Adjust the code approach

Due diligence

Dialogue

Indepen-dent

monitor-ing

Root-cause analysis Joint

problem solving &

Capacity building Follow-up audit

In figure 12, it is suggested that DONG continues its risk-assessment, however, here it is termed

„due diligence‟ in accordance with Ruggie‟s Framework, which means that in order to meet its code requirements and responsibility to respect labour and human rights, a due diligence process is established to identify, prevent, mitigate, and account for how DONG addresses its direct and indirect impacts on the supply chain (2011:15-16). In addition, DONG could follow Sanne Borges‟ advice and set forth zero-tolerance standards. Due diligence is included in the process itself as it is a continuous assessment since risks may change, and DONG‟s operations and the operating context evolve (ibid). According to Jesper Nielsen, companies should contact local NGOs and trade unions before signing contracts with suppliers in order to investigate risks of violations to human and labour rights in the specific country and to gain knowledge about the supplier‟s social performance (p.141). Sanne Borges, Jesper Nielsen, and Carsten Hansen emphasise an ongoing collaboration with local NGOs and trade unions because this ensures more genuine information on compliance and conditions (p.134,143,154,157). In addition, these stakeholders can keep an eye on things, as DONG cannot be present at all times (ibid). Likewise, van Tulder et al. argue that dialogue and engagement with different stakeholders ensure high implementation likelihood (2009). Local trade unions and NGOs could furthermore contribute with workshops on code requirements and labour and human rights as incentive. Moreover, NGOs and trade unions could contribute with establishing grievance mechanisms for the local stakeholders in accordance with Ruggie‟s Framework (2011:24).

In order to enhance social responsible behaviour of suppliers, DONG could collaborate with suppliers, trade unions and local NGOs when performing on-site audits in order to develop a process of improvements and a trusting and mutual relationship, together with transparency and credibility. This way, key actors engage in root-cause analysis and joint problem solving to enhance supplier‟s ability to implement and maintain changes and improve conditions that are monitored by follow-up audits. Thus, information from audits is used as incentive to encourage supplier‟s social responsible behaviour and ensure compliance rather than as a threat to ensure compliance. Consequently, the code‟s lack of enforcement mechanism becomes less important, as the supplier will be more able and willing to comply with the code. The threat of termination of business relationship still prevails, but since it is likely not that pressing any longer, it has been removed from the model. Most suppliers will likely be striving for a social responsible

behaviour as they may gain competitive advantages that come with an inter-active business relationship.

In other words, DONG must engage in an ongoing dialogue and create a relationship with the supplier and go beyond corrective action plans to create capacity building in order to enhance suppliers‟ social responsible behaviour, which is supported by Linna Palmqvist‟s statement: “It‟s not enough to perform audits again and again. If you don‟t combine it with some kind of engagement with the supplier or some kind of capacity building with the supplier, it‟s difficult to implement some positive changes based on the audit alone” (p.130).

6.2.1 Is it possible?

One argument against the adjustment could be that DONG holds limited resources to spend on social responsibility. The expenses do however not necessarily have to be high. The code is relatively easy and cheap to adjust. And, the initiatives suggested are already included in DONG‟s monitoring efforts, except from security forces (Appendix 2). Second, according to Heydenreich, DONG has about 20-25 coal suppliers and that lightens the possibility to engage in dialogues (p.118). Appendix 6 shows which countries DONG imports coal from – it has however not been possible to find information about the number of suppliers in each country.

Nevertheless, if DONG continues to focus on coal suppliers in high-risk countries, there are not many high-risk countries left since DONG already is engaged with Cerrejón and SUEK. The next high-risk country to focus on would therefore be South Africa – where DONG conducted an audit in 2009 (Notat…03.02.10). Third, if DONG collaborates with local trade unions and NGOs they will likely contribute to dialogues, workshops, and credible information on conditions. If DONG collaborates and joins forces with other coal buyers, the expenses will be shared. Lastly, if conditions are improved and DONG is transparent about conditions and performance, future crises and risks may be prevented. Hence, expenses in relation to being responsive to criticism can be avoided.

6.2.2 Pressure on governments to enhance social responsible behaviour

Ruggie argues that states should support companies‟ social responsible behaviour in host-countries and therefore also put pressure on, or collaborate with, host-host-countries to enhance willingness and ability to enforce national laws and regulations (2011:11). The UN, the OECD,

the European Commission are promoting higher social responsibility from both companies and states, so it will probably not be long before this is a „mandatory‟, in the voluntary sense, requirement of self-regulation and CSR. Consequently, DONG may use its increasing bargaining power to take an active stance and put pressure on home- and host-country states to focus attention on social responsible behaviour.

6.2.3 In sum

It is argued that DONG‟s code can contribute to social responsible behaviour of its coal suppliers by adjusting the code on two dimenstion. First, it is suggested that the code is adjusted by including independent montoring and important principles that are nit yet included: indigenous peoples‟ rights and forcefully relocation, security forces, and employment conditions for subcontractors‟ workers, as the lack of these initiatives have led to heavy criticism. As freedom of association is causing much concern and is not complied with, it is suggested that this initative receive more attention. Second, it is suggested that the code approach is adjusted from traditional compliance to commitment-oriented by collaborating with suppliers, local NGOs, and trade unions. This way, an ongoing process of due diligence, dialogue, information sharing, and root-cause analysis may contribute to capacity building whereby suppliers‟ ability and willingness to comply with code requirements increase. Furthermore, it is suggested that in line with the increasing demands on companies to behave socially responsible, DONG takes an active stance and contribute to put pressure on home- and host-country states to increase attention on social responsible behaviour.