Supply Chain Management

Within Canacol, the supply chain assumes a foundational role in the realization of our sustainability objectives. We firmly uphold the belief that our value chain stands as a significant conduit through which we can drive positive outcomes for Colombia. At each stage of engagement with our goods and services suppliers, we conscientiously incorporate holistic environmental, social, and corporate governance (ESG) strategies. These strategic integrations are designed to implement and uphold the sustainability standards prevalent in the oil and gas sector. This underscores our unwavering commitment to the practice of responsible and ethical principles.

Code of Conduct and Ethics for Suppliers of Goods and Services

To maintain the highest standards of transparency across our value chain, we have instituted a Code of Conduct and Ethics for Suppliers of goods and services. This Code is structured around a definitive set of guiding principles, encompassing:

  • Respect for Human Rights (fair working conditions, prohibition of child labor, freedom of association and requirements of the conventions of the International Labor Organization (ILO).
  • Integrity.
  • Transparency and legality (business ethics and prohibition of anti-competitive and corrupt practices).
  • Occupational health and safety requirements.
  • Environmental standards (environmental standards for processes, products and/or services of suppliers, GHG, energy intensity, biodiversity, waste, and water).
  • Confidentiality and data protection.
  • Guidelines for gifts and hospitality.
  • Procedures for reporting code violations.
  • Sustainable procurement policies that suppliers must follow with their subcontractors.

For further information, please refer to the Code of Conduct and Ethics for Suppliers of Goods and Services.

Sustainability in Our Supply Chain

Canacol promotes and implements ESG with its suppliers of goods and services based on the company's three strategic ESG pillars:

  1. A cleaner energy future: We deliver natural gas according to the highest standards of environmental and operational efficiency.
  2. An empowered and sustainable society: We promote a diverse and inclusive culture and maintain close and transparent relationships with our stakeholders.
  3. A transparent and ethical business: We adopt the best corporate practices, promote respect for human rights, and ensure ethics and integrity in all our processes.

These programs are overseen by the ESG Committee of the Board of Directors, and their execution is managed by the Company's Executive team.

The ESG programs for suppliers of goods and services include the following actions:

  • Socialization of the Code of Conduct and Ethics for Suppliers of Goods and Services.
  • Supplier Census: Canacol conducts a census of local suppliers in the areas where it has operations and implements a development plan to promote their participation in the Company's actions and activities in a direct or indirect manner.
  • Training: We prioritize training in ESG criteria; health and safety; Diversity, Equity, and Inclusion (DEI); climate change and Human Rights within the supply chain.
  • Sustainability surveys: Identification of suppliers of goods and services that are risky in terms of sustainability.
  • Socialization of ESG strategy with the Company's strategic suppliers.

These actions allow Canacol to identify and promote good sustainability practices of its suppliers of goods and services, ensuring compliance with standards, good performance and long-term relationships in our supply chain.

To learn more about our ESG practices for suppliers of goods and services, consult the 2022 ESG Report.

Management of Our Supply Chain

When acquiring goods and services from various suppliers, Canacol recognizes the need to establish an effective system for supplier management. This system focuses on assessing the capabilities of goods and services suppliers to meet the increasing demand for and quality of products, while still achieve objectives and fostering trusted relationships between parties.

Canacol establishes comprehensive criteria for the equitable and transparent selection, evaluation, and auditing of goods and services suppliers. These standards encompass the supplier’s capacity to support commercial operations while integrating sustainability considerations. These encompass facets such as business integrity, social responsibility, human rights, health and safety, and environmental management, all aligned with the framework outlined in the Code of Conduct and Ethics for Suppliers of Goods and Services.

Canacol's supply chain strategy is aligned with the most stringent ESG standards. Our supplier assessment and selection protocols adhere to the mandates outlined within the ISO 14001 standard, in addition to conforming to Canacol’s own meticulously crafted Environmental Quality Plan. Suppliers within our network are obliged to provide explicit declarations concerning their strategies aimed at mitigating potential environmental risks and societal impacts. These declarations encompass a comprehensive spectrum of contingency plans, structured programs, defined procedures, and requisite certifications.

Canacol organizes weekly Service Quality Management (SQM) meetings with its suppliers. The aim of these meetings is to effectively communicate business objectives, policies, orientations, and methodologies. Additionally, they provide a platform for valuable knowledge exchange and constructive dialogue between our suppliers and the Company.

Evaluation of Suppliers of Goods and Services

Canacol values transparent and collaborative relationships with its goods and services suppliers. Our commitment to fostering trust within our supply chain is underpinned by a rigorous selection process for bidders, scrutinizing their alignment with our standards and prerequisites. Our evaluation framework for suppliers encompasses a comprehensive assessment of technical, commercial, health and safety, environmental, quality, and governance facets. Within this context, our evaluation processes for pivotal strategic suppliers of goods and services encompass a range of initiatives, including but not limited to:

  • Adherence to the Code of Conduct and Ethics for Suppliers of Goods and Services and Human Rights Policy.
  • SAGRILAFT [Spanish acronym for Self-Control and Management System for the Integral Risk of Asset Laundering and Financing of Terrorism] and compliance practices.
  • Corporate governance aspects such as sustainability strategy, key performance indicators (KPIs), risk management system and risk metrics, and compliance with ESG standards and organizational structure.
  • Lost Time Incident Rate (LTIR) and Total Recordable Incident Rate (TRIR).

Criticality Levels of Suppliers of Goods and Services

Canacol's management structure for goods and services suppliers has been designed to ensure a rigorous risk management approach aimed at preempting and mitigating potential business disruptions. In pursuit of this objective, Canacol conducts evaluations of its principal supplier cohorts. These evaluations culminate in a classification process that hinges on two critical factors: ESG considerations and overall business relevance.

The assessment of suppliers’ ESG risk is contingent upon sector-specific risks. The evaluation of ESG aspects encompasses a spectrum of topics, such as project timelines, quality standards, air quality preservation, greenhouse gas emissions, water usage and disposal, waste management, energy consumption, anti-corruption efforts, fair competition, labor relations, human rights, and health and safety protocols, among others.

The selection of our suppliers of goods and services is underpinned by the correlation between their operational scope and our criticality map. We categorize our operations into four levels of criticality: strategic, tactical, transactional, and routine.

  1. Strategic Suppliers: These encompass entities whose operational undertakings entail substantial risks and exert significant impacts on suppliers, neighboring communities, and the Company. Such implications extend to the realm of both business operations and the overall organizational reputation.
  2. Tactical suppliers: These refer to suppliers whose business operations and product offerings have the potential to influence consumers, thereby exerting considerable ramifications on the purchaser, impacting both business operations and reputational standing.
  3. Transactional Suppliers: This category pertains to suppliers whose operations entail minimal risks and impacts on suppliers, communities, and the Company, while involving a substantial volume of transactions.
  4. Routine Suppliers: This classification encompasses suppliers whose operations primarily focuses on activities that may have potential impacts on neighboring regions or communities, carrying moderate risks for Canacol.

For further information, please refer to the 2022 ESG Report.

Audit and Evaluation of Suppliers

Canacol has established comprehensive supplier evaluation and audit programs aimed at risk management, the formulation of mitigation strategies, and the evaluation of performance guided by jointly developed mitigation plans. These evaluations encompass considerations of production and delivery quality, quantity, and safety, aligned with Canacol’s fundamental requisites and the minimum mandates of labor and environmental regulations. Furthermore, these assessments encompass adherence to recognized standards such as ISO 9001, ISO 14001, and ISO 45001, tailored to the specific nature of the goods or services to be contracted, in addition to strict compliance with our anti-corruption policy.

Canacol has formulated an audit and evaluation plan specifically tailored for strategic suppliers operating within high-risk domains. These domains encompass activities with potential for significant impact on the respective suppliers and neighboring communities, consequently carrying substantial implications for the client in terms of business operations and corporate reputation. The clear objective outlined within this plan is to conduct audits and evaluations for 100% of the strategic suppliers associated with the high-risk operational category.

To assess suppliers’ sustainability performance, the following types of evaluations are conducted:

  1. Documentary evaluation:
    In 2022, Canacol introduced a sustainability performance evaluation form, which was completed by select strategic suppliers to gauge their ESG performance. The primary assessment areas encompass business integrity, human rights, labor relations, occupational health and safety, and the environmental management system. In instances where suppliers exhibit a heightened sustainability risk, an on-site inspection conducted by Canacol’s ESG team becomes necessary to validate the evaluation outcomes.
  2. On-site audit:
    In collaboration with an external consultant, Canacol undertakes sustainability evaluations for suppliers deemed high-risk, employing the sustainability performance evaluation form. Canacol is committed to facilitating enhancement initiatives for its high-risk suppliers in areas pertaining to ESG, recognizing their pivotal role in ensuring the Company’s service continues. To effectively handle and mitigate sustainability risks in the context of high-risk suppliers, we have instituted three vital control measures:
    • Training programs: Canacol offers improvement programs to close gaps in suppliers' ESG knowledge and/or procedures.
    • Performance evaluations: Project by project, the ESG team evaluates the performance of ESG parameters to detect shortcomings and identify opportunities for improvement.
    • Service Quality Management (SQM) meetings: Suppliers participate in periodic reviews of their performance.

For further information, please refer to the 2022 ESG Report.