environmental protection.

We formulated the Principles of Conduct with professional support and discussed them at the draft stage with representatives from civil society, the scientific community and business. They embody EnBW’s core values and represent a voluntary commitment with social policy impact. The Principles of Conduct are a binding part of all resource procurement contracts in all direct procurement relationships.

Our coal producer sustainability registry, which we established in 2012, is a central in-house knowledge base on sustainability aspects in coal procurement. All major coal mining companies are screened for sustainability criteria and scored in an assessment model with traffic light ratings. If the producer analysis flags up any discrepancies, the Committee for the Responsible Procurement of Coal and Other Raw Materials is convened and the company concerned is asked to respond – for example by conducting a self-audit. Our emphasis here is on working together with the supplier on any discrepancies or allegations in a continuous improvement process. If a coal producer does not cooperate, additional audits follow – including by outside parties – and it is also possible for the producer to be disqualified as a trading partner.

EnBW keeps a particularly close watch on developments in producer countries that have been among major procurement sources in recent years but where coal mining is a subject of major concern – as is the case in Colombia. In light of this, EnBW takes an active role in Colombia, sending regular delegations to the Cesar and La Guajira coal mining regions and maintaining close exchange with stakeholders both there and in the capital, Bogota.

Local communities, trade union representatives and Colombian and international NGOs have raised a number of allegations in connection with coal mining in Colombia, including forced resettlements, violation of the rights of indigenous groups, collusion between companies and paramilitary groups, poor working conditions, limited trade union rights and environmental damage.

EnBW is aware of these allegations. We have consequently been involved for many years in efforts to improve local living and working conditions, irrespective of whether we currently source coal from Colombia or will do so in the years ahead.

In cooperation with twentyfifty, EnBW has compiled a study, Buying Coal from Colombia 2012-2018, which analyses the effectiveness of EnBW’s responsible coal sourcing approach. The study found that mining companies have made progress in recent years with regard to respecting human rights. There have been various improvements in the areas of health and safety, cooperation with trade unions, combating violence, environmental and health impacts, resettlement, living conditions and social investment. Overall, however, it is too early to draw clear conclusions regarding any direct improvements in mining companies’ ambition with regard to terms of human rights impacts and in particular living conditions for surrounding communities. The development of and experience gained from multi-stakeholder dialogues between government, local authorities and communities show promise and also have potential to improve matters for people living in the proximity of mines.

The analysis covers the period 2012 to 2018. Developments were presented in the areas of health and safety, cooperation with trade unions, tackling violence, environmental and health impacts, resettlements, living conditions and social investment.

EnBW views the findings as confirmation of its responsible coal procurement approach based on dialogue with all stakeholder groups and ongoing identification of deficits and areas for improvement. The overall situation today shows that progress has been made in all areas, even if that progress is not as wide-ranging as EnBW would wish. It must be borne in mind, however, that structural developments over decades cannot be turned around in just a few years, and changes on the ground and in people’s mindsets take time. Years of civil war, years of neglect in rural regions, continued widespread corruption and the need to establish a functioning administration must all be taken into account in the overall assessment of the situation. Despite this, the study clearly shows that local mining companies take human rights due diligence much more seriously and are far better prepared and willing to respond more specifically to the needs of local communities and employees.

The full study can be downloaded here.

In light of the growing quantities of coal imported from Russia, we have stepped up our corporate responsibility activities with regard to Russian coal suppliers. We are in direct contact with Russian coal producers for this purpose. An initial on-site visit has already taken place with coal producer SUEK, during which we gained a good overall picture of the situation in and around the coal mines. Other planned visits unfortunately had to be postponed due to the Covid-19 pandemic. As an alternative, we have held virtual meetings at regular intervals. The focus of these discussions is on the requirements for coal producers contained in our Principles of Conduct for the Responsible Procurement of Coal and Other Raw Materials. In particular with regard to Russian mine operators, we place emphasis on our requirements concerning occupational safety and compliance, environmental protection and resettlement and compensation issues. A further focus of our efforts in Russia is on promoting local stakeholder dialogue.