BHP to spend $US4bn to reduce emissions by end of the decade
The Big Australian will spend $US4bn to reduce carbon emissions by 30 per cent at the end of this decade, as it bets reforming the mining sector’s image will be a win for investors.
BHP will spend $US4bn by the end of the decade to reduce its carbon emissions, and give its shareholders an annual scorecard on its performance on key social and environmental issues, as the company bets that reforming the mining sector’s image will help it keep delivering dividends to shareholders.
According to a new set of environmental and social achievement guidelines introduced by the mining giant, by next financial year any mining project BHP considers for development will need to demonstrate it will help the company meet its decarbonisation goals to win further funding, the company said on Tuesday.
By 2024 the mining giant will have built at least one pilot steel plant that helps the industry carbon neutral.
Russia’s invasion of Ukraine, and the sharp spike in global energy prices that followed, has meant the growing investor and community pressure on major miners such as BHP to abandon fossil fuels and decarbonise their operations has largely taken a back seat to more immediate community concerns around energy pricing and security.
But, in an investor presentation on Tuesday, BHP chief legal and governance officer Caroline Cox told analysts and investors the company’s “social value” framework would become an increasingly important part of BHP’s decision making process, with the company committing to look at the broader impacts of its decisions, and not just the immediate financial returns.
Ms Cox said that framework, first announced as part of a major reset of BHP’s strategic thinking in late 2019, was a key factor in the company’s to decision keep operating its marginal Mt Arthur thermal coal mine in NSW until its closure 2030, rather than taking advantage of high coal prices to sell the mine to the highest bidder.
“In setting up the bid process, and deciding whether we had viable offers, we took into account financial drivers and the sustainability and rehabilitation credentials of bidders. And we also took into account the interests of employees and communities,” she said.
Ms Cox also updated BHP’s projections on the cost of reducing carbon emissions of its own operations, saying the company expected to spend $US4bn on renewable energy projects, and other initiatives to reduce its impact on global warming.
“On decarbonisation, our operational greenhouse gas emissions have dropped 20 per cent since the 2020 financial year, and we expect to spend around $US4bn through to 2030 to further reduce our emissions,” she said.
BHP has previously given a range of $US2bn to $4bn on its decarbonisation spending, with a target of reducing its operational issues by 30 per cent by 2030. BHP’s targets still sit well below those of some of its peers, with Rio Tinto aiming for a 50 per cent carbon emission reduction by 2030, and planning to spend $US7.5bn along the way.
But from next year BHP will give shareholders an annual scorecard showing its progress on a range of social environmental issues, with Ms Cox pledging the company will give shareholders a clear set of metrics to track its progress of a suite of non-financial issues – and not just its profits and dividends to shareholders.
BHP’s new “six pillars” framework include its decarbonisation plans, its impact on the broader environment, its relationships with traditional owners, workplace safety and inclusion, its impact on the communities in which it operates, and the way in which the company sources and pays suppliers.
BHP’s annual report will now include detailed targets for each pillar, Ms Cox said, as well as figures to track progress on whether its performance has improved – and all would eventually be linked to BHP’s management and workforce bonus structure.
“At its core, this scorecard represents an emphasis on partnership, listening and co-design recognising that it is not for us alone to decide what is of value to communities or the environment, and that addressing challenges like climate change require collaboration,” she said.
Targets to be tracked include BHP’s progress on hiring more indigenous employees, promoting more women through its ranks, and measures to reduce sexual and racial harassment in the workplace.
In addition, BHP on Tuesday committed to create “nature positive” outcomes on the land it controls across the globe, saying at least 30 per cent of the ground it controls would be subject to conservation or restoration plans by 2030.
“To achieve our 30 per cent goal, we will focus on areas of ‘highest ecosystem value’ including the intersections with our operational footprint, working alongside indigenous partners and communities to place these areas under nature positive practices such as conservation, improved land management or restoration,” Ms Cox said.
“We see that effectively managing this land and understanding the impacts of our efforts will only be possible through the creation and management of natural capital accounts – you will see this featured in our metrics and milestones.”
Ms Cox’s presentation is the follow up to a major reset of the company’s strategy in 2019, under former chief executive Andrew Mackenzie.
In a similar investor presentation Ms Cox’s predecessor, Geoff Healy, argued a policy shift to reflect climate change, gender equality and indigenous affairs was a necessary part of winning the right to develop new projects, and not concessions to pressure groups and popular opinion.
The company’s social value framework, announced in October 2019, was part of BHP’s ongoing effort to focus the attention of investors – and its own management – on longer-term returns for the company, rather than quarterly and annual production and financial results.
At the time Mr Healy said the decision to put social and environmental outcomes alongside financial returns in its decision making process was “plain and simple, good business”.
“One word is key here: access. There are two sides to that access. One, protecting and maintaining the access we currently have. And two, securing access to new resources, new talent, and new partnerships to take full advantage of future opportunities,” he said.