BHP strengthens focus on ESG agenda

BHP stays hungry

As the world’s largest mining company, BHP understands its responsibility to inspire and incite the decarbonisation hunt. And with infrastructure and investments mounting, the company has started to walk the talk.

Like most mining companies, BHP isn’t dubious about the path ahead. The world needs to decarbonise, and as society’s inherent foundation, the mining industry is going to be at the summit of the renewable energy transition.

Validating BHP’s ambitions to reduce its operational emissions by at least 30 per cent by 2030, preceding the ultimate objective of a net zero operation by 2050, are initiatives and innovations to drive down emissions.

In 2021, BHP has invested capital into decarbonising its current operations, supporting future advancements and pledging its commitment to organisations committed to developing new-age strategies to combat the stark climate reality.

During the 2021 financial year, iron ore made up the highest level of Scope 3 emissions at BHP, producing 260.7 million tonnes of CO2e across this timeframe.

By March 2021, BHP had instituted partnerships with three separate Chinese steelmakers to investigate ways of decarbonising steelmaking, an industry intrinsically fuelled by iron ore.

Backing the green innovations of HBIS Group, China Baowu and JFE, BHP had invested a combined $US65 million ($89 million) across the three companies, not to mention its support of Boston Metal’s $US50 million initiative to develop a separate decarbonised passageway for iron ore.

BHP chief executive officer Mike Henry says decarbonising steelmaking will offer the mining industry some of its biggest challenges.

“With our recent ‘Say on Climate’, we have come out and committed to a target of net-zero Scope 3 for both shipping and the supply into BHP. But of course, that leaves steelmaking out there,” Henry, speaking at the 2021 Financial Times Mining Summit, says.

“Steelmaking is going to be quite hard to decarbonise. That is point number one. With known technology, it is still not economic to do so.”

BHP holds a grand position in the world’s steelmaking enterprise, but grandeur doesn’t necessarily lead to regulation.

“Point number two is that BHP’s ability to determine that outcome as the seller of product rather than the procurer of product, given the position that we occupy in the industry, is not an absolute or as significant as it would be in the case of shipping or supply into the company,” Henry continues.

BHP’s engagement with others in the supply chain demonstrates the company’s belief in collaboration.

Its partnerships with HBIS Group, China Baowu and JFE will assist these steelmakers in reducing their Scope 1 and 2 emissions, while BHP in turn works to drive down its Scope 3 emissions.

BHP’s Nickel West operation in Western Australia.

Image credit: BHP.

Image credit: BHP.

Through BHP Ventures, which is solely focussed on developing early-stage technology companies and start-ups, there are other decarbonisation endeavours in the works.

Henry hesitates from disclosing information on any immature workings, however.

“We also have, through our Ventures arm, some investments in even more bleedingedge or cutting-edge technologies to enable steelmaking decarbonisation,” he says.

“I cannot go out with integrity and commit to something that is still as earlystage as the decarbonisation of steelmaking is.

“I want to ensure that anything we are specifically putting a target out there on is something that we have a high degree of confidence in our ability to achieve and that we have a real understanding of both the technologies and the costs required for doing so.”

Decarbonising steelmaking is one piece to the net-zero puzzle, and forms part of BHP’s broader environmental, social and governance (ESG) strategy.

The ESG movement has separated the sheep from the goats, highlighting the ethical investors while exposing those less inclined to embrace the climate reality.

Henry believes the ESG movement is going to bring out the best in us, however, like introducing anything new of this scale, there’s going to be hiccups.

“In any time of significant rapid change like we see on the ESG front, of course there are going to be unintended consequences and imperfections in the way the system operates along the way,” Henry says.

“The challenge for all of us is to come together and get the system operating in the way that the world needs it to operate as quickly as possible.”

In the event that the push for decarbonisation escalates the demand for certain resources, there’s also the potential for an unbalanced market.

“In the strong push for decarbonisation with the ensuing implications in terms of copper demand, nickel demand and so on, the world does need more copper supply to be brought to the market more quickly, and the same for nickel,” Henry says.

“Without a concurrent focus on community, water stewardship, biodiversity and so on, you could see unintended or bad consequences on those ESG fronts.”

Henry believes the mining industry must take a bird’s eye look at its ESG strategy before going all in.

“As we all look to grow supply in those commodities, it is important that it is done with a broad-based focus on ESG,” he says.

“Yes, the commodities supply decarbonisation, but we need to ensure that the standards are set around things like water stewardship, biodiversity, community engagement and Indigenous cultural heritage.”

With clear standards comes clear benchmarks, and in a perfect ESG world, mining companies would be answerable to an overarching criterium. But there’s still work to be done in this regard.

“Right now, in certain areas the standards still have further to improve. They need to be as global as possible. The way that companies get benchmarked against them still has opportunity for improvement,” Henry says.

“If we can get all of that right, the world will be able to meet the needs of decarbonisation efficiently, timeously and in a way that sees concurrent improvement in absolute performance in other areas of ESG as well.”

BHP offloading its 80 per cent stake in BHP Mitsui Coal (BMC) – the joint venture representing the Poitrel and South Walker Creek metallurgical coal mines in the Bowen Basin – could demonstrate the company’s contracting embrace of this fossil fuel.

Initially flagging its intentions to offload BMC in August 2020, Henry says the assets have not provided the company sufficient profits.

BHP Minerals Australia president Edgar Basto says the divestment forms part of the company’s net-zero transformation, suggesting the need for higher quality metallurgical coal is imperative to align with steelmakers’ low-emissions obligations.

Elsewhere, BHP is on the decarbonisation hunt at the polymetallic Olympic Dam mine in South Australia, announcing it will enter renewable energy supply arrangements with Iberdrola to reduce emissions at the operation.

In October, BHP produced the first nickel sulphate crystals from its Kwinana nickel sulphate plant in Western Australia.

Nickel sulphate is a key material in the lithium-ion batteries that power electric vehicles (EVs), with more than 85 per cent of BHP’s current production sold to the futurebattery supply chain.

The production follows an announcement in July that BHP will supply Tesla with nickel from its Nickel West assets in a collaboration which will aim to make the battery supply chain more sustainable.

Again, Nickel West is another demonstration of BHP’s overarching ambition to suppress its carbon footprint.

Decarbonisation is not just a prevailing trend at BHP; it underlines every discussion and every investment.

With the fervour to act and the infrastructure mounting, the stage is set for BHP to inspire a decarbonised mining industry going forward.

Olympic Dam is using renewable energy to decarbonise.