Posted by: edwinrutten | July 12, 2010

Blood coal: If you can’t confuse them, convince them

In a documentary on the origins of coal used in the (Dutch) energy sector, tv-program “Netwerk” unravels unsustainable practices. The energy companies are accused of importing ‘bad’ coal from Colombia and South-Africa. The journalists found out that the quarries where the coal is excavated create environmental damage and health problems. In Colombia, 90% of the imported coal originates from mining companies that finance paramilitary missions that caused several casualties.

The documentary has led to a political debate which seems to result in a call for transparency. The energy companies in turn state that they are not familiar with the origin or circumstances of their imported coal since the commodities are marketed via middlemen and/or commodity markets. Yet, they state that they follow the guidelines as formulated by the UN Global Compact. Isn’t that inherently contradictory? How to apply something to someone you don’t seem to know?

Whatever happens next (e.g. a lawsuit, regulation or reputation loss), the companies better look into their supply chain: Who are my suppliers? Or better: where do my raw materials come from? In the end the supply chain is as strong as its weakest link. Traditionally this weakness could be e.g. bad quality or unreliable delivery, but in this case it means “risk” (from the company point of view).  

From the Netwerk  ‘factsheet‘, and as confirmed by a sector response, one can conclude that the supply chain in some cases is quite compact: vertically integrated multinationals own mines and sell coal. Horizontally integrated joint-ventures (partially owned by the same multinationals) take care of the exploitation (literally and figuratively..), handling and transportation. In other cases, coal is purchased on the international commodity market, which makes its origin less transparent.

To my opinion, energy companies should ask themselves the following questions:

  1. Do I want to make energy out of coal in the first place (since it’s inherently unsustainable)?
  2. If so, do I want to buy coal that is or could be coming from dubious (‘unsustainable’) sources?
  3. Which part of my supply originates from bilateral agreements with multinationals, which part comes from anonymous commodity markets?
  4. Do I want to buy from anonymous commodity markets? The current ‘intransparancy’ can give me an excuse for not ‘knowing’ what happens upstream in the supply chain.
  5. In bilateral agreements: do I feel responsible for the operations of my suppliers or my suppliers suppliers (if not: maybe my customers think I should). If so: can I identify them and their practices? If so, are there any irregularities? If so, how to influence my suppliers to become more sustainable (by shifting demand, imposing controls or cooperation)?

In short: energy companies can choose. From a sustainability point of view, parallel sourcing via commodity markets and directly from multinationals seem mutually exclusive in the current market. So companies come out into the open: choose your real responsibility level, choose your supply chain, get to know your sources (really) and lead the way in taking responsibility. Harry Truman once said: “If you can’t convince them, confuse them”. I advise energy companies the opposite: “If you can’t confuse them, convince them”. This is your canary bird early warning indicator.


Responses

  1. Nice blog about Bloodcoal. You’re talking about sustainabile sources. What about sustainable destinations… think of what happens with the waste of generating energy bij nuclear power stations.


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