BHP Group Ltd

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED 30 JUNE 2021.

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to


Commission file number: 001-09526		Commission file number: 001-31714

BHP GROUP LIMITED		BHP GROUP PLC
(ABN 49 004 028 077)		(REG. NO. 3196209)
(Exact name of Registrant as specified in its charter)		(Exact name of Registrant as specified in its charter)

VICTORIA, AUSTRALIA		ENGLAND AND WALES
(Jurisdiction of incorporation or organisation)		(Jurisdiction of incorporation or organisation)

171 COLLINS STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA (Address of principal executive offices)		NOVA SOUTH, 160 VICTORIA STREET LONDON, SW1E 5LB UNITED KINGDOM
		(Address of principal executive offices)

STEFANIE WILKINSON BHP GROUP LIMITED 171 COLLINS STREET MELBOURNE VIC 3000 AUSTRALIA TELEPHONE AUSTRALIA 1300 55 47 57 TELEPHONE INTERNATIONAL +61 3 9609 3333 FACSIMILE +61 3 9609 3015 (Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)		STEFANIE WILKINSON BHP GROUP PLC NOVA SOUTH, 160 VICTORIA STREET LONDON SW1E 5LB UNITED KINGDOM TELEPHONE +44 20 7802 4000 FACSIMILE +44 20 7802 4111 (Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to section 12(b) of the Act.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares*	BHP	New York Stock Exchange	American Depositary Shares*	BBL	New York Stock Exchange

Ordinary Shares**	BHP	New York Stock Exchange	Ordinary Shares, nominal value US$0.50 each**	BBL	New York Stock Exchange

*	Evidenced by American Depositary Receipts. Each American Depositary Receipt represents two ordinary shares of BHP Group Limited or BHP Group Plc, as the case may be.

**	Not for trading, but only in connection with the listing of the applicable American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.


	BHP Group Limited	BHP Group Plc
Fully Paid Ordinary Shares	2,950,251,394	2,112,071,796

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ¨		International Financial Reporting Standards as issued by the International Accounting International Accounting Standards Board ☒		Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check

mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Company details and terms of reference

BHP Group Limited is registered in Australia. Registered office: 171 Collins Street, Melbourne, Victoria 3000, Australia. BHP Group Plc. Registration number 3196209. Registered in England and Wales. Registered office: Nova South, 160 Victoria Street London SW1E 5LB United Kingdom. Each of BHP Group Limited and BHP Group Plc is a member of the Group. BHP is a Dual Listed Company structure comprising BHP Group Limited and BHP Group Plc. The two entities continue to exist as separate companies but operate as a combined group known as BHP.

The headquarters of BHP Group Limited and the global headquarters of the combined Group are located in Melbourne, Australia. The headquarters of BHP Group Plc are located in London, United Kingdom. Both companies have identical Boards of Directors and are run by a unified management team. Throughout this publication, the Boards are referred to collectively as the Board. Shareholders in each company have equivalent economic and voting rights in the Group as a whole.

In this Annual Report, the terms ‘BHP’, the ‘Company’, the ‘Group’, ‘our business’, ‘organisation’, ‘we’, ‘us’, ‘our’ and ‘ourselves’ refer to BHP Group Limited, BHP Group Plc and, except where the context otherwise requires, their respective subsidiaries included in note 30 ‘Subsidiaries’ in section 3.1.6 and in Exhibit 8.1 – List of Subsidiaries. Those terms do not include

non-operated

assets.

This Annual Report covers BHP’s assets (including those under exploration, projects in development or execution phases, sites and closed operations) that have been wholly owned and/or operated by BHP and that have been owned as a joint venture

(1)

operated by BHP (referred to in this Annual Report as ‘operated assets’ or ‘operations’) during the period from 1 July 2020 to 30 June 2021. Our functions are also included.

BHP also holds interests in assets that are owned as a joint venture but not operated by BHP (referred to in this Annual Report as

‘non-operated

joint ventures’ or

‘non-operated

assets’). Notwithstanding that this Annual Report may include production, financial and other information from

non-operated

assets,

non-operated

assets are not included in the BHP Group and, as a result, statements regarding our operations, assets and values apply only to our operated assets unless stated otherwise.

On 17 August 2021, we announced our proposal to adopt a single company structure under BHP Group Ltd, with a primary listing on the Australian Securities Exchange (ASX). The company would also hold a standard listing on the London Stock Exchange (LSE), a secondary listing on the Johannesburg Stock Exchange (JSE) and an ADR program listed on the New York Stock Exchange (NYSE). If implemented, eligible BHP Group Plc shareholders would receive one share in BHP Group Ltd for each BHP Group Plc share they hold. The holdings of BHP Group Ltd shareholders would not change. BHP’s dividend policy and ability to distribute fully franked dividends also would not change. Subject to final Board approval, BHP shareholders are expected to vote on unification at shareholder meetings planned for the first half of CY2022.

All references to websites in this Annual Report are intended to be inactive textual references for information only and any information contained in or accessible through any such website does not form a part of this Annual Report.

Forward-looking statements

This Annual Report contains forward-looking statements, including: statements regarding trends in commodity prices and currency exchange rates; demand for commodities; reserves and production forecasts; plans, strategies and objectives of management; climate scenarios; approval of certain projects and consummation of certain transactions; closure or divestment of certain assets, operations or facilities (including associated costs); anticipated production or construction commencement dates; capital costs and scheduling; operating costs and supply of materials and skilled employees; anticipated productive lives of projects, mines and facilities; provisions and contingent liabilities; and tax and regulatory developments.

Forward-looking statements may be identified by the use of terminology including, but not limited to, ‘intend’, ‘aim’, ‘project’, ‘see’, ‘anticipate’, ‘estimate’, ‘plan’, ‘objective’, ‘believe’, ‘expect’, ‘commit’, ‘may’, ‘should’, ‘need’, ‘must’, ‘will’, ‘would’, ‘continue’, ‘forecast’, ‘guidance’, ‘trend’ or similar words. These statements discuss future expectations concerning the results of assets or financial conditions, or provide other forward-looking information.

(1)	References in this Annual Report to a ‘joint venture’ are used for convenience to collectively describe assets that are not wholly owned by BHP. Such references are not intended to characterise the legal relationship between the owners of the asset.

Examples of forward-looking statements contained in this Annual Report include, without limitation, statements describing (i) our strategy, our values and how we define our success; (ii) the emerging uses of and our expectations regarding future demand for certain commodities, in particular copper, nickel, iron ore, metallurgical coal, steel, oil and gas and potash, and our intentions, commitments or expectations with respect to our supply of certain commodities; (iii) our expectations of a competitive advantage in certain commodities, in particular in copper, nickel and potash; (iv) the perceived synergies and other benefits of the proposed transaction between BHP and Woodside; (v) our future exploration and partnerships plans and the structure of our portfolio; (vi) our outlook for long-term economic growth and other macroeconomic and industry trends; (vii) our projected and expected production levels and development projects across our portfolio of assets; (viii) our reserves; (ix) our plans for our major projects and related budget allocations; (x) our expectations and objectives with respect to decarbonisation, climate change resilience and timelines to achieve such objectives, including our Climate Transition Action Plan, Climate Change Adaptation Strategy and goals, targets and strategies to seek to reduce or support the reduction of greenhouse gas emissions, and related perceived opportunities for BHP; (xi) the assumptions, beliefs and conclusions in our climate change-related statements and strategies, including in our Climate Change Report 2020, for example, in respect of future temperatures, energy consumption and greenhouse gas emissions, and climate-related impacts; (xii) our commitment to generating social value; (xiii) our commitments under sustainability frameworks, standards and initiatives; (xiv) our intention to improve tailings storage management; (xv) our intention to achieve certain inclusion and diversity targets; and (xvi) our intention to achieve certain targets and outcomes with respect to Indigenous peoples.

Forward-looking statements are based on management’s current expectations and reflect judgments, assumptions, estimates and other information available as at the date of this Annual Report and/or the date of BHP’s planning or scenario analysis processes. These statements do not represent guarantees or predictions of future financial or operational performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report. BHP cautions against reliance on any forward-looking statements or guidance, including in light of the current economic climate and the significant volatility, uncertainty and disruption arising in connection with

COVID-19.

For example, our future revenues from our assets, projects or mines described in this Annual Report will be based, in part, on the market price of the minerals, metals or petroleum produced, which may vary significantly from current levels. These variations, if materially adverse, may affect the timing or the feasibility of the development of a particular project, the expansion of certain facilities or mines, or the continuation of existing assets.

Other factors that may affect the actual construction or production commencement dates, revenues, costs or production output and anticipated lives of assets, mines or facilities include: (i) our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; (ii) the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we produce; (iii) activities of government authorities in the countries where we sell our products and in the countries where we are exploring or developing projects, facilities or mines, including increases in taxes; (iv) changes in environmental and other regulations; (v) the duration and severity of the

COVID-19

pandemic and its impact on our business; (vi) political or geopolitical uncertainty; (viii) labour unrest; and (viii) other factors identified in the risk factors set out in section 1.16.

Except as required by applicable regulations or by law, BHP does not undertake to publicly update or review any forward-looking statements, whether as a result of new information or future events.

Past performance cannot be relied on as a guide to future performance.

Emissions and energy consumption data

Due to the inherent uncertainty and limitations in measuring greenhouse gas (GHG) emissions and operational energy consumption under the calculation methodologies used in the preparation of such data, all GHG emissions and operational energy consumption data or references to GHG emissions and operational energy consumption volumes (including ratios or percentages) in this Annual Report are estimates. There may also be differences in the manner that third parties calculate or report GHG emissions or operational energy consumption data compared to BHP, which means that third party data may not be comparable to our data. For information on how we calculate our GHG emissions and operational energy consumption data, see section 4.8.

The Strategic Report is made in accordance with a resolution of the Board.

Ken MacKenzie

Chair

Dated: 2 September 2021

Form 20-F Cross Reference Table


Item Number		Description	Report section reference
1.		Identity of Directors, Senior Management and Advisors	Not applicable
2.		Offer Statistics and Expected Timetable	Not applicable
3.		Key Information
	B	Capitalization and indebtedness	Not applicable
	C	Reasons for the offer and use of proceeds	Not applicable
	D	Risk factors	1.16
4.		Information on the Company
	A	History and development of the company	1.2 to 1.6, 1.8 to 1.17, 3.7, 4.3, 4.5 to 4.9, 4.10.1 to 4.10.5 and Corporate directory
	B	Business overview	1.4 to 1.6, 1.8 to 1.11, 1.17, 3.7, 4.3, 4.5 to 4.9, 4.10.3, 4.10.4, 4.10.9 and Note 1 to the Financial Statements
	C	Organizational structure	4.10.3 and Note 30 to the Financial Statements
	D	Property, plants and equipment	1.10.1 to 1.10.4, 1.11, 1.13, 1.15, 1.16, 1.17, 3.7, 4.3, 4.5 to 4.7 and Notes 11, 15 and 21 to the Financial Statements
4A.		Unresolved Staff Comments	None
5.		Operating and Financial Review and Prospects
	A	Operating results	1.8, 1.17 and 4.10.9
	B	Liquidity and capital resources	1.8, 3.1.4, Notes 11, 20 to 23, 34 and 39 to the Financial Statements
	C	Research and development, patents and licenses, etc.	1.10 to 1.17, 2.3.14, 3.7, 4.3, 4.6, 4.7 and Notes 11 and 15 to the Financial Statements
	D	Trend information	1.2 to 1.6, 1.13, 1.16 and 1.17
	E	Critical Accounting Estimates	IFRS is applied in the Financial Statements as issued by the IASB
6.		Directors, Senior Management and Employees
	A	Directors and senior management	2.1.1, 2.1.2 and 2.1.5
	B	Compensation	2.2
	C	Board practices	2.1.2, 2.1.9, 2.1.10, 2.1.12 and 2.2
	D	Employees	1.12, 4.8 and Note 28 to the Financial Statements
	E	Share ownership	2.2, 2.3.2, 2.3.5, 2.3.18 and Notes 16, 17 and 25 to the Financial Statements
7.		Major Shareholders and Related Party Transactions
	A	Major shareholders	4.10.6
	B	Related party transactions	2.2 and Notes 24 and 33 to the Financial Statements
	C	Interests of experts and counsel	Not applicable
8.		Financial Information
	A	Consolidated Statements and Other Financial Information	1.15, 4.9, 4.10.7, 3.1, 3.2A and the Financial Statements beginning on page F-1 in this Annual Report
	B	Significant Changes	Note 35 to the Financial Statements
9.		The Offer and Listing
	A	Offer and listing details	4.10.2
	B	Plan of distribution	Not applicable
	C	Markets	4.10.2
	D	Selling shareholders	Not applicable
	E	Dilution	Not applicable
	F	Expenses of the issue	Not applicable
10.		Additional Information
	A	Share capital	Not applicable
	B	Memorandum and articles of association	4.10.3 and 4.10.5
	C	Material contracts	4.10.4
	D	Exchange controls	4.10.9
	E	Taxation	4.10.10
	F	Dividends and paying agents	Not applicable
	G	Statement by experts	Not applicable
	H	Documents on display	4.10.5
	I	Subsidiary information	Note 30 to the Financial Statements and Exhibit 8.1
11.		Quantitative and Qualitative Disclosures About Market Risk	Note 23 to the Financial Statements
12.		Description of Securities Other than Equity Securities
	A	Debt Securities	Not applicable
	B	Warrants and Rights	Not applicable
	C	Other Securities	Not applicable
	D	American Depositary Shares	4.10.8 and Exhibit 2.1
13.		Defaults, Dividend Arrearages and Delinquencies	There have been no defaults, dividend arrearages or delinquencies
14.		Material Modifications to the Rights of Security Holders and Use of Proceeds	There have been no material modifications to the rights of security holders and use of proceeds since our last Annual Report
15.		Controls and Procedures	2.1.10 and 3.2A
16A.		Audit committee financial expert	2.1.10
16B.		Code of Ethics	2.1.15
16C.		Principal Accountant Fees and Services	2.1.10 and Note 36 to the Financial Statements
16D.		Exemptions from the Listing Standards for Audit Committees	Not applicable
16E.		Purchases of Equity Securities by the Issuer and Affiliated Purchasers	2.3.2
16F.		Change in Registrant’s Certifying Accountant	Not applicable
16G.		Corporate Governance	2
16H.		Mine Safety Disclosure	Not applicable
16I.		Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	Not applicable
17.		Financial Statements	Not applicable as Item 18 complied with
18.		Financial Statements	The Financial Statements begin on page F-1 in this Annual Report
19.		Exhibits	5

iii

We are BHP,

a leading global resources company


Our Purpose		Our Values

Our purpose is to bring people and resources together to build a better world.		Sustainability Putting health and safety first, being environmentally responsible and supporting our communities.
		Integrity Doing what is right and doing what we say we will do.
		Respect Embracing openness, trust, teamwork, diversity and relationships that are mutually beneficial.
		Performance Achieving superior business results by stretching our capabilities.

		Simplicity Focusing our efforts on the things that matter most.

		Accountability Defining and accepting responsibility and delivering on our commitments.

		We are successful when:

		• Our people start each day with a sense of purpose and end the day with a sense of accomplishment.

		• Our teams are inclusive and diverse.

		• Our communities, customers and suppliers value their relationships with us and are better off for our presence.

		• Our asset portfolio is world class and sustainably developed.

		• Our operational discipline and financial strength enables our future growth.

		• Our shareholders receive a superior return on their investment.

		• Our commodities support continued economic growth and decarbonisation.

Contents


1	Strategic Report	1

1.1	Our highlights	1

1.2	Chair’s review	1

1.3	Chief Executive Officer’s review	3

1.4	Our business today	4

1.5	Positioning for the future	5

1.6	Delivering value	7

1.6.1	Our business model	7

1.6.2	How we deliver value	9

1.6.3	How our choice of commodities and assets helps deliver value	11

1.7	Chief Financial Officer’s review	13

1.8	Financial review	13

1.8.1	Group overview	13

1.8.2	Key performance indicators	14

1.8.3	Financial results	16

1.8.4	Debt and sources of liquidity	18

1.9	How we manage risk	20

1.10	Our business	23

1.10.1	Locations	23

1.10.2	Minerals Australia	24

1.10.3	Minerals Americas	29

1.10.4	Petroleum	35

1.10.5	Commercial	38

1.11	Exploration	39

1.12	People and culture	41

1.13	Sustainability	46

1.13.1	Our sustainability approach	46

1.13.2	Our material sustainability issues	47

1.13.3	Our sustainability performance: Non-financial KPIs	48

1.13.4	Safety	50

1.13.5	Health	53

1.13.6	Ethics and business conduct	55

1.13.7	Climate change and portfolio resilience	57

1.13.8	Community	64

1.13.9	Human rights	65

1.13.10	Indigenous peoples	66

1.13.11	Social investment	68

1.13.12	Environment	70

1.13.13	Water	71

1.13.14	Land and biodiversity	73

1.13.15	Tailings storage facilities	75

1.13.16	Independent limited assurance report	77

1.14	Section 172 statement	78

1.15	Samarco	81

1.16	Risk factors	82

1.16.1	Management of risks	90

1.16.2	Robust risk assessment and viability statement	97

1.17	Performance by commodity	98

1.17.1	Petroleum	98



1.17.2	Copper	101

1.17.3	Iron Ore	103

1.17.4	Coal	105

1.17.5	Other assets	107

1.17.6	Impact of changes to commodity prices	107

1.18	Other information	107

1.18.1	Company details and terms of reference	107

1.18.2	Forward-looking statements	107

2	Governance at BHP	108

2.1	Corporate Governance Statement	110

2.1.1	Chair’s letter	110

2.1.2	Board of Directors and Executive Leadership Team	112

	Board of Directors	112

	Executive Leadership Team	115

2.1.3	BHP governance structure	116

2.1.4	Board and Committee meetings and attendance	117

2.1.5	Key Board activities during FY2021	118

2.1.6	Stakeholder engagement	120

	Shareholder engagement	120

	Workforce engagement	123

2.1.7	Director skills, experience and attributes	124

2.1.8	Board evaluation	127

2.1.9	Nomination and Governance Committee Report	127

2.1.10	Risk and Audit Committee Report	130

2.1.11	Sustainability Committee Report	137

2.1.12	Remuneration Committee Report	138

2.1.13	Risk management governance structure	139

2.1.14	Management	139

2.1.15	Our conduct	140

2.1.16	Market disclosure	140

2.1.17	Conformance with corporate governance standards	141

2.1.18	Additional UK disclosure	143

2.2	Remuneration Report	143

2.2.1	Annual statement by the Remuneration Committee Chair	145

2.2.2	Remuneration policy report	150

	Remuneration policy for the Executive Director	150

	Remuneration policy for Non-executive Directors	157

2.2.3	Annual report on remuneration	159

	Remuneration for the Executive Directors (the CEOs)	159

	Remuneration for other Executive KMP (excluding the CEO)	171

	Remuneration for Non-executive Directors	174



	Remuneration governance	176

	Other statutory disclosures	177

2.3	Directors’ Report	184

2.3.1	Review of operations, principal activities and state of affairs	185

2.3.2	Share capital and buy-back programs	185

2.3.3	Results, financial instruments and going concern	186

2.3.4	Directors	186

2.3.5	Remuneration and share interests	187

2.3.6	Secretaries	188

2.3.7	Indemnities and insurance	188

2.3.8	Employee policies	188

2.3.9	Corporate governance	189

2.3.10	Dividends	189

2.3.11	Auditors	189

2.3.12	Non-audit services	189

2.3.13	Political donations	189

2.3.14	Exploration, research and development	190

2.3.15	ASIC Instrument 2016/191	190

2.3.16	Proceedings on behalf of BHP Group Limited	190

2.3.17	Performance in relation to environmental regulation	190

2.3.18	Share capital, restrictions on transfer of shares and other additional information	191

3	Financial Statements	192

4	Additional Information	194

4.1	Financial information summary	194

4.2	Alternative Performance Measures	195

4.3	Information on mining operations	207

4.4	Financial Information by commodity	222

4.5	Production	228

4.6	Reserves	231

4.7	Major projects	247

4.8	Sustainability – performance data	249

4.9	Legal proceedings	264

4.10	Shareholder information	269

4.10.1	History and development	269

4.10.2	Markets	270

4.10.3	Organisational structure	271

4.10.4	Material contracts	274

4.10.5	Constitution	275

4.10.6	Share ownership	281

4.10.7	Dividends	284

4.10.8	American Depositary Receipts fees and charges	285

4.10.9	Government regulations	286

4.10.10	Taxation	290

4.10.11	Ancillary information for our shareholders	298

4.11	Glossary	299

5	Exhibits	318

vii

Section 1

Strategic Report

1.1 Our highlights

Not required for US reporting.

1.2 Chair’s review

I am pleased to provide our Annual Report for FY2021.

In a year that has seen

COVID-19

continue to challenge the lives and livelihoods of so many, I am proud of the resilience and commitment our people have demonstrated to deliver an outstanding set of results in FY2021.

The strong operational performance driven by our teams across the world, combined with a diversified portfolio and disciplined approach to capital allocation, has seen the Board determine a dividend of US$3.01 per share for FY2021. This means we have returned US$15 billion to shareholders this year, and more than US$38 billion over the past three years. In a year of significant financial disruption across the globe, these results demonstrate the health of your company.

BHP is in a strong position and it is against this backdrop that we are making transformative changes.

We have announced our intention to unify BHP’s corporate structure to a single listing on the Australian Securities Exchange. Creating one BHP today positions the company to deliver on our strategy in the future. We will be more agile, efficient and flexible, while still enabling BHP shareholders around the world to support the company as they have done for decades.

We have also announced a number of strategic steps towards the future of your company, as we continue to grow our portfolio in future facing commodities. We have announced a US$5.7 billion investment in Jansen Stage 1, a top tier potash asset in Canada. BHP has also announced our intention to merge our Petroleum assets with Woodside. The resulting global top 10 independent oil and gas company will have the resilience and optionality to succeed in the energy transition.

The essential resources we produce at BHP are not only fundamental to the way we live now, they are fundamental to the way we will live in the future.

Based on the climate change scenario analysis we undertook last year, we believe that the more action the world takes to limit climate change, the better it will be for BHP.

Commodities like copper, nickel and iron ore will be essential for building the infrastructure and technology that will aid the world’s decarbonisation ambitions, and potash will help feed the world’s growing population.

Investing in future facing commodities creates great opportunities for BHP – it means our strategic goals align with our climate goals – but it also creates a challenge. The world needs to increase production of commodities that support the transition and do so ever more sustainably. BHP has made progress against our greenhouse gas emissions reductions targets and goals, but we intend to continue to challenge ourselves to reduce our own emissions, and work in partnership with our customers and suppliers to reduce emissions along the value chain.

Our response to climate change and the decarbonisation challenge is just one aspect of our broader commitment to deliver social value. Social value is the positive contribution we make to the environment and society. It goes hand in hand with financial value in our decision-making, and we believe this approach is in the long-term best interests of shareholders. We have been able to provide significant support to the communities in which we operate. This includes US$11.1 billion in taxes, royalties and other payments to governments in FY2021 – and US$84.0 billion over the past 10 years.

In FY2021, we continued to broaden our relationships with our Indigenous partners on whose land our operated assets lie. Our Cultural Heritage team has worked to ensure our operational decision-making is informed by reliable and contemporary heritage information, and any decision regarding cultural heritage is made by the most senior site leadership. We have also set out Regional Indigenous Peoples Plans that outline our commitment to agreement-making, Indigenous procurement, employment and social investment.

The delivery of the South Flank project was an important milestone for the Group in FY2021, and we would like to acknowledge the support of the Banjima people in helping us to deliver the project.

Our Board renewal process continued this year as we welcomed Xiaoqun Clever and Christine O’Reilly as independent

Non-executive

Directors in October 2020. We are pleased that Michelle Hinchliffe will join the BHP Board on 1 March 2022. Michelle has significant expertise in financial risk management and strong global experience, and we look forward to welcoming Michelle early next year.

We have also announced that Anita Frew and Susan Kilsby will retire from the BHP Board at the end of the 2021 Annual General Meetings. Both Anita and Susan have recently accepted Chair roles at significant international companies, and we wish them well. I thank Anita and Susan for the invaluable contribution they have made to BHP. Gary Goldberg has replaced Susan as BHP’s Senior Independent Director, and Christine O’Reilly has been appointed Chair of the Remuneration Committee.

Finally, we achieve nothing unless we do it safely. While we are pleased that it has now been over two years since the last fatality at our operated assets, we know that a commitment to health and safety requires more than this. We are committed to stamping out sexual assault and harassment at all our sites. This is a critical issue for BHP and for our industry. We have been working on this for some time, but we know we must do more to make our workplaces safe and inclusive for everyone.

I am confident the decisions we are making to build our company for the future, together with continued strong operational performance and commitment to those who rely on us, will see us continue to grow BHP and create value for our shareholders and our broader stakeholders for decades to come.

Thank you for your continued support of BHP.

Ken MacKenzie

Chair

1.3 Chief Executive Officer’s review

Dear shareholders,

I am pleased to report that BHP performed strongly in FY2021, with no one fatally injured across BHP’s global operations, and record production and throughput in a number of businesses. We completed four major capital projects on time and on budget, a notable feat given the pandemic context, and our approach to capital allocation remained disciplined, generating strong returns for shareholders. I want to thank our employees and all those who supported us in delivering these outcomes.

Our operational and financial results provide the strong foundation upon which we have announced our investment in the Jansen Stage 1 potash project, the intended merger of BHP’s Petroleum business with Woodside Petroleum Ltd. (Woodside), and the intention to unify the BHP corporate structure under a single primary listing in Australia. These strategic steps are intended to underpin BHP’s ability to continue to grow shareholder value in the coming decades.

The future is clear. We believe that the world is going to need increasing supply of the essential commodities BHP produces in order to sustain global economic growth and in order to decarbonise the global economy. It is important for the world that this growing demand is met sustainably, and BHP is ideally positioned to do so given our portfolio of existing assets, our strong track record on sustainability and social value creation, our operating and financial discipline, and most importantly our people.

The intended unification of BHP’s corporate structure will position us even more strongly to be able to continue growing shareholder value. We will be a simpler, more efficient and more agile company. This is expected to enable us to be more competitive and to more quickly create and capitalise on opportunities to continue to grow value.

The intended merger of BHP’s Petroleum business with Woodside will create a global top 10 independent exploration and production company, with increased scale and resilience. We expect shareholders to benefit from significant synergies arising from the intended merger, and they will have greater choice in how to shape the relative commodity exposures in their own portfolios.

The decision to proceed with the Jansen Stage 1 potash project in Canada is a significant milestone for BHP. Potash is a future facing commodity that enables more efficient and sustainable farming, which will be increasingly important in feeding a growing global population and in meeting the world’s need to decarbonise. Jansen Stage 1 also opens up a new front for future growth for BHP. We will be ideally positioned to meet potential future growth in global demand for potash with Jansen Stages 2 through 4, which we anticipate will offer high returns and faster paybacks.

These decisions and intended steps are anticipated to result in around half of BHP’s revenues being derived from the future facing commodities of copper, potash and nickel by the end of this decade. We also expect the other half, comprising iron ore and higher-quality coking coal, to see upside as the world decarbonises.

BHP continues to take action on climate change. In the past year we announced a new suite of climate change related targets and goals, together with an assessment of the performance of BHP’s portfolio under different climate scenarios. The latter indicated that BHP’s overall portfolio is resilient and, in fact, many of our commodities would perform best under our Paris-aligned scenario that sees more rapid decarbonisation and an increase in average global temperature of no more than 1.5°C.

We progressed towards our operational emissions reduction targets and goal by entering into renewable power supply agreements for our Kwinana nickel refinery and Queensland Coal operations – adding to the Escondida and Spence copper mine agreements announced in FY2020.

With a focus on Scope 3 emissions, we entered into partnerships with major steel producers in China and Japan, targeting technologies to reduce emissions from steelmaking.

The combined output of these steel companies equates to around 10 per cent of reported global steel production. We also entered into a series of innovative initiatives that seek to help reduce emissions in bulk shipping.

Finally, we continue to invest in people. In FY2021, we trained more than 500 apprentices and trainees through our FutureFit Academy in Australia, and have committed to creating 2,500 new Australian apprenticeship and trainee positions over the next five years. We have continued our progress towards gender balance and female participation in our workforce increased to 29.8 per cent during the year, complementing our already gender-balanced Executive Leadership Team. Our Indigenous participation rate has also increased to 7.2 per cent in Australia and 7.5 per cent in Chile. We are leading the way in building the workforce of the future.

I hope that you can see that this has been a very good year for BHP. We have taken action to shape BHP’s future, while delivering very strong operational and financial results.

The combination of a clear strategic outlook, increasing operational excellence and greater exposure to future facing commodities is expected to enable us to deliver positive returns and grow more value for all of our stakeholders in the years ahead.

Thank you for your ongoing support.

Mike Henry

Chief Executive Officer

1.4 Our business today

Our business

Our purpose is to bring people and resources together to build a better world.

Our strategy is to deliver long-term value and returns through the cycle. We aim to do this through owning a portfolio of world class assets with exposure to highly attractive commodities that benefit from the mega-trends playing out in the world around us, by operating them exceptionally well, by maintaining a disciplined approach to capital allocation and through being industry leaders in sustainability and the creation of social value.

We are a global business with over 9,000 suppliers around the world, many of which are small to

medium-sized

businesses that are local to our assets.

We have approximately 80,000 employees and contractors who work in more than 17 countries around the world.

The essential resources we produce are critical for continued economic growth and decarbonisation and we are committed to supplying them more safely, responsibly and efficiently.

In FY2021, we produced:

•

the commodities to create the steel that goes into the infrastructure needed for growing cities around the world, including to support the energy transition

•

the copper and nickel required for electrification, such as copper-intensive electric vehicles and nickel-intensive batteries that can reduce the need for fossil fuels and support decarbonisation

•

the energy that heats homes, enables transport and powers many of the household products we use every day



	Future facing commodities		Steelmaking commodities		Oil & Gas

Product	Copper	Nickel	Iron ore	Metallurgical coal*	Petroleum

FY2021 production	1,635.7 kt	89.0 kt	253.5 Mt	40.6 Mt	102.8 MMboe

Traditional usage	Wiring, power cables, cars, smartphones, televisions, laptops, air conditioners	Stainless steel, refrigerators, cookware, homeware, medical equipment	Cities, hospitals, schools, houses, bridges, trains, cars, smartphones * Metallurgical coal is also known as steelmaking coal.		Driving, air travel, heating, generating electricity, cleaning products, medical and hygiene products, roads

Emerging usage	Electrification mega trends		Supporting development and clean energy transition		Supporting mobility and modern life
	Wind turbines, electric vehicles, solar panels, battery charging, electric vehicle batteries, grid storage solutions		Wind turbines, carbon capture infrastructure and climate adaption to adjust to current or expected climate change and its effects		Low-emissions shipping, technology-related materials, pairing with renewables, and the transportation impacts of the e-commerce revolution

1.5 Positioning for the future

Growing value and positioning for the future

In August 2021, we announced proposed changes to our portfolio and corporate structure to position BHP for the future. These portfolio and capability changes are intended to enable us to even more strongly grow long-term value by sustainably producing the commodities the world needs for continued economic growth and decarbonisation. We seek to grow value while continuing to provide climate leadership and considering social value and financial value in the decisions we make. We seek to grow value while continuing to provide climate leadership and considering social value and financial value in the decisions we make.

Jansen Stage 1 potash project – entry into a

top-tier

potash basin

BHP’s Board approved a US$5.7 billion investment in Jansen Stage 1 in Canada, which is aligned with our strategy of growing our exposure to future facing commodities in world class assets. The project is expected to produce 4.35 million tonnes of potash per year with initial production targeted for 2027, ramping up to full production over two years.

Jansen is located in the world’s best potash basin and is in an attractive investment jurisdiction. It opens up a new front for growth for BHP and is an expandable resource that can support a century or more of operations. Potash provides us with greater diversification by commodity, country, and customer.

Potash is a potassium-rich salt mainly used in fertiliser and potassium is an essential nutrient for plant growth.

Potash demand is underpinned by a growing global population and the requirement for more productive farming with a lower environmental footprint.

Jansen Stage 1 is expected to be low cost and one of the world’s most sustainable potash mines, designed for a

low-carbon

footprint and low water intensity.

Jansen Stage 1 is expected to create 3,500 jobs during peak construction and 600 jobs in ongoing operations, and opportunities for local and Indigenous businesses. Our goal is for the Jansen workforce to be gender balanced and for First Nations employees to make up 20 per cent of the team. In the first of their kind in the potash industry, we have signed Opportunity Agreements with six First Nations communities around the site.

Petroleum business merger proposal – creating a global top 10 independent energy company

BHP and Woodside have entered into a merger commitment deed to combine their respective oil and gas portfolios by an

all-stock

merger. The proposed merger would create a global top 10 independent energy company by production, with a global top 10 position in the liquefied natural gas (LNG) industry, and would be the largest energy company listed on the Australian Securities Exchange (ASX).

With the combination of two high-quality asset portfolios, the combined business would have a high-margin oil portfolio, long-life LNG assets and the financial resilience to help supply the energy needed for global growth and development over the energy transition.

The proposed merger is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent, including shareholder, regulatory and other approvals.

The proposed merger is expected to be completed in the first half of CY2022. On completion, it is expected that Woodside would be owned approximately 52 per cent and 48 per cent by existing Woodside and BHP shareholders respectively. The Woodside shares would be immediately distributed to BHP shareholders. Woodside intends to remain listed on the ASX with listings on additional exchanges being considered.

A unified corporate structure – flexibility for the future

BHP currently operates as a Dual Listed Company with two parent entities, both holding primary listings: BHP Group Limited (BHP Ltd) in Australia and BHP Group Plc (BHP Plc) in the United Kingdom.

We are proposing to adopt a single company structure under BHP Ltd, with a primary listing on the ASX. The company would hold a standard listing on the London Stock Exchange, a secondary listing on the Johannesburg Stock Exchange and an American Depositary Receipt program listed on the New York Stock Exchange.

We believe a simplified corporate structure would be more efficient and agile, better positioning the company for continued performance and growth.

One-off

unification costs are expected to range between US$400 to US$500 million.

If a unified model is implemented, eligible BHP Plc shareholders would receive one share in BHP Ltd for each BHP Plc share they hold. The holdings of BHP Ltd shareholders would not change. BHP’s dividend policy and ability to distribute fully franked dividends also would not change.

Subject to final Board approval, BHP shareholders are expected to vote on unification at shareholder meetings planned for the first half of CY2022.

Adding to our early stage options in future facing commodities

Consistent with our strategy to secure further growth opportunities in future facing commodities, in July 2021 we made a public

all-cash

offer to acquire Noront Resources to gain access to a highly prospective nickel basin in an attractive region in Canada, following which Noront’s Board recommended shareholders accept BHP’s offer.

During the year, we also signed an agreement for a nickel exploration alliance with Midland Exploration in Canada and exercised an option to sign a

farm-in

agreement with Encounter Resources for the Elliott copper project in Australia.

Update on our

non-core

coal divestment process

In August 2020, we announced plans to divest our interests in BHP Mitsui Coal (BMC), New South Wales Energy Coal and Cerrejón

to focus our coal portfolio on higher-quality metallurgical coals used in steelmaking.

In June 2021, we announced the signing of a Sale and Purchase Agreement to divest our 33.3 per cent interest in Cerrejón for US$294 million cash consideration. Subject to the satisfaction of customary competition and regulatory requirements, this is expected to complete in the second half of FY2022.

The process for BMC and New South Wales Energy Coal is progressing, in line with the

two-year

timeframe set last year. We remain open to all options and continue consultation with relevant stakeholders.

1.6 Delivering value

1.6.1 Our business model

1.6.2 How we deliver value

Our people

Our global workforce is the foundation of our business. Supporting our people is vital for high performance and for furthering our competitive advantage. For more information on our culture, including our aspirational target of a gender-balanced workforce and progress in FY2021, refer to section 1.12.

Social value

We are committed to creating long-term value for our shareholders and consider social value and financial value in the decisions we make. Social value is our positive contribution to society – to our people, partners, economy, environment and local communities. We know that when we consider social impacts in our decision-making and when we build respectful and mutually beneficial relationships, we create value for all of our stakeholders and in particular for our shareholders.

We consider our social value work to be successful when the societies where we operate are better off through our presence; the communities we are part of are resilient and thriving, even in the face of change; our shareholders receive a superior return on their investment; and we are a partner of choice for governments, investors, employees, communities, suppliers and customers.

Our strategic capabilities

To deliver on our strategy we need outstanding strategic capabilities in areas where we can generate maximum value.

The strategic capabilities we are focused on include:

•

discovering and appraising resources

•

acquiring the right assets and asset options

•

defining the optimal ways to develop our resources

•

optimising our use of capital

•

continuous improvement and innovation

•

establishing and maintaining mutually beneficial stakeholder relationships

Pursuing operational excellence

Our commitment to continuous improvement supports our pursuit of operational excellence. Our current and developing strengths include:

•

the principles, practices and tools of the BHP Operating System (BOS), BHP’s way of working that makes continuous improvement part of what we do in our business every day

•

the capabilities and standards housed in our technical functions, which includes Technology and our Centres of Excellence, which are designed to help deliver improved safety, productivity and sustainability outcomes

•

our internal venture capital unit, BHP Ventures, which looks to invest in emerging companies with game-changing technologies and management teams to help drive innovation and provide us with a valuable portfolio of growth options

Examples in FY2021 included multi-team and cross-functional approaches to achieve:

•

an increase of over 1,000 productive hours a year for the automated truck fleet at our Jimblebar iron ore operation in Western Australia

•

improvements in the refining process at Olympic Dam in South Australia resulting in a copper recovery rate from scrap copper that was 25 per cent above the budgeted target for FY2021 and a record for scrap copper recovery at Olympic Dam

Technology

Technology helps us to improve frontline safety, increase productivity, reduce cost, build capability and accelerate value creation. We are leveraging technologies such as cloud computing, cloud storage and smart analytics to enhance decision-making and advance mining technologies to automate equipment.

Highlights in FY2021 included:

•

the development of an

in-house

machine learning tool, Trident, at Escondida that uses real-time data analytics to optimise vessel scheduling and improve the revenue per tonne from copper concentrate sales. The tool is being implemented across our other copper concentrate assets, including Spence

•

the use of machine learning and optimisation techniques at our Western Australia Iron Ore (WAIO) rail network to refine WAIO’s rail track grinding plan, which has simultaneously resulted in significantly increased grinding compliance and a reduction in hours lost

•

at our WAIO shipping facilities at Port Hedland, data scientists and mathematicians worked alongside the operations team on the ground to develop algorithms that lifted our port outflow capacity by more than 1.4 Mtpa, by helping to optimise transport routes to reduce dump times and vessel

line-up

Exploration

Our exploration program is focused on copper and nickel to grow our future facing resource portfolio and replenish our resource base. It is designed to enable us to generate attractive,

low-cost,

value-accretive options for our business and to position BHP for the best future access to our preferred resources. We use new technology and innovation in our exploration activities.

For more information, refer to section 1.11.

Capital discipline

We use the Capital Allocation Framework (CAF) to assess the most effective and efficient way to deploy capital. This helps us to maintain safe and reliable operations, meet our social value and greenhouse gas emissions reduction commitments, keep our balance sheet strong, and deliver strong growth and returns to our shareholders.

We then look at what would be the most valuable risk-adjusted use for any excess capital.

We evaluate the range of investment opportunities and aim to optimise the portfolio based on our assessment of risk, returns and future optionality. We then develop a long-term capital plan and guidance for the Group.

1.6.3 How our choice of commodities and assets helps deliver value

Our purpose is to bring together people and resources to build a better world.

Building a better world requires the decarbonisation of the global economy and the protection and improvement of the quality of life of people everywhere. The world needs sustainable industries and products, cleaner infrastructure and more of the types of jobs people aspire to. This transformation cannot happen without resources and companies like BHP that seek to produce them more safely, responsibly and efficiently.

Under our Paris-aligned 1.5°C scenario,

(

)

we expect demand for many of our commodities to be driven by continued growth in population and the global economy, decarbonisation and electrification. In our 1.5°C scenario, we anticipate demand for primary copper almost doubling and demand for primary nickel almost quadrupling over the next 30 years, compared to the past 30 years. We also expect demand for steel to almost double in the same period. We believe a wholesale shift away from blast furnace steelmaking, which depends on metallurgical coal, is still decades in the future.

However, we are moving to concentrate our coal portfolio on higher-grade coals used for steelmaking (metallurgical coal) that have the greatest potential upside for quality premiums as steelmakers seek to improve blast furnace utilisation and reduce emissions intensity.

Potash is expected to become vital for more efficient agricultural practices as governments and industry seek more efficient and environmentally sustainable agriculture, as well as to ease pressure on increasingly scarce land for farming.

As the shift to cleaner energy sources occurs, we expect the world will still need oil and gas to power mobility and everyday life on the pathway to decarbonisation. We see oil and gas remaining attractive in terms of their investment fundamentals for at least the next decade.

There is no easy path to achieving net zero emissions, but we believe the world has a responsibility to meet this challenge. The task of reducing emissions is more difficult in some sectors and countries, and activities that reduce or remove carbon, such as natural climate solutions or carbon capture, use and storage, will be required to offset those carbon-emitting activities that are harder to abate, such as industrial processes like steel and cement manufacturing, as the world aims for net zero emissions.

We are taking action to play our part in operating more responsibly to provide essential resources. We have been taking action on climate for decades and continue to work towards our target of reducing operational emissions by at least 30 per cent by FY2030 (from FY2020 levels

(

)

) and our goal of achieving net zero operational emissions by 2050.

(

)

We are working to support the acceleration of decarbonisation in our value chain, including in the hard to abate steelmaking sector. And we will continue to progress work to assess the potential physical impacts of climate change and what will be required to build resilience. For more information regarding our goals to reduce our emissions, refer to section 1.13.7.

Through our focus on operational and financial excellence, ever more sustainable production and use of our commodities, and the creation of broader social value, we believe BHP will play an important role in achieving a cleaner and more prosperous world, while creating greater value for our stakeholders through doing so.

(1)	Refer to our Climate Change Report 2020 for the assumptions and outputs and limitations of our 1.5°C scenario, used in our most recent portfolio analysis.

(2)	The FY2020 baseline will be adjusted for any material acquisitions and divestments based on greenhouse gas emissions at the time of the transaction. Carbon offsets will be used as required.

(3)	These positions are expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.

Our portfolio

We are actively managing our portfolio for value creation to maximise the opportunity to yield financial returns for shareholders and to create greater value for our partners, communities and all other stakeholders. Following our Board’s approval to invest in Jansen Stage 1, the proposed merger of Petroleum and the proposed exit of our

non-core

coal assets, BHP will be focused on producing higher-quality iron ore and metallurgical coal for steelmaking, copper for electrification and renewable energy, nickel for batteries and potash to make food production and land use more efficient. We will also continue to create and secure further options in future facing commodities.

Iron ore: Lowest-cost iron ore majors globally,

(

)

with improved product quality

•

Record annual production at WAIO in FY2021.

•

South Flank sustaining project in Western Australia achieved first ore in May 2021 and is expected to enhance our product mix in FY2022.

•

WAIO is among the world’s lowest carbon emissions intensity iron ore producers.

Metallurgical coal: World class resource with a focus on higher-quality product

•

Seeking value growth by enhancing productivity and focusing on higher-grade coal with greatest potential for quality premiums.

•

Implementing technology applications to improve safety and productivity.

•

Renewable power purchasing agreement in September 2020 to supply up to half of the electricity needs of our Queensland Coal operations from

low-emissions

sources.

Copper: Growth at some of the largest

(

)

and most sustainable copper mines globally

•

Securing more copper resources through exploration and early-stage entry options.

•

Pursuing technical innovation to unlock value.

•

Escondida and Spence on track for 100 per cent renewable electricity supply by the

mid-2020s

with four renewable power contracts to commence from FY2022.

Nickel: Options to grow from the second-largest nickel sulphide resource globally

•

One of the lowest carbon emissions nickel miners in the world.

•

Transitioning to new mines and focusing on higher-margin products and technical innovation.

•

Seeking more resources through exploration, acquisition and early-stage options.

Potash: Developing a potash business with embedded optionality

•

Approved a US$5.7bn investment in the Jansen Stage 1 potash project in the world’s best potash basin in Canada.

•

Expected to be one of the world’s most sustainable potash mines, with a low carbon footprint and low water intensity.

•

Goal for a gender-balanced workforce and for First Nations employees to make up around 20 per cent of the team.

Petroleum: Creation of a global top 10 independent energy company

•

Proposed merger of our Petroleum business with Woodside expected to unlock synergies, value and choice for BHP shareholders.

•

On completion, existing BHP shareholders would own approximately 48 per cent of the combined business.

•

Combined business expected to benefit from a high-margin oil portfolio, long-life LNG assets and the financial resilience to help supply the energy needed for global growth over the energy transition.

(1)	Based on published unit costs by major iron ore producers. There may be differences in the manner that third parties calculate or report unit costs data compared to BHP, which means that third-party data may not be comparable to our data.

(2)	Based on published production figures.

1.7 Chief Financial Officer’s review

Not required for US reporting.

1.8 Financial review

1.8.1 Group overview

We prepare our Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board. We publish our Consolidated Financial Statements in US dollars. All Consolidated Income Statement, Consolidated Balance Sheet and Consolidated Cash Flow Statement information below has been derived from audited Financial Statements. For more information, refer to section 3.

We use various Alternative Performance Measures (APMs) to reflect our underlying performance. These APMs are not defined or specified under the requirements of IFRS, but are derived from the Group’s Consolidated Financial Statements prepared in accordance with IFRS. The APMs are consistent with how management reviews financial performance of the Group with the Board and the investment community. Section 4.2, which is incorporated into the Strategic Report by reference, includes our APMs and section 4.2.1 outlines why we believe the APMs are useful and the calculation methodology. We believe these APMs provide useful information, but they should not be considered as an indication of, or as a substitute for statutory measures as an indicator of actual operating performance (such as profit or net operating cash flow) or any other measure of financial performance or position presented in accordance with IFRS, or as a measure of a company’s profitability, liquidity or financial position.

Summary of financial measures


Year ended 30 June US$M	2021		2020
Consolidated Income Statement (section 3.1.1)
Revenue		60,817		42,931
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders (Attributable profit)		11,304		7,956
Dividends per ordinary share – paid during the period (US cents)		156.0		143.0
Dividends per ordinary share – determined in respect of the period (US cents)		301.0		120.0
Basic earnings per ordinary share (US cents)		223.5		157.3
Consolidated Balance Sheet (section 3.1.3) (1)
Total assets		108,927		105,733
Net assets		55,605		52,175
Consolidated Cash Flow Statement (section 3.1.4)
Net operating cash flows		27,234		15,706
Capital and exploration expenditure		7,120		7,640
Other financial information (section 4.2)
Net debt		4,121		12,044
Underlying attributable profit		17,077		9,060
Underlying EBITDA		37,379		22,071
Underlying basic earnings per share (US cents)		337.7		179.2
Underlying Return on Capital Employed (per cent)		32.5		16.9

(1)

All comparative periods have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’, resulting in the retrospective recognition of US$950 million of goodwill at Olympic Dam (included in the Copper segment) and an offsetting US$1,021 million increase in deferred tax liabilities. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ in section 3 for further information.

For more selected consolidated financial information derived from the historical audited Consolidated Financial Statements of the group, refer to section 4.1.

1.8.2 Key performance indicators

Our key performance indicators (KPIs) enable us to measure our sustainable development and financial performance. These KPIs are used to assess performance of our people throughout the Group. For information on our approach to performance and reward, refer to section 2. For information on our overall approach to executive remuneration, including remuneration policies and remuneration outcomes, refer to section 2.

Following BHP’s sale of the Onshore US assets, the contribution of these assets to the Group’s results is presented in this Annual Report as Discontinued operations. To enable more meaningful comparisons with prior year disclosures and in some cases to comply with applicable statutory requirements, the data in section 1.8.2, except for Underlying EBITDA, has been presented to include Onshore US assets. Footnotes to tables and infographics indicate whether data presented in section 1.8.2 is inclusive or exclusive of Onshore US. Details of the contribution of the Onshore US assets to the Group’s results are disclosed in note 29 ‘Discontinued operations’ in section 3.

(1)	Includes data for Continuing and Discontinued operations for the financial years being reported.

(2)	Excludes data from Discontinued operations for the financial years being reported.

(3)	For more information on APMs, refer to section 4.2.

Reconciling our financial results to our key performance indicators

Profit

Earnings

Cash

Returns

US$M

Measure:

Profit after taxation from Continuing operations

13,451

Profit after taxation from Continuing operations

13,451

Net operating cash flows from Continuing operations

27,234

Profit after taxation from Continuing operations

13,451

Made up of:

Profit after taxation

Cash generated by the Group’s consolidated operations, after dividends received, interest, proceeds and settlements of cash management related instruments, taxation and royalty-related taxation. It excludes cash flows relating to investing and financing activities.

Profit after taxation

Adjusted for:

Exceptional items before taxation

4,470

Exceptional items before taxation

4,470

Exceptional items after taxation

5,797

Tax effect of exceptional items

1,327

Tax effect of exceptional items

1,327

Net finance costs excluding exceptional items

1,220

Exceptional items after tax attributable to

non-controlling

interests

(24

)

Depreciation and amortisation excluding exceptional items

6,824

Income tax benefit on net finance costs

(337

)

Impairments of property,

plant and equipment,

Profit after taxation

Exceptional items

financial assets and

excluding net finance

attributable to BHP

intangibles excluding

costs and exceptional

shareholders

5,773

exceptional items

264

items

20,131

Profit after taxation attributable to

non-controlling

interests

(2,147

)

Net finance costs excluding exceptional items

1,220

Net Assets at the beginning of period

52,175

Taxation expense excluding exceptional items

9,823

Net Debt at the beginning of period

12,044

Capital employed at the beginning of period

64,219

Net Assets at the end of period

55,605

Net Debt at the end of period

4,121

Capital employed at the end of period

59,726

Average capital employed

61,973

To reach our KPIs

Underlying attributable profit

17,077

Underlying EBITDA

37,379

Net operating cash flows

27,234

Underlying Return on Capital Employed

32.5%

Why do we use it?

Underlying attributable profit allows the comparability of underlying financial performance by excluding the impacts of exceptional items and is also the basis on which our dividend payout ratio policy is applied.

Underlying EBITDA is used to help assess current operational profitability excluding the impacts of sunk costs (i.e. depreciation from initial investment). It is a measure that management uses internally to assess the performance of the Group’s segments and make decisions on the allocation of resources.

Net operating cash flows provide insights into how we are managing costs and increasing productivity across BHP.

Underlying Return on Capital Employed is an indicator of the Group’s capital efficiency. It is provided on an underlying basis to allow comparability of underlying financial performance by excluding the impacts of exceptional items.

1.8.3 Financial results

The following table provides more information on the revenue and expenses of the Group in FY2021:


Year ended 30 June	2021 US$M			2020 US$M			2019 US$M
Continuing operations
Revenue (1)		60,817			42,931			44,288
Other income		510			777			393
Expenses excluding net finance costs		(34,500	)		(28,775	)		(28,022	)
Loss from equity accounted investments, related impairments and expenses		(921	)		(512	)		(546	)

Profit from operations		25,906			14,421			16,113

Net finance costs		(1,305	)		(911	)		(1,064	)
Total taxation expense		(11,150	)		(4,774	)		(5,529	)

Profit after taxation from Continuing operations		13,451			8,736			9,520

Discontinued operations
Loss after taxation from Discontinued operations		–			–			(335	)

Profit after taxation from Continuing and Discontinued operations		13,451			8,736			9,185

Attributable to non-controlling interests		2,147			780			879
Attributable to BHP shareholders		11,304			7,956			8,306

(1)	Includes the sale of third-party products.

Profit after taxation attributable to BHP shareholders increased from a profit of US$8.0 billion in FY2020 to a profit of US$11.3 billion in FY2021. Attributable profit of US$11.3 billion in FY2021 includes an exceptional loss of US$5.8 billion (after tax), compared to an attributable profit of US$8.0 billion, including an exceptional loss of US$1.1 billion (after tax) in the prior period. The FY2021 exceptional loss mainly relates to impairment charges recognised in relation to the Group’s energy coal and Potash assets as well as the Samarco dam failure. For more information on Exceptional items, refer to note 3 ‘Exceptional items’ in section 3.

Revenue of US$60.8 billion increased by US$17.9 billion, or 42 per cent, from FY2020. This increase was primarily attributable to higher average realised prices for iron ore, copper, nickel, oil, natural gas and thermal coal, partially offset by lower average realised prices for metallurgical coal and LNG. Record volumes achieved at WAIO, along with the highest annual production at Olympic Dam since our acquisition in 2005, were more than offset by the impacts of expected grade declines at Escondida and Spence, natural field decline in Petroleum and adverse weather events. For information on our average realised prices and production of our commodities, refer to section 1.17.

Total expenses excluding net finance costs of US$34.5 billion increased by US$5.7 billion, or 20 per cent, from FY2020. This includes a US$2.0 billion increase of net impairment charges recognised against the Group’s Potash assets of US$1.3 billion and at NSWEC of US$1.1 billion recognised in FY2021 compared to US$0.4 billion at Cerro Colorado in FY2020. The increase also included higher price linked costs of US$0.9 billion reflecting higher royalties due to higher realised prices for iron ore and US$0.5 billion of higher third party concentrate purchase costs. Depreciation and amortisation expense increased by US$0.7 billion reflecting a decrease in estimated remaining reserves at Bass Strait due to underperformance of the reservoir in the Turrum field and lower overall condensate and natural gas liquids (NGL) recovery from the Bass Strait gas fields and higher depreciation at WAIO due to a change in Yandi’s life of mine. This was combined with higher foreign exchange losses of US$1.6 billion reflecting the impact of the stronger Australian dollar and Chilean peso against the US dollar on our cost base.

Loss from equity accounted investments, related impairments and expenses of US$(0.9) billion in FY2021, increased by US$0.4 billion from FY2020. The increase was primarily due to unfavourable foreign exchange impacts in relation to the Samarco dam failure provision of US$0.5 billion combined with a US$0.5 billion impairment charge at Cerrejón, partially offset by higher current year profits from Antamina of US$0.4 billion primarily due to higher prices. Further information on the total impact of the Samarco dam failure provision and impairment charges connected with equity accounted investments, can be found at note 3 ‘Exceptional items’ in section 3 and note 13 ‘Impairment of

non-current

assets’ in section 3 respectively.

Net finance costs of US$1.3 billion increased by US$0.4 billion, or 43 per cent, from FY2020. This was primarily attributable to premiums of US$395 million paid as part of the value accretive multi-currency hybrid debt repurchase programs completed during the year. For more information on net finance costs, refer to section 1.8.4 and note 22 ‘Net finance costs’ in section 3.

Total taxation expense of US$11.2 billion increased by US$6.4 billion from FY2020. The increase was primarily due to significantly higher profits and higher withholding tax on dividends, mostly driven by higher commodity prices. For more information on income tax expense, refer to note 6 ‘Income tax expense’ in section 3.

Principal factors that affect Underlying EBITDA

The following table and commentary describes the impact of the principal factors

(1)

that affected Underlying EBITDA for FY2021 compared with FY2020:


	US$M
Underlying EBITDA for year ended 30 June 2020		22,071
Net price impact:
Change in sales prices		16,965		Higher average realised prices for iron ore, copper, nickel, oil, natural gas and thermal coal, partially offset by lower average realised prices for metallurgical coal and LNG.

Price-linked costs		(870	)	Increased royalties reflect higher realised prices for iron ore and higher third party concentrate purchase costs reflect higher nickel prices, partially offset by lower royalties for petroleum and metallurgical coal.
		16,095
Change in volumes		(312	)	Record volumes at WAIO with strong performance across the supply chain, were offset by natural field decline at Petroleum. The expected lower grades at Escondida and Spence more than offset Escondida concentrator throughput maintained at record levels, the new stream of concentrate production from the Spence Growth Option that came online in December 2020 and highest annual copper production achieved at Olympic Dam since our acquisition in 2005. Lower volumes due to adverse weather impacts in the Gulf of Mexico (Petroleum) and NSWEC, combined with dragline maintenance and higher strip ratios at BMC. This was partially offset by the acquisition of the additional 28 per cent working interest at Shenzi and increased volumes at Nickel West following resource transition and major quadrennial maintenance shutdowns in the prior period.
Change in controllable cash costs:
Operating cash costs		(34	)	Higher inventory drawdowns at Olympic Dam due to stronger mill and smelter performance and at Nickel West as volumes increased following planned maintenance shutdowns in the prior period and additional costs associated with the ramp-up of South Flank. This was largely offset by strong cost performance supported by cost reduction initiatives across our assets, lower technology costs and a gain from the optimised outcome from renegotiation of cancelled power contracts at Escondida and Spence.
Exploration and business development		109		Lower exploration expenses due to lower seismic activity in Petroleum.
		75
Change in other costs:
Exchange rates		(1,588	)	Impact of the stronger Australian dollar and Chilean peso against the US dollar.
Inflation		(286	)	Impact of inflation on the Group’s cost base.
Fuel and energy		223		Predominantly lower diesel prices at our minerals assets.
Non-Cash		282		Lower deferred stripping depletion at Escondida in line with planned development phase of the mines.
One-off items		(122	)	Volume loss across our operations due to COVID-19 restrictions, predominantly at our copper operations in Chile.
		(1,491	)
Asset sales		17
Ceased and sold operations		242		Reflects the divestment of Neptune and a decrease in costs related to the closure and rehabilitation provision for closed mines of US$311 million compared with the prior year.

Other items		682		Other includes higher average realised sales prices received by Antamina.
Underlying EBITDA for year ended 30 June 2021		37,379

(1)	For information on the method of calculation of the principal factors that affect Underlying EBITDA, refer to section 4.2.2.

Cash flow

The following table provides a summary of the Consolidated Cash Flow Statement contained in section 3.1.4:


Year ended 30 June	2021 US$M			2020 US$M			2019 US$M
Net operating cash flows from Continuing operations		27,234			15,706			17,397
Net operating cash flows from Discontinued operations		–			–			474

Net operating cash flows		27,234			15,706			17,871

Net investing cash flows from Continuing operations		(7,845	)		(7,616	)		(7,377	)
Net investing cash flows from Discontinued operations		–			–			(443	)
Proceeds from divestment of Onshore US, net of its cash		–			–			10,427

Net investing cash flows		(7,845	)		(7,616	)		2,607

Net financing cash flows from Continuing operations		(17,922	)		(9,752	)		(20,515	)
Net financing cash flows from Discontinued operations		–			–			(13	)

Net financing cash flows		(17,922	)		(9,752	)		(20,528	)

Net increase/(decrease) in cash and cash equivalents		1,467			(1,662	)		(10,477	)

Net increase/(decrease) in cash and cash equivalents from Continuing operations		1,467			(1,662	)		(10,495	)
Net increase/(decrease) in cash and cash equivalents from Discontinued operations		–			–			18

Net operating cash inflows

of US$27.2 billion increased by US$11.5 billion. This reflects stronger iron ore and copper commodity prices and strong operational performance across the Group’s portfolio partially offset by the impacts of a stronger Australian dollar and Chilean peso against the US dollar, lower grades at Escondida and Spence, natural field decline at Petroleum and adverse weather events.

Net investing cash outflows

of US$7.8 billion increased by US$0.2 billion. This reflects the investment in an additional 28 per cent working interest in Shenzi from Hess Corporation of US$0.5 billion, increasing our share from 44 per cent to 72 per cent; partially offset by lower purchases of property plant and equipment of US$0.3 billion as the Group commissioned SGO and South Flank in FY2021.

For more information and a breakdown of capital and exploration expenditure on a commodity basis, refer to section 1.17.

Net financing cash outflows

of US$17.9 billion increased by US$8.2 billion. This reflects the higher repayment of interest bearing liabilities of US$6.0 billion mainly due to bond repayments on maturity of US$3.5 billion and early repurchase of hybrid bonds of US$3.4 billion. This was combined with higher dividends paid in FY2021 of US$1.0 billion reflecting the record half year dividend and higher dividends paid to

non-controlling

interests of US$1.1 billion driven by higher profits achieved at Escondida.

For more information, refer to section 1.8.4 and note 20 ‘Net debt’ in section 3.

Underlying Return on Capital Employed (ROCE)

of 32.5 per cent increased by 15.6 percentage points (FY2020: 16.9 per cent) reflecting the significant increase in profit after taxation excluding net finance costs and exceptional items of US$9.5 billion. The Underlying ROCE in FY2021 includes US$12.1 billion of Assets under Construction (average of ending balances for FY2021 of US$10.4 billion and FY2020 of US$13.8 billion) including major projects in Potash and Mad Dog Phase Two, that are not yet producing their planned contribution to earnings.

For more information on Assets under Construction refer to note 11 ‘Property, plant and equipment’ in section 3.

The comparisons for the year ended 30 June 2020 to 30 June 2019 in connection with Financial results, Principal factors that affect Underlying EBITDA and Cash flow have been omitted from this Form

20-F

and can be found in our Form

20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

1.8.4 Debt and sources of liquidity

Our policies on debt and liquidity management have the following objectives:

•

a strong balance sheet through the cycle

•

diversification of funding sources

•

maintain borrowings and excess cash predominantly in US dollars

Interest bearing liabilities, net debt and gearing

At the end of FY2021, Interest bearing liabilities were US$21.0 billion (FY2020: US$27.0 billion) and Cash and cash equivalents were US$15.2 billion (FY2020: US$13.4 billion). This resulted in Net debt

(1)

of US$4.1 billion, which represented a decrease of US$7.9 billion compared with the net debt position at 30 June 2020. This was primarily due to the significant operating cash flow generated from strong financial and operational performance, and the favourable commodity price environment experienced during the year. Gearing, which is the ratio of Net debt to Net debt plus Net assets, was 6.9 per cent at 30 June 2021, compared with 18.8 per cent at 30 June 2020.

During FY2021, two multi-currency hybrid debt repurchase programs were completed (US$1.7 billion on 17 September 2020 and US$1.1 billion on 23 November 2020) and were funded from surplus cash. The Group also redeemed US$1.0 billion of 6.250 per cent hybrid notes on 19 October 2020, US$0.3 billion of 6.750 per cent hybrid notes on 30 December 2020 (the balance following the repurchase programs), and €1.25 billion of 4.750 per cent hybrid notes on 22 April 2021 using surplus cash.

At the subsidiary level, Escondida borrowed US$550 million to refinance maturing long-term debt during FY2021.

Funding sources

No new Group-level debt was issued in FY2021 and debt that matured during the year was not refinanced. These actions enhanced BHP’s capital structure and extended BHP’s average debt maturity.

Our Group-level borrowing facilities are not subject to financial covenants. Certain specific financing facilities in relation to specific assets are the subject of financial covenants that vary from facility to facility, as is considered normal for such facilities. In addition to the Group’s uncommitted debt issuance programs, we hold the following committed standby facility:


	Facility available 2021 US$M		Drawn 2021 US$M		Undrawn 2021 US$M		Facility available 2020 US$M		Drawn 2020 US$M		Undrawn 2020 US$M
Revolving credit facility (2)		5,500		–		5,500		5,500		–		5,500

Total financing facility		5,500		–		5,500		5,500		–		5,500

(1)	We use APMs to reflect our underlying financial performance. Refer to section 4.2 for a discussion on the APMs we use. For the definition and method of calculation of APMs, refer to section 4.2.1. For the composition of net debt, refer to note 20 ‘Net debt’ in section 3.

(2)

During the year we completed a

one-year

extension of the facility which is now due to mature on 10 October 2025. The committed US$5.5 billion revolving credit facility operates as a back-stop to the Group’s uncommitted commercial paper program. The combined amount drawn under the facility or as commercial paper will not exceed US$5.5 billion. As at 30 June 2021, US$ nil commercial paper was drawn (FY2020: US$ nil), therefore US$5.5 billion of committed facility was available to use (FY2020: US$5.5 billion). A commitment fee is payable on the undrawn balance and an interest rate comprising an interbank rate plus a margin applies to any drawn balance. The agreed margins are typical for a credit facility extended to a company with BHP’s credit rating.

For more information on the maturity profile of our debt obligations and details of our standby and support agreements, refer to note 20 ‘Net debt’ in section 3. Information in relation to our material off-balance sheet arrangements, principally contingent liabilities, commitments for capital expenditure and commitments under leases at 30 June 2021 is provided in note 11 ‘Property, plant and equipment’, note 21 ‘Leases’ and note 34 ‘Contingent liabilities’ in section 3.

In our opinion, working capital is sufficient for our present requirements. Our Moody’s credit rating has remained at

A2/P-1

outlook stable (long-term/short-term) throughout FY2021. Moody’s affirmed its credit rating on 31 May 2021. Our Standard & Poor’s rating changed from

A/A-1

outlook stable (long-term/short-term) to

A/A-1

CreditWatch negative (long-term/short-term) on 23 August 2021. Credit ratings are forward-looking opinions on credit risk. Standard & Poor’s and Moody’s credit ratings express the opinion of each agency on the ability and willingness of BHP to meet its financial obligations in full and on time. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by an assigning rating agency. Any rating should be evaluated independently of any other information.

The following table expands on the net debt, to provide more information on the cash and

non-cash

movements in FY2021:


Year ended 30 June	2021 US$M					2020 US$M
Net debt at the beginning of the financial year				(12,044	)				(9,446	)

Net operating cash flows		27,234					15,706
Net investing cash flows		(7,845	)				(7,616	)

Free cash flow				19,389					8,090

Carrying value of interest bearing liability repayments		7,433					1,533
Net settlements of interest bearing liabilities and debt related instruments		(7,424	)				(1,984	)
Dividends paid		(7,901	)				(6,876	)
Dividends paid to non-controlling interests		(2,127	)				(1,043	)
Other financing activities (1)		(234	)				(143	)

Other cash movements				(10,253	)				(8,513	)

Fair value adjustment on debt (including debt related instruments) (2)		58					88
Foreign exchange impacts on cash (including cash management related instruments)		(1	)				(26	)
IFRS 16 leases taken on at 1 July 2019		–					(1,778	)
Lease additions		(1,079	)				(363	)
Others		(191	)				(96	)

Non-cash movements				(1,213	)				(2,175	)

Net debt at the end of the financial year				(4,121	)				(12,044	)

(1)	Other financing activities mainly comprises purchases of shares by Employee Share Option Plan trusts of US$234 million (FY2020: US$143 million).

(2)

The Group hedges against the volatility in both exchange and interest rates on debt, and also exchange on cash, with associated movements in derivatives reported in Other financial assets/liabilities as effective hedged derivatives (cross currency and interest rate swaps), in accordance with accounting standards. For more information, refer to note 23 ‘Financial risk management’ in section 3.

Dividends

Our dividend policy provides for a minimum 50 per cent payout of Underlying attributable profit at every reporting period. The minimum dividend payment for the second half of FY2021 was US cents 109 per share. Recognising the importance of cash returns to shareholders, the Board determined to pay an additional amount of US cents 91 per share, taking the final dividend to US cents 200 per share (US$10.1 billion). Total dividends of US$15.2 billion (US$3.01 per share) have been determined for FY2021, including an additional amount of US$6.7 billion above the minimum payout policy. These returns are covered by total free cash flow of US$19.4 billion in FY2021.

The comparison for the year ended 30 June 2020 to 30 June 2019 has been omitted from this Form

20-F

and can be found in our

Form 20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

1.9 How we manage risk

Risk management helps us to protect and create value, and is central to achieving our purpose and strategic objectives. Our Risk Framework has four pillars: risk strategy, risk governance, risk process and risk intelligence.

Risk strategy

Risk classification

We classify all risks to which BHP is exposed using our Group Risk Architecture. This is a tool designed to identify, analyse, monitor and report risk, which provides a platform to understand and manage risks. Similar risks are considered together in groups and categories. This gives the Board and management visibility over the aggregate exposure to risks on a Group-wide basis and supports performance monitoring and reporting against BHP’s risk appetite.

Risk appetite

BHP’s Risk Appetite Statement is approved by the Board and is a foundational element of our Risk Framework. It provides guidance to management on the amount and type of risk we seek to take in pursuing our objectives.

Key risk indicators

Key risk indicators (KRIs) are set by management to help monitor performance against our risk appetite. They also support decision-making by providing management with information about financial and

non-financial

risk exposure at a Group level. Each KRI has a target, or optimal level of risk we seek to take, as well as upper and lower limits. Where either limit is exceeded, management will review potential causes to understand if BHP may be taking too little or too much risk and to identify whether further action is required.

Risk culture

Our risk management approach is underpinned by a risk culture that supports decision-making in accordance with BHP’s values, objectives and risk appetite. We use a common foundation across BHP to build the tools and capabilities required to enable us to understand, monitor and manage our risk culture. These include tailored cultural assessments, Group-wide risk culture dashboards and the inclusion of behavioural auditing in our internal audit plan.

Strategic business decisions

Strategic business decisions and the pursuit of our strategic objectives can inform, create or affect risks to which BHP is exposed. These risks may represent opportunities as well as threats. Our Risk Appetite Statement and KRIs assist in determining whether a proposed course of action is within BHP’s risk appetite.

Our focus when managing risks associated with strategic business decisions is to enable the pursuit of high-reward strategies. Therefore, as well as having controls designed to protect BHP from threats, we seek to implement controls to enhance and/or increase the likelihood of opportunities being realised. For example, we might establish additional governance, oversight or reporting to help ensure new initiatives remain on track.

Risk governance

Three lines model

BHP uses the ‘three lines model’ of risk governance and management to define the role of different teams across the organisation in managing risk. This approach sets clear accountabilities for risk management and provides appropriate ‘checks and balances’ to support us in protecting and growing value.

The first line is provided by our frontline staff, operational management and people in functional roles – anyone who makes decisions, deploys resources or contributes to an outcome is responsible for identifying and managing the associated risks.

The Risk team and other second-line functions are responsible for providing expertise, support, monitoring and challenge on risk-related matters, including by defining Group-wide minimum standards.

The third line, our Internal Audit and Advisory team, is responsible for providing independent and objective assurance over the control environment (governance, risk management and internal controls) to the Board and Executive Leadership Team. Additional assurance may also be provided by external providers, such as our External Auditor.

BHP Board and Committees

The Board reviews and monitors the effectiveness of the Group’s systems of financial and

non-financial

risk management and internal control. The broad range of skills, experience and knowledge of the Board assists in providing a diverse view on risk management. The Risk and Audit Committee (RAC) and Sustainability Committee assist the Board by reviewing and considering BHP’s risk profile (covering operational, strategic and emerging risks) on a biannual basis.

For more information, refer to sections 2.1.7, 2.1.10 and 2.1.11.

Performance against risk appetite is monitored and reported to the RAC, as well as the Sustainability Committee for HSEC matters, enabling the Board to challenge and hold management to account where necessary.

Second-line risk-based reviews are undertaken to provide greater oversight and enhance our understanding and management of the Group’s most significant risks, with outcomes reported to management, the RAC and Sustainability Committee. These outcomes may be used to develop remediation plans, adjust BHP’s Risk Appetite Statement or KRIs, enhance our Risk Framework or inform strategic decisions.

Additional information on risk management and internal controls is shared between the Board, the RAC and, for HSEC matters, the Sustainability Committee, and is provided by the Business Risk and Audit Committees (covering each business region), management committees, our Internal Audit and Advisory team and our External Auditor. For more information, refer to section 2.1.

Risk process

Our Risk Framework requires identification and management of risks (both threats and opportunities) to be embedded in business activities through the following process:

•

Risk identification – threats and opportunities are identified and each is assigned an owner, or accountable individual.

•

Risk assessments – risks are assessed using appropriate and internationally recognised techniques to determine their potential impacts and likelihood, prioritise them and inform risk treatment options.

•

Risk treatment – controls are implemented to prevent, reduce or mitigate threats, and enable or enhance opportunities.

•

Monitoring and review – risks and controls are reviewed periodically and on an ad hoc basis (including where there are high-potential events or changes in the external environment) to evaluate performance.

Our Risk Framework includes requirements and guidance on the tools and process to manage current and emerging risks.

Current risks

Current risks are risks that could impact BHP today or in the near future, and comprise current operational risks (risks that have their origin inside BHP or occur as a result of our activities) and current strategic risks (risks that may enhance or impede the achievement of our strategic objectives).

Current risks include material and

non-material

risks (as defined by our Risk Framework). The materiality of a current risk is determined by estimating the maximum foreseeable loss (MFL) if that risk was to materialise. The MFL is the estimated impact to BHP in a worst-case scenario without regard to probability and assuming all risk controls, including insurance and hedging contracts, are ineffective.

Our principal risks are described in section 1.16.

Our focus for current risks is to prevent their occurrence or minimise their impact should they occur, but we also consider how to maximise possible benefits that might be associated with strategic risks (as described in the ‘Risk strategy’ section). Current material risks are required to be evaluated once a year at a minimum to determine whether our exposure to the risk is within our risk appetite.

Emerging risks

Emerging risks are newly developing or changing risks that are highly uncertain and difficult to quantify. They are generally driven by external influences and often cannot be prevented.

BHP maintains a ‘watch list’ of emerging themes that provides an evolving view of the changing external environment and how it might impact our business. We use the watch list to support the identification and management of emerging risks, as well as to inform and test our corporate strategy.

Once identified, our focus for emerging risks is on structured monitoring of the external environment, advocacy efforts to reduce the likelihood of the threats manifesting and identifying options to increase our resilience to these threats.

Risk intelligence

The Risk team provides the Board and senior management with insights on trends and aggregate exposure for our most significant risks, as well as performance against risk appetite. Risk reports may also provide an update on the Risk Framework, overview of (and material changes in) the risk profile and updates on emerging risk themes and risk culture. They are supported by an opinion from the Chief Risk Officer (or other relevant individual).

We maintain a risk insights dashboard designed to provide current, data-driven and actionable risk intelligence to our people at all levels of the business to support decision-making. This tool empowers the business to manage risks more effectively, with increased accuracy and transparency.

The Board also receives reports from other teams to support its robust assessment of BHP’s emerging and principal risks, including internal audit reports, ethics and compliance reports and the Chief Executive Officer’s report.

For information on our principal risks, robust risk assessment and viability statement, refer to section 1.16.

1.10 Our business

1.10.1 Locations

1.10.2 Minerals Australia

Minerals Australia includes operated assets in Western Australia, Queensland, New South Wales and South Australia, focused on iron ore, metallurgical coal, copper, nickel and energy coal. The commodities produced by our Minerals Australia assets are transported by rail to port and exported to our global customers.

Copper

Olympic Dam

Overview

Located in South Australia, Olympic Dam (BHP ownership: 100 per cent) is one of the world’s most significant deposits of copper, gold, silver and uranium. It comprises underground and surface operations, and is a fully integrated processing facility from ore to metal.

Ore mined underground is hauled by an automated train system to crushing, storage and ore hoisting facilities or trucked directly to the surface.

Olympic Dam has a fully integrated metallurgical complex with a grinding and concentrating circuit, a hydrometallurgical plant incorporating solvent extraction circuits for copper and uranium, a copper smelter, a copper refinery, including an electro-refinery and an electrowinning-refinery, and a recovery circuit for precious metals.

Key developments in FY2021

Copper production increased by 20 per cent to 205 kilotonnes (kt) (172 kt in FY2020), reflecting improved smelter performance and strong underground mine performance. This was the highest annual copper production since Olympic Dam was acquired in 2005. Record gold production of 146 thousand troy ounces (koz) was also achieved.

The short-term focus remains on completing the multi-year asset integrity program designed to improve the reliability of operations, which is on track heading into a planned major smelter maintenance campaign in FY2022. A new refinery crane commenced operation in FY2021 to improve stability and reliability at the electro-refinery. At Oak Dam, next stage resource definition drilling commenced in May 2021 to inform resource characterisation and potential development pathways.

Iron ore

Western Australia Iron Ore

Overview

Western Australia Iron Ore (WAIO) is an integrated system of four processing hubs and six

open-cut

mines in the Pilbara region of northern Western Australia, connected by more than 1,000 kilometres of rail infrastructure and port facilities.

WAIO’s Pilbara reserve base is relatively concentrated, allowing development through integrated mining hubs connected to the mines and satellite orebodies by conveyors or spur lines. This approach seeks to maximise the value of installed infrastructure by using the same processing plant and rail infrastructure for several orebodies.

Ore is crushed, beneficiated (where necessary) and blended at the processing hubs – Mt Newman operations, Yandi, Mining Area C and Jimblebar – to create lump and fines products that are transported along the Port Hedland–Mt Newman rail line to the Finucane Island and Nelson Point port facilities at Port Hedland.

There are four main WAIO joint ventures (JVs): Mt Newman, Yandi, Mt Goldsworthy (which includes the new South Flank mining hub) and Jimblebar. BHP’s interest in each is 85 per cent, with Mitsui and ITOCHU owning the remaining 15 per cent. The joint ventures are unincorporated, except Jimblebar.

BHP, Mitsui, ITOCHU and POSCO are also participants in the POSMAC JV. BHP’s interest in POSMAC is 65 per cent. The ore from the POSMAC JV is sold to the main joint ventures.

All ore is transported on the Mt Newman JV and Mt Goldsworthy JV rail lines. The Nelson Point port facility is owned by the Mt Newman JV and the Finucane Island facility is owned by the Mt Goldsworthy JV. WAIO’s current licensed export capacity is 290 million tonnes per annum (Mtpa).

Key developments in FY2021

WAIO production increased by 1 per cent to a record 252 million tonnes (Mt) (248 Mt in FY2020), or 284 Mt on a 100 per cent basis (281 Mt in FY2020), reflecting record production at Jimblebar and Mining Area C, which included first ore from South Flank in May 2021. This was achieved despite significant wet weather impacts, temporary rail labour shortages due to

COVID-19

related border restrictions and the planned

tie-in

activity to integrate South Flank with the Mining Area C processing hub. Strong operational performance across the supply chain reflected continued improvements in car dumper performance and reliability, and improved train cycle times.

Yandi commenced its

end-of-life

ramp-down as South Flank ramped up. Yandi is expected to provide supply chain flexibility with a lower level of production to continue for a few years.

South Flank is scheduled to ramp up to full production capacity of 80 Mtpa (100 per cent basis) over three years. South Flank’s high-quality ore is expected to increase WAIO’s average iron ore grade from 61 to 62 per cent, and the overall proportion of lump from 25 to between 30 and 33 per cent, once fully ramped up. South Flank iron ore will be transported (eight to 16 kilometres) by overland conveyors to the Mining Area C processing hub.

Metallurgical coal

Queensland Coal

Overview

Queensland Coal comprises the BHP Mitsubishi Alliance (BMA) (BHP ownership: 50 per cent) and BHP Mitsui Coal (BMC) (BHP ownership: 80 per cent) assets in the Bowen Basin, Queensland. It has access to infrastructure in the Bowen Basin, including a modern, multi-user rail network and its own coal-loading terminal at Hay Point, near Mackay. Queensland Coal also has contracted capacity at three other multi-user port facilities – the Port of Gladstone (RG Tanna Coal Terminal), Dalrymple Bay Coal Terminal and North Queensland Export Terminal (formerly known as Abbot Point Coal Terminal).

BMA operates seven metallurgical coal mines – Goonyella Riverside, Broadmeadow, Daunia, Peak Downs, Saraji, Blackwater and Caval Ridge. With the exception of the Broadmeadow underground longwall operation, BMA’s mines are open cut. BMA also owns and operates the Hay Point Coal Terminal near Mackay.

BMC owns and operates two

open-cut

metallurgical coal mines – South Walker Creek and Poitrel.

Key developments in FY2021

Queensland Coal’s metallurgical coal production was 41 Mt (41 Mt in FY2020), reflecting strong operational performance, including record production at Goonyella and record tonnes from Broadmeadow, but offset by operational delays due to significant wet weather impacts and planned wash plant maintenance at Saraji and Caval Ridge. At South Walker Creek, despite record stripping, production decreased as a result of higher strip ratios due to ongoing impacts from geotechnical constraints and lower yields.

The divestment process for our interests in BMC that was announced in August 2020 is progressing, in line with the

two-year

timeframe we set last year. We remain open to all options and continue consultation with relevant stakeholders.

Energy coal

New South Wales Energy Coal

Overview

New South Wales Energy Coal (NSWEC) (BHP ownership: 100 per cent) comprises the Mt Arthur Coal

open-cut

energy coal mine in the Hunter Valley. It has access to infrastructure in the Hunter Region, including a multi-user rail network and coal loading terminal access at the Port of Newcastle through Newcastle Coal Infrastructure Group (28 per cent owned by BHP) and Port Waratah Coal Services.

Key developments in FY2021

NSWEC production decreased by 11 per cent to 14 Mt (16 Mt in FY2020) reflecting operational delays due to significant weather impacts and higher strip ratios, as well as lower volumes due to an increased proportion of washed coal. This was due to our strategy to focus on higher-quality products in response to increased price premiums for these products, and reduced port capacity following damage to a shiploader at the Newcastle port in November 2020. The shiploader returned to operation in July 2021.

The divestment process for NSWEC that was announced in August 2020 is progressing, in line with the

two-year

timeframe we set last year. We remain open to all options and continue consultation with relevant stakeholders.

Nickel

Nickel West

Overview

Nickel West (BHP ownership: 100 per cent) is a fully integrated nickel business located in Western Australia, with three streams of concentrate. It comprises

open-cut

and underground mines, concentrators, a smelter and refinery.

Disseminated sulphide ore is mined at the Mt Keith

open-pit

operation and crushed and processed onsite to produce nickel concentrate. Nickel sulphide ore is mined at the Cliffs and Leinster underground mines and Rocky’s Reward

open-pit

mine and processed through a concentrator and dryer at Leinster. A concentrator plant in Kambalda processes ore and concentrate purchased from third parties.

The three streams feed the Kalgoorlie nickel smelter, which uses a flash furnace to produce nickel matte. The Kwinana nickel refinery then turns this into nickel powder and briquettes.

Key developments in FY2021

Nickel West production increased by 11 per cent to 89 kt (80 kt in FY2020) reflecting strong performances from the Mt Keith Satellite mine (Yakabindie) and Venus underground mine (part of the Leinster underground mine complex) which reached full production.

Construction of a nickel sulphate plant at the Kwinana nickel refinery is in the final stages of commissioning, with first production expected in the September 2021 quarter. The plant is expected to produce at least 100 kilotonnes per annum (ktpa) of nickel sulphate for the

lithium-ion

battery industry.

A power purchase agreement with Southern Cross Energy for Nickel West’s Goldfields-based operations was extended to 2038, adding flexibility for renewable power generation. Nickel West also entered into a renewable power purchasing agreement to supply up to 50 per cent of the power for its Kwinana refinery operations from Merredin Solar Farm. These two agreements are expected to improve BHP’s position as one of the lowest-carbon nickel miners in the world. Nickel West is constructing a

38-megawatt

solar farm and battery energy storage system for its Mt Keith and Leinster operations.

Nickel West completed the acquisition of the Honeymoon Well development project and the remaining 50 per cent interest in the Albion Downs North and Jericho exploration joint ventures, located about 50 kilometres from Mt Keith.

1.10.3 Minerals Americas

The Minerals Americas asset group includes projects, operated assets and

non-operated

joint ventures in Canada, Chile, Peru, the United States, Colombia and Brazil.

Our operated copper assets in the Americas, Escondida and Pampa Norte, are

open-cut

mines that produce copper concentrate and copper cathodes. The

non-operated

assets in the Minerals Americas portfolio are

open-cut

mines that produce copper (Antamina), iron ore (Samarco) and energy coal (Cerrejón). The commodities produced by our Minerals Americas assets are transported to port by pipeline, rail or road and exported to customers around the world.

In FY2021, our Chilean assets operated with a substantial reduction in their operational workforces due to preventative measures implemented to mitigate the impact of

COVID-19.

We expect the operating environment across our Chilean assets to remain challenging, with reductions in our

on-site

workforce expected to continue in FY2022.

Copper

Escondida

Overview

Escondida (BHP ownership: 57.5 per cent) is a leading producer of copper concentrate and cathodes located in the Atacama Desert in northern Chile.

Escondida’s two pits feed three concentrator plants, as well as two leaching operations (oxide and sulphide).

Key developments in FY2021

Escondida copper production decreased by 10 per cent to 1,068 kt (1,185 kt in FY2020), as continued strong concentrator throughput of 371 kilotonnes per day (ktpd), at record levels was more than offset by the impact of lower concentrator feed grade and lower cathode production, due to reduced operational workforce associated with

COVID-19

restrictions.

Pampa Norte

Overview

Pampa Norte (BHP ownership: 100 per cent) consists of two assets in the Atacama Desert in northern Chile – Spence and Cerro Colorado.

Spence produces copper cathodes and, since December 2020, copper concentrate.

Cerro Colorado produces copper cathodes. Its current environmental licence expires at the end of CY2023.

Key developments in FY2021

Pampa Norte copper production decreased by 10 per cent to 218 kt (243 kt in FY2020) largely due to a decline in stacking feed grade at Spence of 11 per cent, planned maintenance at Spence and the impact of a reduced operational workforce because of

COVID-19

restrictions.

The Spence Growth Option (SGO) produced first copper concentrate in December 2020 and is in the process of

ramping-up

to full capacity.

Potash

Jansen Potash Project

Overview

The Jansen Potash Project (BHP ownership: 100 per cent) is located about 140 kilometres east of Saskatoon, Canada.

Jansen’s large resource provides the opportunity to develop it in stages, with Jansen Stage 1 (Jansen S1) expected to produce approximately 4.35 Mt of potash per annum on completion, and sequenced brownfield expansions of up to 12 Mtpa (approximately 4 Mtpa per stage).

BHP holds mineral leases covering around 9,600 square kilometres in the Saskatchewan potash basin.

Key developments in FY2021

The focus was on installing watertight steel and concrete final liners in the production and service shafts, and continuing the installation of essential surface infrastructure and utilities, with current scope of work 93 per cent complete at the end of FY2021.

On 17 August 2021, BHP approved US$5.7 billion (C$7.5 billion) in capital expenditure for the Jansen S1 potash project in the province of Saskatchewan, Canada. Jansen S1 includes the design, engineering and construction of an underground potash mine and surface infrastructure including a processing facility, a product storage building, and a continuous automated rail loading system. Jansen S1 product will be shipped to export markets through Westshore, in Delta, British Columbia and the project includes funding for the required port infrastructure.

First ore is targeted in CY2027, with construction expected to take approximately six years, followed by a ramp-up period of two years.

Non-operated

minerals joint ventures

Copper

Antamina

Overview

Antamina (BHP ownership: 33.75 per cent) is a large,

low-cost

copper and zinc mine in north central Peru with

by-products

including molybdenum and silver. Antamina owns integrated pipeline and port facilities and is operated independently by Compañía Minera Antamina S.A.

Key developments in FY2021

Antamina copper production increased by 16 per cent to 144 kt (125 kt in FY2020) and zinc increased by 64 per cent to 145 kt due to higher concentrator throughput and higher zinc grades. During FY2021, Antamina continued with a strong focus on developing improvement opportunities to maintain productivity and progressing on its modified environmental impact assessment for its life extension project from CY2028 to CY2036, which includes extension of current approved tailings capacity, additional waste dumps and new pit design.

Resolution Copper

Overview

Resolution Copper (BHP ownership: 45 per cent), located in the US state of Arizona, is operated by Rio Tinto (55 per cent ownership interest). Resolution Copper is one of the largest undeveloped copper projects in the world and has the potential to become the largest copper producer in North America. The Resolution Copper deposit lies more than 1,600 metres beneath the surface.

Key developments in FY2021

In FY2021, Resolution progressed its prefeasibility study and safely completed the shaft No. 9 work (November 2020). The shaft No. 9 project involved deepening the historic shaft from its original depth at 1,460 metres below the surface to a final depth of 2,086 metres and linking it with the existing No. 10 shaft via development activities underground.

The Resolution Copper project is subject to a federal permitting process in the US (the National Environmental Policy Act (NEPA)). The Forest Service published the Final Environmental Impact Statement (FEIS) on 15 January 2021. On 1 March 2021, the US Department of Agriculture (USDA) directed the Forest Service to rescind the FEIS. BHP supports meaningful consultation with local communities and Native American Tribes as Resolution continues to study the project. For more information, refer to section 1.13.10.

Energy coal

Cerrejón

Overview

Cerrejón (BHP ownership: 33.33 per cent) owns, operates and markets (through an independent company) one of the world’s largest

open-cut

energy coal mines, located in the La Guajira province of Colombia. Cerrejón owns integrated rail and port facilities.

Key developments in FY2021

Cerrejón production declined by 30 per cent to approximately 5 Mt (7 Mt in FY2020). This was mainly due to a

91-day

strike and subsequent delays to the restart of production as well as the impact of a reduced operational workforce associated with

COVID-19

restrictions.

Cerrejón maintained its focus on higher-quality products and maintained lower operational costs through the implementation of a transformation program, which allowed it to remain cash flow positive despite the volume decline.

In June 2021, BHP entered into a sale and purchase agreement with Glencore to divest our 33.3 per cent interest in Cerrejón for US$294 million cash consideration. The transaction has an effective economic date of 31 December 2020. The purchase price is subject to adjustments at transaction completion, which may include an adjustment for any dividends paid by Cerrejón to BHP during the period from signing to completion. Subject to the satisfaction of competition and regulatory requirements, we expect completion to occur in the first half of CY2022.

Iron ore

Samarco

Overview

Samarco (BHP ownership: 50 per cent) comprises a mine and three concentrators located in the Brazilian state of Minas Gerais, four pellet plants and a port located in Anchieta in the state of Espírito Santo. Three

400-kilometre

pipelines connect the mine site to the pelletising facilities.

Samarco is operated independently by Samarco Mineração S.A. Samarco’s main product is iron ore pellets. Pellets are independently marketed by Samarco and sold to customers around the world.

Key developments in FY2021

Having met the licensing requirements, Samarco restarted iron ore pellet production at one concentrator in December 2020 and produced 1.9 Mt of iron ore pellets in FY2021.

For more information on the Fundão dam failure, refer to section 1.15.

1.10.4 Petroleum

Our Petroleum unit comprises conventional oil and gas assets located in the US Gulf of Mexico, Australia, Trinidad and Tobago, Algeria and Mexico, and appraisal and exploration options in Trinidad and Tobago, central and western US Gulf of Mexico, eastern Canada and Barbados. The crude oil and condensate, gas and natural gas liquids (NGLs) produced by our Petroleum assets are sold on the international spot market or domestic market.

On 17 August 2021, BHP and Woodside entered into a merger commitment deed to combine their respective oil and gas portfolios by an

all-stock

merger. The merger is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent including shareholder, regulatory and other approvals.

United States

Gulf of Mexico

Overview

Our producing fields include our operated asset Shenzi (BHP ownership: 72 per cent) and our

non-operated

assets, Atlantis (BHP ownership: 44 per cent) and Mad Dog (BHP ownership: 23.9 per cent). They are located between 155 and 210 kilometres offshore from the US state of Louisiana.

We also own 25 per cent and 22 per cent respectively of the companies that own and operate the Caesar oil pipeline and the Cleopatra gas pipeline.

These pipelines transport oil and gas from the Green Canyon area, where our fields are located, to connecting pipelines that transport product onshore.

Key developments for FY2021

•

The Atlantis Phase 3 project, a new subsea production system that ties back to the Atlantis facility, achieved first production in July 2020. Atlantis Phase 3 is expected to have the capacity to produce up to 38,000 gross barrels of oil equivalent per day.

•

On 6 November 2020, BHP finalised a membership interest purchase and sale agreement with Hess Corporation to acquire an additional 28 per cent working interest in Shenzi for US$480 million, which brings our working interest to 72 per cent.

•

The Mad Dog Phase 2 project achieved a major milestone in April 2021 as the semi-submersible floating production platform, Argos, arrived in the US from South Korea. First production from Mad Dog Phase 2 is expected in the middle of the CY2022.

•

On 20 May 2021, BHP finalised a purchase and sale agreement with EnVen Energy Ventures, LLC to divest our interest in and operation of Neptune.

•

On 5 August 2021, the Board approved the funding to develop the Shenzi North Project, a

two-well

subsea

tie-in

to the Shenzi platform. First production is targeted in CY2024.

Australia

Overview

We operate Macedon (BHP ownership: 71.43 per cent) which is an offshore gas field located around 75 kilometres west of Onslow, Western Australia and an onshore gas processing facility located around 17 kilometres southwest of Onslow. The operation produces gas from four subsea wells, with gas piped onshore to the processing plant.

We operate Pyrenees (BHP ownership: 39.99–71.43 per cent), which is a floating production, storage and

off-take

facility, located about 23 kilometres off Northwest Cape, Western Australia. The facility produces oil from six offshore fields.

We have a 32.5–50 per cent

non-operated

interest in Bass Strait, which is a collection of offshore installations and onshore processing facilities producing oil and gas. It is located between 25 and 80 kilometres off the southeastern coast of Australia and onshore Victoria. Gas is piped from offshore fields to the onshore Longford processing facility for processing with liquefied petroleum gas transported to market by pipeline, road tanker or ship and ethane by pipeline.

We have a 12.5–16.67 per cent

non-operated

interest in the North West Shelf project, which comprises offshore oil and gas fields, with onshore gas processing infrastructure to produce oil, LNG, condensate, LPG and domestic gas. The offshore facilities are located about 125 kilometres northwest of Dampier in Western Australia. Gas is piped from offshore platforms to the onshore Karratha Gas Plant for processing, with LNG and all liquefied products exported to market by ship, and domestic gas transported by pipeline.

Key developments in FY2021

In December 2020, BHP and the North West Shelf joint venture partners executed fully termed gas processing agreements for processing third-party gas from the Pluto and Waitsia projects through the North West Shelf facilities, extending the life of the asset.

The Bass Strait West Barracouta gas project achieved first production in April 2021.

Rest of world

Overview

BHP operates Ruby (BHP ownership: 68.46 per cent) and Greater Angostura (BHP ownership: 45 per cent interest in a production sharing contract) fields, which form part of our Trinidad and Tobago operations – an integrated oil and gas development consisting of two fields located between 40 and 45 kilometres offshore east of Trinidad.

BHP has a

non-operated

interest in an onshore integrated development, the Rhourde Ouled Djemma (ROD) Integrated Development (BHP ownership: 28.85 per cent effective interest), that produces oil and is located 900 kilometres southeast of Algiers. It comprises six satellite oil fields that pump oil back to a dedicated processing train.

Key developments in FY2021

Ruby achieved first oil production in May 2021 ahead of schedule and on budget. Drilling and completion of the remaining wells at Ruby is ongoing with subsequent wells expected to be placed into production in CY2021 and project completion expected in the first half of CY2022.

1.10.5 Commercial

BHP’s Commercial function seeks to maximise commercial value across our

end-to-end

supply chain and provides improved service levels to our assets and customers through subject-matter expertise, simplified processes and the centralisation of standardised activities.

The function is organised around the following core activities in our value chain, supported by business partnering, credit and market risk management, and strategy and planning activities.

Sales and Marketing

Connects BHP’s resources to market through commercial expertise, sales and operations planning, customer insights and proactive risk management. It presents a single face to markets across multiple assets, with a view to realising maximum value for our products and supporting sustainability initiatives in our downstream supply chain.

Maritime and Supply Chain Excellence

Manages BHP’s enterprise-wide maritime transportation strategy and the chartering of ocean freight to meet BHP’s inbound and outbound transportation needs. It focuses on supply chain excellence and sourcing sustainable, cost-efficient marine freight. We seek to mitigate supply chain risk by vetting the safety performance of the ships loading BHP cargo.

Procurement

Purchases the goods and services used by our projects, assets and functions globally. Procurement works to help optimise equipment performance, reduce operating costs, improve working capital and create social value. It manages supply chain risk, fosters supplier innovation and develops sustainable relationships with global suppliers and local businesses in the communities where we operate.

Warehousing, Inventory, Logistics and Property

Designs and operates our inbound supply chain networks for the delivery and warehousing of spare parts, operating supplies and consumables, and designs and operates our office workspaces globally.

Market Analysis and Economics

Develops BHP’s proprietary view on the outlook for commodity demand and prices, as well as our input costs, the world economy, climate change and financial markets. The team works with our Procurement, Maritime, and Sales and Marketing

sub-functions

to help optimise

end-to-end

commercial value, and with the Portfolio Strategy and Development and External Affairs functions to identify and respond to

long-run

strategic changes in our operating environment.

Global Business Services

Global Business Services (GBS) unites common shared services across the Group into a single operation with capabilities focused on transaction efficiency, process intelligence and automation. GBS manages

end-to-end

functional processes designed to deliver continuous process improvement and a better customer experience.

1.11 Exploration

Our exploration program is focused on copper and nickel to replenish our resource base and enhance our portfolio. The purpose is to generate attractive,

low-cost,

value-accretive options by leveraging our competitive strengths. For the first time, the Petroleum and Metals teams partnered together on a Joint Global Endowment study to explore future growth opportunities and global,

yet-to-find

volume and metal accumulations through the use of data analytics and augmented intelligence. The study is expected to create a competitive advantage and position BHP for future access to new search spaces.

Following exploration results in previous drilling phases, which confirmed mineralised intercepts of copper with associated gold, uranium and silver, in May 2021 the Oak Dam copper discovery in South Australia commenced the next stage of definition drilling to inform future design of the deposit. Elsewhere during the year, we continued to seek, secure and test concessions in regions such as Ecuador, south-western United States, South Australia, Chile and Peru. Greenfield nickel exploration activities were initiated in Western Australia and we started to look beyond Australia for new nickel opportunities through a partnership in Canada.

Exploration in FY2021

Metals (copper, nickel)

The Metals Exploration teams are focused on identifying and gaining access to new search spaces to test the best targets capable of delivering large, high-quality, Tier 1 deposits and maintaining research and technology activities aligned with our exploration strategy. Despite the slowdown and restrictions on movement due to the

COVID-19

pandemic, the field teams were active in Chile, Peru, Ecuador, the United States and Australia. These activities involved early stage reconnaissance work through target definition and drill testing. With the addition of nickel to the exploration portfolio, the sphere of work expanded into Western Australia, where BHP holds a significant land position and drill programs are scheduled pending appropriate clearances. Metals Exploration also extended its partnership with Midland Exploration, a Canadian company with interests in copper and nickel projects in northern Québec in Canada, to generate nickel targets in Québec, including the completion of a regional airborne electromagnetic survey. We initiated a global assessment of new nickel opportunities to further strengthen the pipeline.

Technology collaboration and research partnerships are key to our metals exploration strategy. In particular, we are focused on developing and deploying technologies that will allow us to get to the ‘Next 400’ (that is below the first 400 metres of the Earth’s surface). Similarly, we are conducting research in collaboration with university groups to determine controls on high-grade mineralisation and undertaking programs in Chile and the United States to further our own exploration effort under cover. These two elements are intended to allow us to continue to be successful in discovery within the areas where we operate that are often incorrectly considered mature.

Our business partnerships continue to deliver encouraging results as we continued to add to our early stage options in future facing commodities. During FY2021, we advanced our

earn-in

with Luminex in Ecuador, undertaking drilling at our Tarqui project. Elsewhere in Ecuador, we maintained a 13.6 per cent ownership in SolGold plc, the majority owner and operator of the Alpala porphyry copper-gold project. We also own a 5 per cent interest in Midland Exploration Inc., a mineral exploration company in Canada. In Mexico, the team continued the financial agreement with Riverside Resources, which exposes BHP to new search spaces and exploration opportunities. In Australia, we committed to a partnership with Encounter Resources to explore for sediment-hosted copper deposits in the Northern Territory of Australia.

In addition, on 27 July 2021, we entered into a definitive Support Agreement with Noront Resources (Noront) to extend the Company an

all-cash

takeover offer. The Noront Board of Directors has unanimously recommended the offer to Noront shareholders. Noront owns the Eagles Nest nickel-copper deposit in the James Bay Lowlands, Ontario, in an area highly prospective for nickel known as the Ring of Fire.

Petroleum

In FY2021, Petroleum continued to add to and mature the exploration potential of our portfolio.

In the US Gulf of Mexico, we expanded our acreage positions through lease sale participation. In July 2020, the regulator awarded BHP two blocks

(1)

in Green Canyon, central Gulf of Mexico and three blocks

(2)

in the western Gulf of Mexico. We additionally progressed our partnering strategy in the Gulf of Mexico through lease exchange agreements with Chevron, expanding our portfolio in the central Gulf of Mexico.

In Mexico, we commenced an Ocean Bottom Node seismic acquisition over the Trion field in November 2020, as part of our ongoing evaluation and analysis. The survey was completed in the March 2021 quarter. The results will be incorporated into the current evaluation of the Trion opportunity. In addition, we received formal approval for a

124-day

extension for the evaluation and exploration periods through 1 July 2021 and 1 July 2022 respectively, because of the suspension of activities in 2020 due to

COVID-19

restrictions.

In Trinidad and Tobago, we drilled the

Broadside-1

exploration well on Block 3, which fully satisfied the remaining drilling obligations on the Southern exploration licenses. The

Broadside-1

well reached the main reservoir on 22 October 2020 and did not encounter hydrocarbons. The well was a dry hole and was plugged and abandoned on 8 November 2020. The Southern licenses expired in June 2021, and BHP elected to participate in a Market Development Phase (MDP) for Block 5 to retain the acreage around the LeClerc and Victoria discoveries. The proposed MDP is pending regulatory approval. The Transocean drilling rig arrived on location and commenced drilling of two Calypso gas appraisal wells for our northern licenses in July 2021.

In Australia, BHP participated in a multi-client 3D seismic acquisition in the Gippsland Basin that was completed in September 2020. Analysis will continue through FY2022 and will inform us of the prospectivity in this area.

Exploration and appraisal wells drilled, or in the process of drilling, during the year included:

Well

Location

Target

BHP equity

Spud date

Water
depth

Total well

depth

Status

Broadside-1

Trinidad and Tobago Block 3

Oil

65%

(BHP operator)

20 August 2020

2,019 m

7,064 m

Dry hole; plugged and abandoned

(1)	Leases were awarded in blocks: GC80 and GC123.

(2)	Leases were awarded in blocks: AC36, AC80 and AC81.

Exploration expenditure

Our resource assessment exploration expenditure increased by 5 per cent in FY2021 to US$138 million, while our greenfield expenditure increased by 23 per cent to US$54 million. Expenditure on resources assessment and greenfield exploration over the last three financial years is set out below.


Year ended 30 June	2021 US$M		2020 US$M		2019 US$M
Greenfield exploration		54		44		62
Resources assessment		138		132		126

Total metals exploration and assessment		192		176		188

Petroleum exploration and appraisal

Petroleum exploration expenditure for FY2021 was US$322 million, of which US$296 million was expensed. Expenditure on petroleum exploration over the last three financial years is set out below.

Year ended 30 June

2021

US$M

2020
US$M

2019
US$M

Petroleum exploration

322

564

685

Our petroleum exploration program prioritised drilling commitments for development wells and strategic partnering in FY2021. A US$540 million exploration program is planned for FY2022 as we progress testing of our future growth opportunities and evaluate potential new basins for future entries.

Exploration expense

Exploration expense represents that portion of exploration expenditure that is not capitalised in accordance with our accounting policies, as set out in note 11 ‘Property, plant and equipment’ in section 3.

Exploration expense for each segment over the last three financial years is set out below.


Year ended 30 June	2021 US$M		2020 US$M		2019 US$M
Exploration expense
Petroleum (1)		382		394		409
Copper		53		54		62
Iron Ore		55		47		41
Coal		7		9		15
Group and unallocated items (2)		19		13		10

Total Group		516		517		537

(1)	Includes US$86 million (FY2020: US$ nil; FY2019: US$21 million) exploration expense previously capitalised, written off as impaired.

(2)	Group and unallocated items includes functions, other unallocated operations, including Potash, Nickel West and legacy assets (previously disclosed as closed mines in the Petroleum reportable segment), and consolidation adjustments.

1.12 People and culture

We aim to recruit and retain the best people ensuring we deliver our strategy and run our operations safely and productively.

Around 80,000 employees and contractors work for us globally; they are the foundation of our business. We create and promote an inclusive and diverse environment where the safety and wellbeing of our people is the highest priority. To enable our people to perform at their best, we continue to invest in technology and innovative ways to manage risk, streamline processes and improve productivity. We also offer competitive remuneration that rewards expertise and invest in the development of our people to build capability and improve performance.

Developing our capabilities and an enabled culture

To drive continuous improvement, we respect people’s differences and encourage self-accountability, a hunger to learn and a commercial mindset.

One of the ways we achieve this is by applying the BHP Operating System (BOS) practices to help build leader capability. BOS is a way of leading and working that focuses on the safety of our people, value for our customers and a mindset of zero waste. In FY2021, we continued to train our leaders through BOS learning academies to improve operational capability and culture.

We also deploy a simplified Engagement and Perception Survey (EPS) three times a year. After each EPS, leaders are accountable for identifying actions to address improvement areas, as shaped by employee feedback, in the following 90 days. With a strong response rate (81 per cent) and overall engagement scores of 84 per cent, two to three percentage points under top decile of global organisation benchmarks provided by Qualtrics, we believe our overall workforce feels supported and engaged.

In 2018, we created a new business unit, Operations Services, to provide maintenance and production services across our Minerals Australia assets. Operations Services employs its people on a permanent basis and supports skill building through a structured coaching and

in-field

training program designed to enable the workforce to deliver consistent equipment operation and maintenance that balances safety, maximum productivity and equipment reliability. As at 30 June 2021, Operations Services employed more than 3,700 employees and is expected to continue to grow.

As part of a new national training program to help bolster Australia’s skills base and create new career pathways into the mining sector, the BHP FutureFit Academy (FFA) provides a pathway to join Operations Services through either an accredited maintenance traineeship or a trade apprenticeship. Once trained and qualified, employees move to a job at one of our Australian operations. In FY2021, the FFA trained more than 500 apprentices and trainees as the first cohort graduated (163 graduates in FY2021). For more information on BHP’s FutureFit Academy see our case study at bhp.com/people.

Inclusion and diversity

An inclusive and diverse workforce promotes safety, productivity and wellbeing, and underpins our ability to attract new employees. We employ, develop and promote based on people’s strengths and do not tolerate any form of discrimination, bullying, harassment, exclusion or victimisation. Our systems, processes and practices are designed to support fair treatment for all of our people. In July 2020, we published our Inclusion and Diversity Statement confirming our vision, commitment and contributions to inclusion and diversity.

Our employees are encouraged to celebrate diversity and to speak up if they encounter behaviours inconsistent with our values and expectations. To help mitigate gender pay disparities, we have taken steps to reduce potential bias in recruitment and conduct an annual gender pay review, the results of which are reported to the BHP Remuneration Committee.

Respect is one of

Our Charter

values and is fundamental to building stronger teams and being an inclusive and diverse workplace. For some people, this has not been their experience of working at BHP. We are determined to address this.

For information on our approach to addressing workplace sexual harassment, refer to section 1.13.4.

Our ambition to achieve a more diverse and inclusive workplace is focused on four areas:

•

embedding flexibility in the way we work

•

encouraging and working with our supply chain partners to support our commitment to inclusion and diversity

•

uncovering and taking steps to mitigate potential bias in our behaviours, systems, policies and processes

•

ensuring our brand and workplaces are attractive to a diverse range of people

Gender balance

(1)

In 2016 we publicly announced our aspiration to achieve gender balance within our employee workforce globally by the end of FY2025. At the end of FY2021 we had 5,257 more female employees than reported in 2016. In FY2021, we increased the representation of women working at BHP by 2.7 per cent. Overall, women represent 29.8 per cent of our employee workforce including employees on extended absence such as parental leave. The Executive Leadership Team is confident of achieving 40 per cent female representation by the end of FY2025, meeting the definition of gender balance used by entities such as the International Labour Organization and HESTA, which consider balance to be a minimum of 40 per cent women and 40 per cent men.

The percentage of employees newly hired to work for BHP in FY2021 was 52.1 per cent male and 47.9 per cent female. This is a marked increase on our FY2015 baseline for our aspirational goal, which was 10.4 per cent female.

We also improved our representation of women in leadership by 2.8 percentage points compared to FY2020, with 25.2 per cent female leaders as at the end of FY2021.

To further accelerate female representation in FY2021, we worked to:

•

improve employment messaging to target diverse audiences about why they should work for BHP

•

progress market mapping to proactively target people or groups of people not actively looking to work for BHP or our industry

•

broaden our employment and brand reach across social, digital and traditional media channels

•

enhance our workforce development and retention through coaching and support materials for leaders

•

develop a Ways of Working Framework to guide employees and leaders to ‘Work where you get great outcomes’

•

implement mentoring and support networks for women

(1)

Based on a ‘point in time’ snapshot of employees as at 30 June 2021, as used in internal management reporting for the purposes of monitoring progress against our goals. This does not include contractors. For the first time this includes employees on extended absence (660 at 30 June 2021), who were previously not included in the active headcount.

The table below shows the gender composition of our employees, senior leaders and the Board over the last three financial years.


	2021		2020		2019
Female employees (1)		11,868		8,072		6,874
Male employees (1)		27,953		23,517		22,052
Female senior employees (2)(3)		90		67		70
Male senior employees (2)(3)		189		185		227
Female Executive Leadership Team (ELT) members (2)		5		4		4
Male Executive Leadership Team (ELT) members (2)		5		6		7
Female Board members (2)		4		3		4
Male Board members (2)		8		9		7

(1)

FY2021 employee numbers based on actual numbers at BHP operated location as at 30 June 2021, not

10-month

averages. FY2020 and FY2019 are based on the average of the number of employees at the last day of each calendar month for a

10-month

period from July to April which is then used to calculate a weighted average for the year to 30 June and adjusted based on BHP ownership. Data includes Continuing and Discontinued operations (Onshore US assets) for the financial years being reported.

(2)	Based on actual numbers as at 30 June 2021, not 10-month averages.

(3)

For the purposes of the UK Companies Act 2006, we are required to show information for ‘senior managers’, which are defined to include both senior leaders and any persons who are directors of any subsidiary company, even if they are not senior leaders. In FY2021, there were 297 senior leaders at BHP. There are 18 Directors of subsidiary companies who are not senior leaders, comprising 14 men and 4 women. Therefore, for UK law purposes, the total number of senior managers was 203 men and 94 women (31.6 per cent women) in FY2021.

Indigenous employment

Indigenous peoples are critical partners and stakeholders for many of BHP’s operations around the world. BHP recognises, as part of our Global Indigenous Peoples Strategy, that we can contribute to the economic empowerment of Indigenous peoples through providing opportunities for employment, training, procurement and supporting Indigenous enterprises.

Pre-employment

training, employment, career development and retention of Indigenous employees are key to this.

We have set targets to achieve Indigenous employment of 8 per cent in our Australian workforce by the end of FY2025, 10 per cent in our workforce in Chile by the end of FY2026 and 20 per cent in our Potash workforce in Canada by the end of FY2027.

Indigenous employment within our employee and contractor workforce

(1)

as at 30 June 2021 was 7.2 per cent in Australia, 7.5 per cent at our operations in Chile and 13.7 per cent at our Jansen Potash Project in Canada.

LGBT+ inclusion

Our LGBT+ ally employee inclusion group, Jasper, was established in 2017 as a natural extension of our inclusion and diversity aspirations and to reflect

Our Charter

value of respect. The membership base of LGBT+ employees and allies has grown substantially with eight regional chapters globally.

In February 2021, we launched our Gender Affirmation Policy and leader toolkit outlining how we will support employees affirming their gender.

Flexible working

Our focus on flexible working over the past few years assisted our office-based workers to adapt to remote working requirements caused by the

COVID-19

pandemic.

We expect to maintain a hybrid working model for employees based in corporate offices, allowing office and home-based working arrangements, while requiring 30 to 50 per cent of their work to be based in the office (excluding times when

COVID-19-related

workplace restrictions are in place) depending on the nature of their work.

We also understand many site-based employees are in roles that by their very nature cannot be performed remotely. We will continue to seek to provide flexible working through part-time and

job-share

arrangements, flexible rosters and career breaks.

(1)	Based on a ‘point in time’ snapshot of employees and labour hire contractors as at 30 June 2021.

Employee relations

Our four key focus areas for employee relations are:

•

ensuring we comply with legal obligations and regional labour regulations

•

negotiating where there are requirements to collectively bargain

•

closing out agreements with our workforce in South America and Australia, with no lost time due to industrial action, to the extent possible

•

creating solid relations with our workforce based on a culture of trust and cooperation

During FY2021, Minerals Americas participated in seven collective bargaining processes, which were important to enable our business objectives in relation to financial performance, organisational capabilities, culture change and behaviour management.

Escondida signed three collective bargaining agreements: with the supervisors’ union for 36 months (1 October 2020 to 30 September 2023), the Intermel (Operators and Maintainers) union for 24 months (1 April 2021 to 31 March 2023) and Union No. 1 (Operators and Maintainers) for 36 months (2 August 2021 to 1 August 2024). Spence signed two

36-month

collective bargaining agreements: with the supervisors’ union (1 December 2020 to 30 November 2023) and the Operator and Maintainers union (1 June 2021 to 31 May 2024). Cerro Colorado executed two collective agreements: one with the supervisors’ union for 36 months (1 June 2021 to 31 May 2024) and with the Operators and Maintainers union for 36 months (1 September 2021 to 31 August 2024).

The Specialists and Supervisors Union for BHP Chile Inc. invoked article 342 of the Chilean Labor Code, under which employees had their current entitlements under existing collective agreement preserved for the next 18 months (June 2021 to December 2022). In the collective bargaining between BHP Chile Inc. and the Specialists and Supervisors Union, there were 13 days of legal strike action (27 May 2021 to 8 June 2021). Contingency plans were put in place to hand over management of the control rooms back to the operations and planned maintenance activities were undertaken ahead of time, resulting in no operational downtime due to this strike.

Impacts and challenges from

COVID-19

related to our people

The impact of

COVID-19

and the resulting measures taken by governments within Australia to control its spread, resulted in changes to working patterns for our employees and contractors. In Australia and Chile, there was an increase in unplanned absenteeism due to

COVID-19

restrictions. As a result of the

COVID-19

restrictions, we implemented a range of employee measures across our business to reduce the number of workers required onsite, such as remote working arrangements, increased health and safety requirements, vaccination campaigns and hybrid working.

With state border closures restricting the mobilisation of employees and contractors to our operating sites in Australia, changes to rosters and hours of work were made to ensure operational requirements for essential work were met. There has also been a further extension of flexible work options for employees and contractors in Australia in response to government-imposed lockdowns preventing them from attending their normal place of work. These flexible work options included staggered start times, working from home and reduced working hours. Our contractor workforce was reduced after the Spence Growth Option (SGO) transitioned to the operation.

For information on the impact of

COVID-19

to our workforce, refer to section 1.13.5.

Our people policies

Our Charter

is the foundation of the work we do at BHP. It describes our purpose, our values, how we measure our success, who we are, what we do and what we stand for.

Our Code of Conduct

demonstrates how to practically apply the commitments and values set out in

Our Charter

and reflects many of the standards and procedures we apply throughout BHP.

Through these documents, we make it clear that discrimination on any basis is not acceptable and we give full and fair consideration to applications for employment received from all candidates, having regard to their particular aptitudes and abilities. In instances where employees require support for a disability, we work with them to identify roles that meet their skills, experience and capability, and offer retraining where required.

Our Human Rights Policy Statement outlines our commitment to respecting human rights, which includes rights related to workplace health, safety and labour. We commit to operating in a manner consistent with the terms of the International Labour Organization Declaration on Fundamental Principles and Rights at Work.

The

Our Requirements

standards outline the mandatory minimum standards we expect of those who work for or on behalf of BHP. Some of those standards relate to people activities, such as recruitment and talent retention.

Our

all-employee

share purchase plan, Shareplus, is available to all permanent full-time and part-time employees and those on fixed-term contracts, except where local regulations limit operation of the scheme. In these instances, alternative arrangements are in place.

More information on people is available at bhp.com/people.

1.13 Sustainability

1.13.1 Our sustainability approach

Our commitment to sustainability starts with our purpose – to bring people and resources together to build a better world. Our products support global development and many aspects of modern life, and we expect many will play an essential role as the world decarbonises.

We also understand there will be times when we must make difficult choices involving trade-offs, some of which may lead to differences of opinion and concern among some stakeholders. While we seek to gain and maintain the support of all our stakeholders, we also respect the right of every stakeholder to disagree with a decision or choice we may make.

There may be adverse impacts in the production and use of our products, and while our aim is to avoid them, the nature of our activities and products means this will not always be possible. We seek to minimise and mitigate these impacts where we can and look for ways to contribute to the long-term health of society and the natural environment.

We view our management of sustainability as core to our efforts to generate social value including:

•

putting the health and safety of our people first

•

being environmentally responsible

•

respecting human rights

•

supporting the communities where we operate

We recognise sustainability is integral to the work we do at BHP. We believe it leads to higher performance by making us more productive and safe. Our approach to sustainability is defined by

Our Charter

and governed through the

Our Requirements

standards. These standards describe our mandatory minimum performance requirements and provide the foundation to develop and implement management systems at our operated assets.

Across the Group, we embed sustainability performance measures through our public five-year sustainability targets. Achieving these targets and working towards our goals aligns with our commitments to the Paris Agreement goals and the United Nations Sustainable Development Goals (UNSDGs). It also drives improvement in our sustainability performance. Our current five-year public sustainability targets conclude at the end of FY2022, and we are developing new targets. We have already set a climate change target to reduce operational greenhouse gas (GHG) emissions (Scope 1 and Scope 2 from our operated assets) by at least 30 per cent from FY2020 levels

(

)

by FY2030. Our long-term goal is to achieve net zero

(

)

operational emissions by 2050.

(

)

We commit to several sustainability frameworks, standards and initiatives and disclose data according to their requirements. Our sustainability reporting, including on our website is prepared in accordance with the Global Reporting Initiative (GRI) Standards comprehensive-level reporting,

(

)

the International Council on Mining and Metals (ICMM) Sustainable Development Framework, the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and the Sustainability Accounting Standards Board (SASB) Metals and Mining standard. It also serves as our United Nations Global Compact (UNGC) Communication on Progress on implementation of the UNGC Ten Principles and support for its broader development objectives.

BHP’s Board oversees our approach to sustainability. The Board’s Sustainability Committee has oversight of health, safety, environmental and community (HSEC) matters and assists the Board with governance and monitoring. For more information about the Sustainability Committee and its work, refer to section 2.1.11.

There is a growing number of sustainability standards we commit to voluntarily or as part of our memberships. In FY2021, we completed a number of self-assessments across different operated assets for the ICMM Mining Principles and associated performance expectations. In October 2020, BHP signed a letter of commitment to the CopperMark

(

)

assurance process for our copper producing assets (Olympic Dam, Escondida and Spence) and completed self-assessments as part of this commitment.

(1)	The FY2020 baseline will be adjusted for any material acquisitions and divestments based on greenhouse gas emissions at the time of the transaction. Carbon offsets will be used as required.

(2)	Net zero includes the use of carbon offsets as required.

(3)	These positions are expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.

(4)	Our GRI Content Index is available at bhp.com/FY21ESGStandardsDatabook

(5)	https://www.bhp.com/media-and-insights/news-releases/2020/11/bhp-commits-to-copper-mark/.

1.13.2 Our material sustainability issues

Sustainability materiality assessment

Each year we identify the sustainability issues most material to our business and stakeholders. We use this assessment to help inform our sustainability strategies and to ensure the sustainability disclosures in our Annual Report include the issues of most interest to our business and stakeholders in line with the GRI Standards Reporting Principles.

The materiality assessment considers internal and external stakeholder perspectives and the economic, social, environmental and cultural impacts of our activities. We identified over 30 material sustainability issues as part of our materiality assessment in FY2021. Of those, the issues shown below and disclosed in this Annual Report were identified as the most material issues to BHP and our stakeholders. The below table also covers our requirements under the UK Companies Act 2006.

(1)

More information about our materiality assessment is available at bhp.com/materialityassessment

Material sustainability issues

(1)	We comply with the Non-financial Reporting Directive requirements and therefore report sustainability matters from sections 414CA and 414CB of the UK Companies Act 2006.

This table sets out where relevant information is located in this Annual Report.

(2)	Although these standards are for internal use, we have made the HSEC-related elements of several of the Our Requirements standards and related documents publicly available at bhp.com.

(3)	For further information on BHP’s principal risks, refer to section 1.16.

1.13.3 Our sustainability performance:

Non-financial

KPIs

Our five-year sustainability targets and FY2021 performance.


People	Target	FY2021 result		Year-on-year
	Zero work-related fatalities	Workplace fatalities	0	FY2017 (1) FY2018 FY2019 (2) FY2020 FY2021	1 2 1 0 0
	Year-on-year improvement of total recordable injury frequency (3) (TRIF) per million hours worked	Total recordable injury frequency decreased by 11 per cent compared to FY2020		FY2017 (4) FY2018 (4) FY2019 (5) FY2020 FY2021	4.2 4.4 4.7 4.2 3.7
	50 per cent reduction in the number of workers potentially exposed (6) to our most material exposures of diesel particulate matter, respirable silica and coal mine dust compared to our FY2017 (7) baseline by FY2022	Occupational exposures 70 per cent reduction compared to FY2017 baseline		Adjusted FY2017 baseline FY2018 FY2019 (8) FY2020 FY2021 (9)	4,266 3,032 2,192 1,744 1,280
Society	Zero significant community events (10)	FY2021	0	FY2017 FY2018 FY2019 FY2020 FY2021	0 0 0 0 0
	Not less than 1 per cent of pre-tax profits (11) invested in community programs that contribute to the quality of life in the communities where we operate and support the achievement of the UN Sustainable Development Goals	Social investment spend US$174.8 million (12)		FY2017 (13) FY2018 FY2019 (14) FY2020 FY2021	US$80.2 million US$77.1 million US$93.5 million US$149.6 million US$174.8 million
	By FY2022, implement our Indigenous Peoples Strategy across all our operated assets through the development of Regional Indigenous Peoples Plans	Regional Indigenous Peoples Plans being implemented across Australia (Reconciliation Action Plan (RAP)) and North and South America
Environment	Zero significant environmental events (10)	FY2021	0	FY2017 FY2018 FY2019 FY2020 FY2021	0 0 0 0 0
	Reduce FY2022 withdrawal of fresh water (15) by 15 per cent from FY2017 levels	Freshwater withdrawal reduction from FY2017 baseline (16)	27%	Adjusted FY2017 baseline (16) FY2018 FY2019 FY2020 FY2021	156,120 ML 140,515 ML 155,570 ML 126,997 ML 113,444 ML
	By FY2022, improve marine and terrestrial biodiversity outcomes by developing a framework to evaluate and verify the benefits of our actions, in collaboration with others	Progressed framework development, including pilots and approaches to data validation in collaboration with others. On track to deliver by end of FY2022		Year-on-year progress on development of framework to evaluate and verify the benefits of our actions

(1)	FY2018 and FY2019 data includes Continuing and Discontinued operations (Onshore US assets to 28 February 2019).

(2)	FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.

(3)

The sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) multiplied by 1 million/actual hours worked by our employees and contractors. Stated in units of per million hours worked. We adopt the US Government’s Occupational Safety and Health Administration Guidelines for the recording and reporting of occupational injuries and illnesses.

(4)	FY2017 and FY2018 TRIF data includes Continuing and Discontinued operations (Onshore US assets).

(5)	FY2019 TRIF data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.

(6)

For exposures exceeding our FY2017 baseline occupational exposure limits discounting the use of personal protective equipment, where required. The baseline exposure profile (as at 30 June 2017) is derived through a combination of quantitative exposure measurements and qualitative assessments undertaken by specialist occupational hygienists consistent with best practice as defined by the American Industrial Hygiene Association.

(7)	New FY2017 baseline due to the removal of 98 exposures attributed to the Onshore US assets.

(8)	Data excludes Discontinued operations (Onshore US assets).

(9)	As of FY2021, the Occupational Exposure Limit for Coal was reduced to 1.5 mg/m 3 compared to 2.0 mg/m 3 in previous years.

(10)	A significant event resulting from BHP operated activities is one with an actual severity rating of four or above, based on our internal severity rating scale (tiered from one to five by increasing severity) as defined in our mandatory minimum performance requirements for risk management.

(11)	Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.

(12)	Expenditure includes BHP’s equity share for operated and non-operated joint ventures, and comprises cash, administrative costs, including costs to facilitate the operation of the BHP Foundation.

(13)	FY2017 and FY2018 social investment figures includes Discontinued operations (Onshore US assets).

(14)	FY2019 social investment figure includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.

(15)	Where ‘withdrawal’ is defined as water withdrawn and intended for use (in accordance with ‘A Practical Guide to Consistent Water Reporting’, ICMM (2017)).

‘Fresh water’ is defined as waters other than seawater, wastewater from third parties and hypersaline groundwater. Freshwater withdrawal also excludes entrained water that would not be available for other uses. These exclusions have been made to align with the target’s intent to reduce the use of freshwater sources subject to competition from other users or the environment.

(16)

The FY2017 baseline data has been adjusted to account for: the materiality of the strike affecting water withdrawals at Escondida in FY2017 and improvements to water balance methodologies at WAIO, BMA and BMC and exclusion of hypersaline, wastewater, entrainment, supplies from desalination and Discontinued operations (Onshore US assets) in FY2019 and FY2020.

1.13.4 Safety

Our highest priority is the safety of our workforce and the communities where we operate.

Our safety performance

In FY2021, we continued to focus on strong safety performance:

•

no fatalities at our operated assets

•

a decrease of 17 per cent in high-potential injury frequency rate from FY2020. The highest number of events with potential for one or more fatalities were related to vehicle and mobile equipment accidents. High-potential injury trends will remain a primary focus to assess progress against our most important safety objective, eliminating fatalities

•

a decrease in total recordable injury frequency (TRIF) of 11 per cent from FY2020. The highest number of injuries are related to slips, trips and falls for both employees and contractors

•

an increase in field leadership activities, which occurred at a sustainable frequency rate of 9,400 activities per million hours worked with over 1,573,000 activities completed in the period and over 44,000 employees and contractors participating in the program at least once. Scheduled activities compared to

non-scheduled

activities increased by 72 per cent from FY2020 and coaching increased by 5 per cent

•

we took a number of significant steps to improve our controls to address sexual assault and sexual harassment, however we have further to go to fully stop this behaviour from occurring across BHP

•

no safety fines were received at our operated assets in FY2021

Performance data – workforce health and safety for FY2021

(1)

High-potential injury events

(2)


Year ended 30 June	2021		2020		2019
High-potential injury events		33		42		50


	Employees		Contractors
High-potential injury frequency (3)		0.02		0.05

Total recordable injury frequency


Year ended 30 June	2021		2020		2019
Total recordable injury frequency (4)		3.7		4.2		4.7


	Employees		Contractors
Total recordable injury frequency (3)		0.67		0.80

(1)	FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations. Due to the lag nature of incident reporting and subsequent verification, final results may vary post reporting. Prior year data has not been adjusted.

(2)	High-potential injury includes injuries with fatality potential. The basis of calculation revised in FY2020 from event count to injury count as part of a safety reporting methodology improvement.

(3)	Employee and contractor frequency per 200,000 hours worked.

(4)	Combined employee and contractor frequency per 1 million hours worked.

Our results were achieved through a sustained focus on improving our management of risk through new and existing programs including:

•

Fatality Elimination Program

•

Integrated Contractor Management Program

•

Field Leadership Program

Fatality Elimination Program

In FY2021, we introduced our Fatality Elimination Program to enable a step change towards our goal of no fatalities across our business.

Fatality elimination is not a new priority for us. We have been seeking to improve our safety performance over a number of years and more recently, have considerably reduced high potential injuries. However, there is more to do and we are taking additional steps to systematise a common set of controls. In FY2021, the Fatality Elimination Program:

•

engaged subject matter experts and mining, equipment, technology and services (METS) organisations to provide control solutions to our top 10 safety risks

•

identified over 60 recommended controls for our top 10 safety risks, including new controls and material improvements to existing controls

•

conducted assessments at our operated assets and relevant functions against the recommended controls to determine the actions that need to be taken

•

established a global project team to prioritise and deliver a global five-year fatality elimination roadmap

•

commenced planning to update the

Our Requirements for Safety

Standard and coordinate a selection of control and human performance improvement initiatives in FY2022

Integrated Contractor Management Program

Our Integrated Contractor Management Program is designed to make it safer and easier for our contractors to work with us. Introduced in FY2020, the program is focused on building long-term mutually beneficial relationships with our contractors, integrating and simplifying processes and systems, and creating an inclusive, respectful and caring workforce culture.

In 2021, we launched our new global contractor performance standard, establishing global requirements for how we work with contractors (including subcontractors and consultants). This replaced existing local frameworks and provides a standardised way of working with contractors to drive best practice. To embed the standard, a number of initiatives and tools have been developed:

•

Our Scope of Work Library is an online resource containing best practice examples for different types of contractor engagements. This assists our contractor partners to better understand the work required at our sites, enabling them to assign contractors with the right skills and competencies to perform the work.

•

To assist in defining the minimum requirements for key roles, governance and process routines, we introduced an operational tiering model. The model factors in work scope, operational safety risks and contract arrangements to inform the robustness of process requirements, including key performance indicators.

•

We developed a specific contractor perception survey to ensure we receive contractor feedback on our culture and their experience working at BHP.

•

We developed systems to support the contractor management process to improve supervision and training of contractors across our operated assets. A pilot was conducted at one of our Australian operated assets to ensure the system was

fit-for-purpose

before broader implementation.

Field Leadership Program

Leaders spending time in the field is vital to maintaining safe operations. Our global Field Leadership Program involves leaders engaging with workers in the field to drive a common approach to improving health, safety and environment (HSE) performance. These engagements are used to verify critical safety controls are in place, being applied and are effective in reducing the risk of fatalities.

The program encourages the workforce to provide feedback to their leaders about safety and to look out for the safety of themselves and their colleagues.

In FY2021 we:

•

increased supervisor time in the field through BOS and reduced the large spans of control that some supervisors had over their teams

•

continued to improve the quality of field leadership activities by increasing coaching and delivery of field leadership engagements at our operated assets

•

focused on ensuring our leaders were proactively scheduling Fatality Elimination Program activities and executing them to plan to ensure adequate verification of all fatality risks across our operated assets

•

developed a global, standardised field leadership procedure designed to increase the effectiveness of field leadership activities by reducing variances in practices across the business

•

conducted field leadership on

COVID-19

controls, which increased our understanding of control application and effectiveness by engaging our workforce for direct feedback

•

introduced sexual harassment field leadership activities, which provided information on progress and areas for improvement in this space

Sexual assault and sexual harassment

Our position on sexual assault and sexual harassment is clear. This conduct is completely unacceptable, contrary to our values and unlawful. Over a number of years, we have taken action to prevent sexual harassment including through education, encouraging reporting and security measures. While we have made important progress, this continues to be an issue at BHP and, as long as it does, we must and will do more and we continue to focus and invest in preventing this behaviour.

In 2018, we formally defined sexual assault and sexual harassment as a health and safety risk. As part of the risk assessment processes, we engaged experts in health and safety, harassment and inclusion and diversity. We introduced a range of controls including security measures such as

on-site

security guards, additional CCTV, increased security patrols in public areas and improved lighting, with a further AU$300 million for planned improvements to occur in FY2022. We have also introduced trauma informed emergency response, victim-centric investigations and a dedicated support service that provides

end-to-end

assistance and advice to anyone impacted by sexual assault and sexual harassment. We are committed to the full implementation of all requisite controls in FY2022, and have tied completion of actions to executive and employee remuneration. We also recognise that we can improve the coordination of our work to address this issue and have set up a project management office for this purpose.

Sexual assault and sexual harassment are risks for BHP and the industry, and we are working with others in the industry to address these risks, as we have done with other health and safety matters. We participated in the Minerals Council of Australia Taskforce that developed and released an industry statement and Code of Conduct aimed at eradicating sexual assault and sexual harassment from our industry. We also made a submission to the Inquiry in Western Australia into sexual harassment against women in the FIFO mining industry to contribute to the industry addressing this issue which can be found at

BHP Submission – A Inquiry in relation to Sexual Harassment in FIFO mining industry.pdf (parliament.wa.gov.au)

For information on reported cases, refer to section 1.13.6.

More information on safety is available at bhp.com/safety.

1.13.5 Health

We are committed to protecting the health and wellbeing of our employees and contractors.

We set clear mandatory minimum standards to identify and assess health risks, manage their impact and monitor the health of our people.

Occupational illness

The reported incidence of occupational illness

(1)

for employees in FY2021 was 308 which was 4.36 per million hours worked, representing a minor increase compared to FY2020 which was 4.30 per million hours worked.

(1)	The data for FY2017 and FY2018 includes Continuing and Discontinued operations (Onshore US assets). FY2019 data includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.

(2)	Occupational illnesses excludes COVID-19 related data.

(3)	Due to the lag nature of incident reporting and subsequent verification, final results may vary post reporting. Prior year data has not been adjusted.

(4)	Due to regulatory regimes and limited access to data, we do not have full oversight of the incidence of contractor noise-induced hearing loss (NIHL) cases.

For our contractor workforce, the reported incidence of occupational illness was 180 which was 1.87 per million hours worked, an increase of 31 per cent compared with FY2020. Due to regulatory regimes and limited access to data, we do not have full oversight of the incidence of contractor noise-induced hearing loss (NIHL) cases.

(1)	An illness that occurs as a consequence of work-related activities or exposure.

Musculoskeletal illness accounts for the majority of our reported occupational illnesses. These are conditions impacting the musculoskeletal system and connective tissues caused by repetitive work-related stress or strain or exposure over time. Musculoskeletal illness does not include disorders caused by slips, trips, falls or similar incidents.

The main change in the incidence of occupational illness in FY2021 as compared to FY2020 was an increase in the rate of employee cases of NIHL reported by our operated assets in South America. This was due to an increase in testing for noise induced hearing loss this year because of a suspension of testing activities due to

COVID-19

impacts last year.

Our occupational illness data excludes cases of

COVID-19

among our employees and contractors. In settings of high levels of community transmission and with an evolving understanding of the epidemiological criteria for infection and emerging

COVID-19

variants with evidence of increased transmission, it is difficult to conclude, with reasonable certainty, that a person was infected because of work-related activities or exposure. For information on our response to

COVID-19,

refer to the

‘COVID-19’

section below.

Occupational exposures

Occupational exposure limits (OELs) for our most material exposures are set according to the latest scientific evidence, which for a number of agents, such as diesel particulate matter (DPM), resulted in lower limits than the then regulatory requirements. Where exposures potentially exceed regulatory limits or our stricter limits, respiratory protective equipment is required.

For our most material exposures to DPM, silica and coal mine dust, we have a five-year target to achieve, by FY2022, a 50 per cent reduction in the number of workers potentially exposed

(1)

as compared to our 30 June 2017 baseline exposure profile

(2)

(3)

. In FY2016, we committed to applying an OEL of 0.03 mg/m

for DPM and in FY2017, we committed to applying OELs of 1.5 mg/m

for respirable coal mine dust by 1 July 2020 and 0.05 mg/m

for silica by 1 July 2021. Exposure data in this Annual Report is based on these limits and in all cases discounts the effect of personal protective equipment.

In FY2021, material exposures overall reduced by 70 per cent compared to the adjusted FY2017 baseline which is better than our FY2020 target. This includes a reduction of 29 per cent compared to FY2020 in the number of workers potentially exposed to silica in excess of our OEL and this reduction was largely due to reduction in exposures by our Minerals Americas operated assets where there was a 35 per cent reduction compared to the previous year.

In addition, work to control exposure to DPM at Nickel West and Olympic Dam resulted in a 12 per cent reduction compared to FY2020 in the number of workers potentially exposed to DPM. No potential exposures in excess of our OEL for respirable coal mine dust were reported in FY2020; however, in FY2021 we have identified a workgroup as being potentially exposed in excess of our OEL at one of our coal operated assets. We are committed to reducing this potential exposure to below the OEL in the next reporting period.

Coal mine dust lung disease

In FY2021, there were four coal mine dust lung disease (CMDLD)

(4)

claims accepted, which consisted of two current workers and two former workers at our BMA asset.

Mental health

The mental health of our people continues to be a focus. In FY2021, good progress was made with implementing our Group-wide Mental Health Framework to raise awareness of mental wellbeing, reduce stigma and increase the capacity of our leaders to recognise and support individuals experiencing mental illness. We also became a founding member of the Global Business Collaboration for Better Workplace Mental Health, which seeks to advance progress across the globe by committing senior leaders to a pledge to create mentally healthy workplaces.

To support the proactive management of mental wellbeing and give our workforce the tools and skills they need to build resilience and positive mental health, we provide and promote the Employee Assistance Program, our mental health toolkit, Thrive, education and awareness campaigns (including stigma reduction) and the BHP Resilience Program.

In May 2021, we held our inaugural Mental Health month, with the aim of increasing mental wellbeing in the communities where we operate and encouraging everyone to support and look out for one another. We also continue to support global mental health campaigns, including World Mental Health Day, R U OK? Day and Movember.

We plan to progress our efforts in FY2022 by addressing psychosocial hazards in the workplace using a risk management approach to further support better workplace mental health.

(1)	For exposures exceeding our FY2017 occupational exposure limits discounting the use of personal protective equipment, where required.

(2)	The baseline exposure profile is derived through a combination of quantitative exposure measurements and qualitative assessments undertaken by specialist occupational hygienists consistent with best practice as defined by the American Industrial Hygiene Association.

(3)	The baseline has been adjusted to exclude Discontinued operations (Onshore US assets).

(4)	CMDLD is the name given to the lung diseases related to exposure to coal mine dust and includes coal workers’ pneumoconiosis, silicosis, mixed dust pneumoconiosis and chronic obstructive pulmonary disease.

COVID-19

Throughout FY2021, we continued to navigate the challenges of the global

COVID-19

pandemic and prioritise the health and safety of our people and workplaces. This included the removal of vulnerable workers from the workplace and an increase in testing regimes in site-based workforce during periods of high community transmissions.

Across BHP’s global workforce,

(1)

we estimated there were as many as 5,000 confirmed

(2)

COVID-19

cases including three deaths, with around 1,100 of those cases potentially infectious while at work

(3)

(figures for persons potentially infectious while at work are included irrespective of where infection may have occurred). We recognise the significant impact

COVID-19

has had on the daily lives of our people and the communities where we operate and we offer our deep sympathies to the families of our colleagues who tragically were amongst the many people who have lost their lives to

COVID-19.

Almost all confirmed cases were from people in our Minerals Americas workforce.

We conduct

COVID-19

tests as part of our workplace entry screening, which includes mainly polymerase chain reaction (PCR) testing and a small percentage of antigen testing. In FY2021, we conducted 27,261 tests in our Petroleum operated assets and 440,000 tests in our Minerals Americas operated assets and identified 248 and 2,277 confirmed cases respectively. This included symptomatic and asymptomatic cases that may not have been identified otherwise.

Our support extended to areas impacted by high community transmissions and reduced local medical capabilities. This included establishing telehealth services,

in-home

PCR testing, emergency ambulance support, mental wellness support and provision of medical support (e.g. procurement of oxygen concentrators in India) to support ill workers and their family members.

More information on health including a case study on how we supported our people and the communities where we operate through

COVID-19

is available at bhp.com/health.

1.13.6 Ethics and business conduct

Our conduct

Our Code of Conduct

(

Our Code

)

(4)

brings our values to life so we can make the right choices every day. It applies to everyone who works for us or on our behalf. To ensure everyone understands how

Our Code

applies and the standards of behaviour we expect, annual training is mandatory for all employees and contractors. There are also consequences for breaching

Our Code

and we encourage people to speak up where a decision or action is not in line with

Our Code

Our Charter

Our Code

is available in five languages and accessible at bhp.com.

EthicsPoint is our confidential reporting tool that is accessible to all, including external stakeholders and the public, to report conduct that may be unethical, illegal or inconsistent with

Our Code

In 2021, 4,162 reports were received into EthicsPoint (of these 3,541 were classified as business conduct concerns,

(5)

representing an increase of 52 per cent from FY2020. This increase coincides with enhanced training on

Our Code

and efforts to increase awareness of the requirement for line leaders to log all concerns relating to

Our Code

in EthicsPoint. Of the reports received, 42 per cent were made anonymously,

(6)

compared with 53 per cent in FY2020, a reduction from FY2020, which may indicate that reporters have greater confidence in the EthicsPoint process. Of the total reports received, 38 per cent contained one or more substantiated allegations.

(7)

(1)	Employees and contractors engaged by BHP.

(2)	A person with a laboratory confirmation of COVID-19 infection, using polymerase chain reaction (PCR) test methodology, irrespective of clinical signs and symptoms.

(3)

Potentially infectious while at work is defined as being in one of BHP’s managed locations (including camps and offices) within 48 hours before onset of symptoms and/or while symptomatic. Figures for persons potentially infectious while at work are included irrespective of where infection may have occurred.

(4)	https://www.bhp.com/our-approach/our-company/our-code-of-conduct/.

(5)	Some EthicsPoint reports are enquiries, or are not related to business conduct concerns, or are a duplicate of an existing report

(6)	This excludes reports not containing a business conduct concern, and excludes reports logged by leaders on behalf of others.

(7)	The calculation is based on reports received and completed in FY2021, containing one or more substantiated allegations.

Transparency and accountability

We understand the connection between:

•

the disclosures we make about the taxes and royalties we pay to governments, which enable the public to see what we have paid

•

transparency of the contracts we have with governments which allows comparison of our actual payments against what is required to be paid

We support initiatives by governments of the countries where we operate to publicly disclose the content of our licences or contracts for the development and production of oil, gas or minerals that form the basis of our payments to government, as outlined in the Extractive Industries Transparency Initiative (EITI) Standard. Other key initiatives include our work in partnership with Transparency International, our representation on the Board of the EITI, our support for ultimate beneficial ownership transparency, our financial support for and Steering Committee membership of the Bribery Prevention Network (in Australia) and our funding of the BHP Foundation, including its Natural Resource Governance Global Program. We believe these transparency initiatives will reduce corruption risk and improve our ability to operate and compete for resources.

Anti-corruption

We are determined to play a significant role in the global fight against corruption in the resources industry.

Our Charter

and

Our Code

provide the framework for our anti-corruption compliance program.

All activities that potentially involve higher risks of exposure to corruption require review or approval by our Ethics and Compliance function. This function has a mandate to design and govern our compliance frameworks for key compliance risks, including anti-bribery and corruption. The function is independent of our assets and regions, and reports to the Chief Legal Governance and External Affairs Officer. The Chief Compliance Officer reports quarterly to the Risk and Audit Committee on ethics and compliance issues and meets at least annually with the Committee Chair.

Our Ethics and Compliance function also participates in all risk assessments in respect of operated assets or functions that are considered to carry material anti-corruption risks. In FY2021, the Ethics and Compliance team provided input into 41 risk assessments.

As part of our commitment to anti-corruption, we prohibit authorising, offering, giving or promising anything of value directly or indirectly to a government official to influence official action, or to anyone to encourage them to perform their work disloyally or otherwise improperly. We also prohibit facilitation payments, which are payments to government officials for routine government actions. Our people must take care that third parties acting on our behalf do not violate anti-corruption laws. Disciplinary action, including dismissal or termination of contractual relationships, may follow from a breach of these requirements.

We regularly review our anti-corruption compliance program to ensure it meets the requirements of the US Foreign Corrupt Practices Act, the UK Bribery Act, the Australian Criminal Code and the applicable laws and regulatory developments of all places where we do business. These laws are consistent with the standards of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Recognising the challenges posed to normal ways of working by

COVID-19,

in FY2021 we increased the frequency of our compliance monitoring to support the timely identification of activities that could potentially present an enhanced compliance risk. By regularly calibrating our compliance processes, we work to ensure optimal resource allocation to areas presenting the highest corruption risks to our business. Our efforts are complementary to the BHP Foundation’s global partnership with Transparency International, which is supporting governments to identify and address corruption risks in mining licencing processes.

Anti-corruption training is provided to all employees and contractors as part of mandatory annual training on

Our Code

. In FY2021, additional risk-based anti-corruption training was also undertaken by 3,879 employees and contractors, as well as employees of certain of our business partners and community partners.

More information on ethics and business conduct is available at bhp.com/ethics.

1.13.7 Climate change and portfolio resilience

We believe the world must pursue the Paris Agreement goals with increased levels of national and global ambition to limit the impacts of climate change. Providing access to affordable and clean energy and other products is essential to meet sustainable development goals. At BHP, we advocate for effective actions in line with the Paris Agreement goals while recognising the challenge of achieving these goals is of global scale and historic complexity.

In September 2021, BHP published its Climate Transition Action Plan 2021, which sets out our strategic approach to our goal to reduce operational GHG emissions (Scope 1 and Scope 2 from our operated assets) to net zero

(1)

by 2050, and our enhanced Scope 3 position for GHG emissions in our value chain. The Plan, together with more information on our climate commitments, actions and performance, including our Climate Change Report 2020, is available at bhp.com/climate.

Governance and management

Climate change is a material governance and strategic issue for us. Our Board is actively engaged in the governance of climate change issues, including our strategic approach and performance against our commitments, supported by the Sustainability Committee and the Risk and Audit Committee (for more information, refer to section 2.1).

Below the level of the Board, key management decisions are made by the CEO and management, in accordance with their delegated authority. Management has primary responsibility for the design and implementation of our climate change strategy and execution of that strategy is overseen by the Climate Change Steering Committee. BHP has a dedicated Climate Change Team that is responsible for advising the Executive Leadership Team. The team collaborates with BHP’s functions and asset teams, external partners and industry to develop practical climate change solutions, designed to preserve and unlock long-term value for BHP. It regularly prepares information and advice for the Executive Leadership Team, Sustainability Committee, Risk and Audit Committee and the Board on climate-related strategy, risks and performance against climate-related metrics. It also monitors key indicators and signposts against our appetite for climate change-related risks (both threats and opportunities).

Addressing climate risks

BHP applies a single, Group-wide approach to the management of risk, known as the Risk Framework. When new and emerging risks are identified, each is assigned an owner in the part of the business where the risk occurs. Risks are assessed to determine their potential impacts and likelihood, enable prioritisation and determine risk treatment options. We then implement controls designed to prevent, reduce or mitigate downside risks and increase the likelihood of opportunities being realised. Risks and controls are reviewed periodically and on an

ad-hoc

basis to evaluate performance of the controls against the risks.

(1)	Net zero includes the use of carbon offsets as required.

Climate-related risks can be grouped in two categories: transition risk and physical risk.

Transition risks arise from policy, regulatory, legal, technological, market and other societal responses to the challenges posed by climate change and the transition to a

low-carbon

economy. For more information on BHP’s exposure to and management of transition risks, refer to section 1.16.

Physical risks refer to acute risks that are event-driven, including increased severity of extreme weather events, and chronic risks resulting from longer-term changes in climate patterns. For more information on BHP’s exposure to and management of physical risks, refer to ‘Adaptation to physical risks’ below in this section and to section 1.16.

Adaptation to physical risks

BHP’s vision for adapting to the physical risks of climate change is to take a proactive and collaborative approach to building the climate resilience of our operated assets, investments, portfolio, supply chain, communities and ecosystems, to achieve mutually beneficial outcomes for our stakeholders.

In FY2021, following external benchmarking and internal engagement, we finalised our updated Adaptation Strategy as set out below.

The focus in FY2021 was on enhancing governance structures, developing a more consistent and comprehensive approach to the use of climate data, and improving how we integrate physical climate risk within the existing risk management process in order to identify and resource priority actions. In FY2022, we intend to build these priority actions into planning and capital allocation processes, and continue to analyse identified risks in more detail. This will provide the basis from which we can develop our ability to report on specific material physical risks and their potential financial impacts (including material expenditure on climate change adaptation) in later years.

Portfolio analysis and capital alignment

The world must undergo multiple transitions arising from commitments to reduce GHG emissions. These transitions are complex, multi-faceted and could reasonably be expected to manifest in unique ways across different regions, reflecting heterogeneous local conditions. However, we believe that together they comprise a global transition to a lower-carbon economy that can mitigate the impacts of climate change. We see steps towards these transitions in the emergence of electric mobility and the rapid cost declines of renewable power generation. Global accords such as the Paris Agreement and subsequent government commitments suggest these transitions are likely to accelerate.

The Paris Agreement has set an ambition to pursue efforts to limit global temperature increases to 1.5°C above

pre-industrial

levels, which will require aggressive action to reduce GHG emissions. Abatement commensurate with limiting temperature increases to 1.5°C would reduce the potential physical impact of climate change on our assets, our employees, our communities and our markets, and potentially generate significant value for our portfolio.

In the BHP Climate Change Report 2020,

(1)

we described the impact on our business of four divergent scenarios

(2)

across a range of temperature outcomes, including our Paris-aligned 1.5°C scenario.

(3)

Our most recent portfolio analysis indicated that under our 1.5°C scenario, the world would need around twice as much steel and copper, and four times as much nickel in the next 30 years as it did in the last 30. Potash demand, required for higher agricultural yields due to land use competition, also grows under that scenario.

Today’s signposts do not yet indicate that the appropriate measures are in place to drive decarbonisation at the pace or scale required to achieve the Paris Agreement goals. However, as governments, institutions, companies and society increasingly focus on addressing climate change, the potential for a

non-linear

transition and the subsequent impact on opportunities and risk increases.

We intend to systematically integrate one or more Paris-aligned scenarios (including 1.5°C scenarios) into our strategy and capital prioritisation processes beginning in FY2022. This will enhance our current approach, in which our 1.5°C scenario is used to inform and test strategic portfolio decisions. See the BHP Climate Transition Action Plan 2021 at bhp.com/climate for more information.

Operational greenhouse gas emissions and energy consumption

Our long-term goal is to achieve net zero

(4)

operational GHG emissions by 2050. We have also set a medium-term target to reduce operational GHG emissions by at least 30 per cent from FY2020 levels

(5)

by FY2030.

(6)

This reflects our commitment to decarbonising BHP’s operations and a recognition that we have a part to play in accelerating the global pathway to decarbonisation.

We are also working to achieve our short-term target for FY2022 to maintain our total operational GHG emissions at or below FY2017 levels

(7)

while continuing to grow our business.

Our operational GHG emissions are measured against our target performance based on an operational control, market-based methodology.

Building on our Light Electric Vehicle (LEV) trials at Olympic Dam and Queensland Coal, we have commenced LEV trials at Nickel West using onboard battery power. This trial is anticipated to reduce noise, heat and diesel particulate matter, as well as consumption of fossil fuel. We have increased the renewable component of our energy consumption in FY2021 due to the start of the renewable power purchasing agreement at Queensland Coal.

(1)	bhp.com/climate

(2)

Scenarios highlight critical elements of assumed future states and draw attention to the key factors that may drive future developments. They are hypothetical constructs, not forecasts, predictions or sensitivity analyses. As they are a tool to enhance critical strategic thinking, a key feature of scenarios is they should challenge conventional wisdom about the future. In a world of uncertainty, scenarios are intended to explore alternatives that may significantly alter the basis for ‘business as usual’ assumptions. There are inherent limitations with scenario analysis and it is difficult to predict which, if any, of the scenarios might eventuate. Scenarios do not constitute definitive outcomes for us. Scenario analysis relies on assumptions that may or may not be, or prove to be, correct and may or may not eventuate, and scenarios may be impacted by additional factors to the assumptions disclosed.

(3)

This scenario aligns with the Paris Agreement goals and requires steep global annual GHG emissions reductions, sustained for decades, to stay within a 1.5°C carbon budget. Refer to the BHP Climate Change Report 2020 available at bhp.com for information about the assumptions, outputs and limitations of our 1.5°C Paris-aligned scenario. 1.5°C is above

pre-industrial

levels.

(4)	Net zero includes the use of carbon offsets as required.

(5)	FY2020 baseline will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will be used as required.

(6)	These positions are expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.

(7)	FY2017 will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will be used as required.

Progress on decarbonisation

In FY2021:

•

We signed a renewable power purchasing agreement (PPA) to supply up to 50 per cent of our electricity needs at the Nickel West Kwinana Refinery from the Merredin Solar Farm.

•

We secured firm renewable electricity via a PPA to meet half of the electricity needs across Queensland Coal mines from

low-emissions

sources.

•

We continued to implement power purchase agreements for renewable electricity commencing from FY2022 at our Chilean copper operated assets, Escondida and Spence, which are on track to reach net zero Scope 2 GHG emissions by the

mid-2020s.

These agreements are intended to help meet our FY2022 and FY2030 operational GHG emissions targets. We regularly monitor our forecasted GHG emissions to check we are on track.

In FY2021, we partnered with Rio Tinto and Vale to launch the ‘Charge on Innovation Challenge’, a mining truck electrification initiative, facilitated by Austmine. The initiative aims to develop innovative charging infrastructure in parallel with the development of battery-electric trucks.

In August 2021, BHP became a founding member of Komatsu’s GHG Alliance, which aims to develop commercially viable

zero-GHG

emissions haul trucks. BHP will provide engineering and technical resources to Komatsu, enabling BHP’s real-time access to technology in development and giving Komatsu the opportunity to draw on BHP’s mining expertise to accelerate its path to market. Also in August 2021, BHP and TransAlta announced plans to build two solar farms and a battery storage system to help power the Mt Keith and Leinster operations at Nickel West.

In FY2022, we intend to look for further opportunities to collaborate with original equipment manufacturers, source renewable electricity for our Australian operated assets and progress studies for diesel displacement at our operated assets.

Value chain emissions

We recognise the importance of supporting efforts to reduce emissions in our value chain. In 2020, BHP set Scope 3 emissions goals for 2030 for processing of our steelmaking products and maritime transportation of our products, supported by an action plan and aligned to a long-term vision to support the economy-wide transition necessary to meet the Paris Agreement goals by working with customers and suppliers to achieve sectoral decarbonisation. Those goals are to:

Support industry to develop technologies and pathways capable of 30 per cent emissions intensity reduction in integrated steelmaking, with widespread adoption expected post 2030;

Support 40 per cent emissions intensity reduction of

BHP-chartered

shipping of our products.

In our Climate Transition Action Plan 2021, we are building on these medium-term goals. Our position reflects the challenges and opportunities in line with our strategy for increasing long-term portfolio exposure towards future facing commodities. Our recent proposed portfolio changes

(1)

are aligned with our strategic approach to manage risk and maximise value. While these decisions were not made for the purpose of setting a future Scope 3 position, upon completion, the changes would lower our total Scope 3 emissions inventory.

As we shape our portfolio for the future, we are announcing our enhanced Scope 3 position.

(2)

While we cannot ensure the outcome alone, for our reshaped portfolio,

(3)

we are pursuing the long-term goal of net zero

(4)

Scope 3 GHG emissions by 2050 to support the transition that the world must make. To progress towards this goal:

•

we are targeting net zero for the operational GHG emissions of our direct suppliers

(5)

and the emissions from maritime transport of our products; and

•

recognising the particular challenge of a net zero pathway for customers’ processing of our products,

(6)

which is dependent on the development and downstream deployment of solutions and supportive policy, we cannot set a target, but will continue to partner with customers and others to accelerate the transition to carbon neutral

(7)

steelmaking and other downstream processes. We will also support the value chain by pursuing carbon neutral production of our future facing commodities, such as copper, nickel and potash, to provide the essential building blocks of a net zero transition.

(1)

On 17 August 2021, BHP announced it had entered into a merger commitment deed with Woodside to combine their respective oil and gas portfolios by an

all-stock

merger. Completion of the merger is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent including shareholder, regulatory and other approvals, and expected to occur in the second quarter of the 2022 calendar year, with an effective date of 1 July 2021. For more information, refer to the Joint Announcement ‘Woodside and BHP to create a global energy company’ by Woodside and BHP dated 17 August 2021, available at bhp.com/investor-centre. On 28 June 2021, BHP announced its agreement with Glencore to divest its 33.3 per cent interest in Cerrejón, a

non-operated

energy coal joint venture in Colombia, with an effective economic date of 31 December 2020. Completion is subject to the satisfaction of customary competition and regulatory requirements and expected to occur in the first half of the 2022 calendar year.

(2)	This position is expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.

(3)	Subject to completion of both of the divestment of our oil and gas business and the sale of our interest in Cerrejón.

(4)	Net zero includes the use of carbon offsets as required.

(5)

‘Operational GHG emissions of our direct suppliers’ means the Scope 1 and Scope 2 emissions of our direct suppliers included in BHP’s Scope 3 emissions reporting categories of purchased goods and services (including capital goods), fuel and energy related activities, business travel, and employee commuting.

(6)

In line with our reporting methodology for Scope 3 emissions, we define ‘processing of our products’ as emissions resulting from our customers’ processing of our products comprising iron ore and metallurgical coal (steelmaking materials) and copper (assumed to be processed into copper wire for end use).

(7)	Carbon neutral includes all those GHG emissions as defined for BHP reporting purposes.

We have therefore set these Scope 3 targets:

(1)

•

We will target net zero

(2)

by 2050 for the operational GHG emissions of our direct suppliers,

(3)

subject to the widespread availability of carbon neutral

(4)

goods and services to meet our requirements.

•

We will target net zero

(5)

by 2050 for GHG emissions from all shipping

(6)

of our products,

(7)

subject to the widespread availability of carbon-neutral

(8)

solutions including

low/zero-emission

technology on board suitable ships and

low/zero-emission

marine fuels.

Action on our value chain GHG emissions goals in FY2021

Steelmaking

In FY2021, BHP signed memoranda of understanding for partnerships with three of our customers, China Baowu, JFE and HBIS, to invest up to a total of US$65 million in research and development of steel decarbonisation pathways. We also established a research program with the University of Newcastle in Australia to study raw material properties in

low-carbon

iron and steelmaking. Additionally, BHP Ventures is strategically investing in a range of emerging companies, including some focused on

low-

no-carbon

steelmaking.

In FY2022, we intend to progress research and development and develop plans for operational testing and trials under the three steelmaking partnerships. We also plan to explore new steelmaking partnerships to jointly study

low-carbon

steelmaking technologies.

Maritime

In FY2021, BHP committed to becoming one of the founding members of the Global Centre for Maritime Decarbonisation. The Centre is to be set up in Singapore and act as a focal point for the global maritime industry’s efforts in decarbonisation and innovation. In April 2021, we participated in the first marine biofuel trial involving an ocean-going vessel bunkering in Singapore in collaboration with Oldendorff Carriers and GoodFuels, and supported by the Maritime and Port Authority of Singapore. BHP also issued and awarded the world’s first

LNG-fuelled

Newcastlemax bulk carrier vessel tender in FY2021, with the aim of significantly reducing GHG emissions per voyage. In FY2022, we intend to begin to integrate the use of

LNG-fuelled

bulk carriers into our maritime operations and assess the suitability of a range of routes for LNG or

bio-fuelled

bulk carriers. We are also developing a sustainability analytics platform to analyse the operational energy efficiency and emissions of

BHP-chartered

vessels. This will enable more energy-efficient vessel selection, as well as more targeted emissions reduction insights and actions that can be pursued with our shipping partners.

(1)

These targets are referable to a FY2020 baseline year, which will be adjusted for any material acquisitions and divestments based on emissions at the time of the transaction, and to reflect progressive refinement of the Scope 3 emissions reporting methodology. The targets’ boundaries may in some cases differ from required reporting boundaries. Carbon offsets will be used as required.

(2)	Net zero includes the use of carbon offsets as required.

(3)	‘Operational GHG emissions of our direct suppliers’ means the Scope 1 and Scope 2 emissions of our direct suppliers included in BHP’s Scope 3 reporting categories of purchased goods and services (including capital goods), fuel and energy related activities, business travel, and employee commuting.

(4)	Carbon neutral includes all those greenhouse gas emissions as defined for BHP reporting purposes.

(5)	Net zero includes the use of carbon offsets as required.

(6)	BHP-chartered and third party-chartered shipping.

(7)	Target excludes maritime transportation of products purchased by BHP.

(8)	Carbon neutral includes all those greenhouse gas emissions as defined for BHP reporting purposes.

Investing in decarbonisation

In FY2020, we announced a commitment of at least US$400 million to invest in GHG emissions reduction across our operated assets and value chain over the five-year life of our Climate Investment Program. In FY2021, we spent US$29 million under this program, targeting operational, maritime, steelmaking and BHP Ventures investments, and committed to spend significantly more, including up to US$65 million over coming years towards partnerships with our customers in the steel sector.

We estimate potential spend of between US$100 and US$200 million per year over the next five years in support of operational decarbonisation at our operated assets. This estimate has been included in existing capital guidance. Going forward, as our climate response is further integrated into

business-as-usual

planning, our spending on climate initiatives is expected to become increasingly indistinguishable from normal business spending.

We assess and rank each decarbonisation project across our operated assets through our Capital Allocation Framework, where our decarbonisation commitments rank alongside maintenance capital in the hierarchy of our capital allocation. Through our studies and investment governance process, we seek to optimise the risk and reward proposition for these projects to allocate capital and optimise decarbonisation at a portfolio level. We have developed an internal marginal abatement cost curve designed to support the allocation of capital towards the most economically efficient and effective decarbonisation projects.

We include regional carbon price forecasts in our assessment of all projects in the Capital Allocation Framework. In recognition that explicit carbon pricing regimes in many instances do not fully reflect the implicit regulatory risk and value of carbon across our value chain, we are developing additional qualitative and quantitative metrics to better capture the future cost and value of GHG emissions abatement to inform corporate strategy and core business decisions.

Carbon offsets

BHP’s approach to carbon offsetting is to prioritise emission reduction projects at our operated assets, with investments in external carbon offset projects considered complementary to this ‘structural abatement’. We work with others to promote the development of carbon market mechanisms, particularly for natural climate solutions.

Although we prioritise our internal emission reduction projects, we acknowledge a role for high-quality offsets in a temporary or transitional capacity while abatement options are being studied, as well as for ‘hard to abate’ emissions with limited or no current technological solutions.

In FY2021, we retired 0.3 million carbon offsets in the form of verified carbon units. The offsets were sourced from high-quality projects, such as the Cordillera Azul National Park REDD+ Project and the Kasigau Corridor REDD Project,

(1)

representing additional, permanent and otherwise unclaimed emission reductions from activities designed to avoid contributing to social or environmental harms. For more information on how BHP manages offsets, refer to bhp.com/offsets-2021.

Natural climate solutions

Investing in natural ecosystems is a cost-effective and immediately available solution to mitigate climate change that often provides sustainability

co-benefits,

such as biodiversity conservation, improved water quality or support for local communities. We work to support the development of market mechanisms that channel private sector finance into projects that increase carbon storage or avoid GHG emissions through conservation, restoration and improved management of terrestrial landscapes, wetlands and coastal and marine ecosystems (e.g. mangroves, tidal marshes, seagrasses and seaweed, generally referred to as ‘blue’ carbon ecosystems). We focus on project support, governance, knowledge and innovation, and market stimulation for carbon credits generated by these projects.

For more information, see bhp.com/climate.

Just transition

There are communities around the world that rely on mining certain commodities, which therefore risk being disproportionately impacted by the transition to a

low-carbon

economy. Solutions will require a multi-stakeholder approach including the local community, investors and financiers, government at all levels and, of course, resource companies such as BHP.

In FY2022, we plan to develop our approach to ‘Just Transition’ taking into consideration the evolving Climate Action 100+ Net Zero Company Benchmark (NZCB).

Engagement and disclosure

Achieving the Paris Agreement goals will require supportive policy across jurisdictions globally. The policy-making process is complex and change is unlikely to be smooth or linear. We believe BHP can best support policy development by ensuring we meet our own climate commitments, continuing to make the case for the economic opportunities arising from the energy transition, and focusing on those policy areas where we are likely to have the greatest ability to influence change. We engage on policy matters directly with government and through our membership of industry associations and issue-specific coalitions and initiatives.

Our Global Climate Policy Standards clarify how our policy positions on climate change should be reflected in our own advocacy and that of associations to which we belong, globally. Over the past five years, BHP has introduced a range of measures to strengthen the Company’s governance of its member associations and their climate change advocacy. Further information on our approach to industry associations can be found at

bhp.com/our-approach/operating-with-integrity/industry-associations-bhps-approach/.

BHP was one of the first companies to align its climate-related disclosures with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). In FY2021, we published our Climate Change Report 2020, and also participated in the CA100+ NZCB, which assesses the world’s largest corporate GHG emitters on their progress in the transition to the net zero future.

In September 2021, we published the BHP Climate Transition Action Plan 2021, which sets out the steps BHP intends to take with the goal of reducing GHG emissions to net zero within our own operations by 2050 and pursuing net zero across our value chain. As responding to climate change is an integral part of our strategy and operations, our TCFD-aligned disclosures and information in support of our NZCB assessment can be found throughout this Annual Report, in our BHP Climate Change Report 2020 and at bhp.com. A navigator showing where to find relevant information in relation to the TCFD recommendations is available at bhp.com.

(1)	REDD and REDD+ are UN programs for reducing GHG emissions from deforestation and forest degradation.

1.13.8 Community

Making a positive contribution to the communities where we operate

To make a positive contribution to the social and economic wellbeing of the communities where we operate requires long-term partnerships based on respect, honesty, transparency and trust. Our actions and approach to community engagement, social investment, cultural heritage, working with Indigenous peoples and human rights practices are governed by

Our Code.

We understand our activities have potential social, cultural, environmental and human rights impacts. We assess those impacts and consider external factors such as changing socio-political and economic content and societal expectations and community concerns.

To gain a deeper understanding of the context in which we operate, our operated assets are required to conduct periodic social research activities. We seek to implement and conduct these planned activities in a culturally sensitive and socially inclusive manner which can include social baseline analysis, social impact and opportunity assessments, human rights impact assessments, stakeholder mapping and community perception surveys. Through these activities, we seek to better understand social and reputational impacts, threats and opportunities and make more informed decisions.

We provide a range of opportunities for communities to express their views, experiences, concerns and complaints. The

Our Requirements for Community

standard requires all operated assets to have culturally appropriate complaint and grievance mechanisms in place which are accessible to all stakeholders, including Indigenous peoples. To further strengthen these mechanisms, we have established globally consistent principles aligned with the UN Guiding Principles on Business and Human Rights to be applied across each of our operated assets.

In FY2021:

•

Community perception research was conducted at 11 of our operated assets providing an aggregated view of local community perceptions and a valuable input into asset planning.

•

All of our operated assets had a stakeholder engagement plan in place and conducted regular stakeholder engagement activities, including

one-on-one

meetings, dialogue tables (multi-issue, multi-stakeholder), consultation groups (issue based), written communications and open days.

•

The primary concerns of community members, as reported to our operated assets, largely related to community support (including economic contribution, capacity building, resilience and social inclusion), environmental sustainability and a desire for more communications or engagement from BHP.

•

Complaints and grievance mechanisms were in place across all our operated assets.

•

103 community complaints (four classified as grievances

(

)

) were received globally across our operated assets. While this was a 10 per cent decrease in community complaints compared to FY2020, we are revising our approach to reporting to ensure we capture and record all concerns, complaints and grievances received through our community engagement channels.

•

No significant community incidents were recorded, meeting our five-year public target of no significant community events between FY2017 and FY2022.

(

)

•

No artisanal or small-scale mining on or adjacent to our operations was reported.

As part of our commitment to respecting human rights, we recognise water access, sanitation and hygiene as fundamental human rights and acknowledge traditional, spiritual and cultural connections to water. Engaging with communities on water challenges is a component of our water stewardship work outlined in our Water Stewardship Position Statement. In FY2021, we sought to strengthen our engagement with stakeholders on water-related threats and opportunities at the community and catchment levels through the commencement of Water Resource Situation Analysis projects, to identify the shared water challenges and collective action opportunities across the catchment.

More information on community is available at bhp.com/community.

(1)	An event or community complaint relating to an adverse impact/event that has escalated to the point where a third-party intervention or adjudication is required to resolve it.

(2)	A significant event resulting from BHP operated activities is one with an actual severity rating of four or above, based on our internal severity rating scale (tiered from one to five by increasing severity) as defined in our mandatory minimum performance requirements for risk management.

1.13.9 Human rights

We are committed to respecting internationally recognised human rights as set out in the Universal Declaration on Human Rights and the Voluntary Principles on Security and Human Rights, and operating in a way that is consistent with the UN Guiding Principles on Business and Human Rights and the UNGC Ten Principles.

Our commitments are implemented through

Our Charter

values,

Our Code of Conduct

, the Human Rights Policy Statement (HRPS) and the

Our Requirements

standards. We seek to meet those commitments through policies and processes, due diligence activities, training and by monitoring activities that may have human rights impacts.

BHP’s HRPS sets out our expectations of our people, business partners and other relevant parties to respect human rights. In FY2021, our annual review of the HRPS identified two areas in which stakeholders are seeking greater transparency and a more explicit commitment:

•

labour rights, specifically to operate consistently with the terms of the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work, including the four core labour standards

•

human rights requirements of the Global Industry Standard on Tailings Management

The HRPS was updated to reflect these commitments and has been endorsed by relevant members of our Executive Leadership Team. It is available at bhp.com.

In FY2021:

•

A total of 610 employees completed human rights training,

(

)

including teams across Corporate Affairs and Commercial functions. The training is publicly available at bhp.com.

•

Our human rights impact assessment (HRIA) pilot project was finalised resulting in a globally consistent methodology for HRIAs to be applied across our operated assets.

•

HRIAs were conducted by an external consultant across Minerals Australia and Minerals Americas, with self-assessments conducted at each of these operated assets. A HRIA was also conducted for the Jansen Potash Project in Canada. The

Our Requirements

standards require operated assets to complete a HRIA at least every three years and review whenever there are changes that may affect the impact profile.

•

No resettlements or physical or economic displacement of families or communities occurred as a result of the activities of our operated assets.

In Australia, the most salient human rights related risks reported in the HRIA include sexual assault and sexual harassment, mental health, and fair and equitable treatment (for example, discrimination, inclusion and diversity and equal pay for equal work). These findings align with responses to existing risks currently managed across our business through measures including the introduction of a sexual assault and sexual harassment support line, our ongoing focus on mental health and our commitment to inclusion and diversity. Human rights related risks to communities, including those related to the environment, Indigenous peoples and access to remedy, were also identified. The most salient human rights related risks reported in the HRIA for Chile were access to remedy for employees and contractors, fair and equitable treatment, occupational health and safety, access to remedy for communities where we operate, water and the impacts of

COVID-19.

Additional human rights risks relating to security, cumulative impacts on communities and working conditions were identified across our operated assets in Chile.

The outcomes of the HRIA pilot are expected to strengthen our approach to managing and monitoring human rights related risks. In FY2022, our operated assets and functions intend to use a risk-based approach to determine when a HRIA needs to be reviewed or conducted. Results of the HRIAs are also expected to be better integrated into our existing risk assessment processes to enhance our understanding of the full spectrum of identified risks, and where required, develop additional controls. Social value assessments are intended to include HRIA results to ensure our operated assets have a deep understanding of their operating context and external environment as inputs into their business planning.

(1)	The number of employees trained has been annualised using data from a 10-month period, July to April, to determine a total for the year.

During FY2021, we reviewed the risk of an actual or perceived failure to prevent or mitigate an adverse human rights impact linked to our supply chain (directly or indirectly), including maritime activities. We continued to focus on embedding and building the maturity of our supply chain due diligence program taking a risk-based approach to assessing potential human rights breaches by our suppliers, including extended due diligence for high or very high risk suppliers based on our initial risk rating processes.

In FY2021, we started to align our supply chain due diligence with the OECD Due Diligence Guidance on Conflict-Affected and High Risk Areas. This work is to be completed by the end of FY2022 with an update on alignment activities planned for inclusion in our FY2022 Modern Slavery Statement.

Modern slavery

Our Modern Slavery Statement FY2021, prepared under the UK Modern Slavery Act (2015) and the Australian Modern Slavery Act (2018), is available at bhp.com.

More information on our approach to human rights is available at bhp.com/humanrights.

1.13.10 Indigenous peoples

We respect the rights of Indigenous peoples and acknowledge their right to maintain their culture, identity, traditions and customs. We also recognise the significant contribution Indigenous peoples make to national and international economic prosperity brought about by mining.

Many of our operated assets around the world are located on or near the traditional lands of Indigenous peoples. We believe this establishes a fundamental relationship with Indigenous peoples who are critical partners and, in many jurisdictions, rights-holders under law. As global events of the past 18 months have reinforced, the continued success of BHP and the industry more broadly is dependent on having strong and trusting relationships with Indigenous peoples.

In FY2021, we established a new global Indigenous Engagement team to lead Indigenous engagement, agreement-making and advocacy to enhance our focus on our engagement with Indigenous peoples. We also continued our focus on cultural heritage management practices. Our Cultural Heritage team has enhanced our systems and processes to ensure operational decision-making is informed by the most up to date heritage information. This program of work commenced with enhancements to Western Australia Iron Ore’s cultural heritage databases and information systems, enabling us to better integrate cultural heritage considerations into our mine planning processes. As a result, we can better understand and engage with Traditional Owners on cultural heritage sites that may be impacted by our activities earlier in the planning process. A staged rollout across Minerals Australia will continue in FY2022, with relevant lessons to be applied beyond Australia.

We further strengthened our engagement with Traditional Owners and other representative Indigenous bodies during the year. This includes the introduction of a set of Principles on Cultural Heritage in Australia agreed with the First Nations Heritage Protection Alliance. The Principles are jointly developed to guide and inform BHP’s approach to Indigenous cultural heritage in Australia. The Principles represent an important, further contribution to BHP’s commitments in relation to Indigenous peoples, agreement-making and cultural heritage and will apply in addition to the existing requirements in relation to Indigenous engagement and cultural heritage set out in BHP’s agreements with Traditional Owners.

Beyond cultural heritage engagement, we implement Regional Indigenous Peoples Plans, which set expectations for our relationships with Indigenous peoples across our operated assets. We believe we are well positioned to bring economic participation opportunities to Indigenous communities where we operate and through these plans, we articulate our approach to agreement-making, Indigenous procurement, employment and social investment, which are core components of our Indigenous Peoples Strategy.

Our efforts are complementary to the BHP Foundation’s global programs supporting Indigenous peoples. These include the landmark ‘10 Deserts’ project in Australia that has enabled and supported Indigenous land management activities across 35 per cent of the Australian landmass, and similar projects supporting Indigenous peoples’ participation in the management and protection of traditional lands in the Boreal Forest of Canada and the Peruvian Amazon.

Minerals Australia

There has been broad support and wide-ranging community efforts to further strengthen the laws, policies and practices regulating how Aboriginal and Torres Strait Islander cultural heritage values are managed in Australia.

We participated in the Joint Standing Committee on Northern Australia’s inquiry into matters relevant to the Juukan Gorge events in the Pilbara region of Western Australia. The Committee’s Terms of Reference include considering the effectiveness and adequacy of state and federal laws in relation to Aboriginal and Torres Strait Islander cultural heritage in each jurisdiction. In December 2020, the Committee released its Interim Report with recommendations calling for stronger cultural heritage protection legislation and noting the Western Australian Government is in the process of progressing heritage law reform.

Consultation with Aboriginal people, industry representatives, heritage professionals and the broader community on Western Australia’s Aboriginal Cultural Heritage Bill 2020 (WA) concluded in FY2021. The passage of new legislation remains subject to parliamentary processes.

A Heritage Advisory Council comprising Banjima Elders and senior BHP representatives has been established to provide input into mine planning at South Flank. The Council has convened on several occasions and is a vital forum for ongoing high-level dialogue on important cultural heritage and related matters. This Council and corresponding forums seek to enable a critical exchange for appropriate understanding and management of cultural heritage so concerns can be raised and addressed.

In January 2021, as part of routine monitoring at Mining Area C in the Pilbara region of Western Australia, we identified a rock fall at a registered Banjima heritage site. Since that time, we have been working closely with the Banjima community, via an independent investigation conducted by a team of external experts, to understand how the rock fall occurred. The key findings of the investigation will be released publicly. We continue to be committed to working in partnership with the Banjima community to responsibly manage heritage and further strengthen our processes as we learn from this event.

Upholding our commitment to Australian Indigenous peoples requires Group-wide awareness and commitment. In FY2021:

•

We developed an Australian Indigenous Cultural Respect Framework, including developing a package of additional Aboriginal and Torres Strait Islander training and awareness sessions targeted at our leaders and employees, which is intended to be delivered in partnership with Traditional Owner groups where possible. Elements of the framework were delivered in FY2021, with further rollouts scheduled for FY2022.

•

We provided a submission to the Australian Government’s Indigenous Voice

co-design

consultation process outlining support for Aboriginal and Torres Strait Islander people to have a greater voice on the laws, policies and services that impact them, their communities and their lives. This submission is consistent with our broader support for the Uluru Statement from the Heart. The Uluru Statement calls for meaningful structural reforms designed to enable a new relationship between First Nations and the Australian nation based on justice and self-determination.

•

BMC and the Barada Barna people negotiated an Indigenous Land Use Agreement to provide BMC with consents for past, current and future acts associated with the South Walker Creek mine and deliver a comprehensive benefits package for immediate and intergenerational benefits to the Barada Barna people. In conjunction, a Cultural Heritage Management Plan was agreed, providing for the protection and appropriate management of Aboriginal cultural heritage at the mine. Further work is underway with the Widi people in relation to shared country at South Walker Creek.

In FY2021, Minerals Australia saw a 17 per cent increase, to A$114.6 million, in our direct spend with Indigenous businesses across our operated assets as compared to FY2020 levels. Of this A$48.4 million was with BHP Considered Traditional Owner Businesses.

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)

Compared to FY2020 levels, we also increased the number of Indigenous businesses we directly procure from by 35 per cent.

(1)	Suppliers that have any ownership by a Traditional Owner(s) from one of the language groups in which BHP operates or as defined in an Indigenous Land Use Agreement or other formal agreement, providing a minimum overall Indigenous ownership of 50 per cent exists.

Minerals Americas

In line with our Indigenous Peoples Plan for South America, we seek to work closely with the communities where we operate to make a positive contribution, including through key agreement-making with local communities. We reviewed our cultural heritage risks in FY2021 and are continuing work to improve our processes for the management of cultural heritage across all our activities and supporting the work being undertaken by our

non-operated

joint ventures where we have the opportunity to do so. We established a permanent Minerals Americas Indigenous Engagement team to enhance our work and have sought to use our Indigenous peoples global working group to better ensure alignment and sharing of leading practices.

In Chile, our operated asset Escondida, the Attorney General’s Office, the Peine Atacamanian Indigenous community and the Council of Atacamanian Peoples recently entered into an agreement to improve the environmental sustainability of the Salar de Punta Negra following the settlement of a legal claim. For more information, refer to section 1.13.13.

During FY2021, we refreshed most of our Opportunity Agreements with our Jansen Potash Project Indigenous partners in Canada. In December 2020, we signed our first Opportunity Agreement with the George Gordon First Nation. The refresh of two remaining Opportunity Agreements is expected to be completed in FY2022.

Non-operated

joint ventures – Resolution

Resolution Copper Mining is jointly owned by Rio Tinto (55 per cent) and BHP (45 per cent) and managed by Rio Tinto. In January 2021, the Final Environmental Impact Statement (FEIS) was published, part of an independent governmental, social and environmental assessment and licensing process led by the United States Forest Service (USFS) under the National Environmental Policy Act. In March 2021, the US Department of Agriculture directed the USFS to rescind the FEIS.

We recognise the Resolution Copper project area includes sites of cultural significance for Native American Tribes and their members. Resolution Copper Mining has indicated it intends to continue to engage in the regulatory processes determined by the United States Government and has publicly stated its commitment to ongoing engagement with Native American Tribes. Resolution Copper is working to seek consent before any decision is made on the development of the project, consistent with the ICMM Position Statement on Indigenous Peoples and Mining.

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)

We are monitoring and supporting Resolution Copper Mining’s engagement with Native American Tribes through ongoing good-faith dialogue.

Our funding decisions in relation to Resolution Copper will be contingent upon the project satisfying commercial considerations and alignment with our values, policies and practices concerning the rights of Indigenous peoples.

More information on Indigenous peoples is available at bhp.com/indigenous.

1.13.11 Social investment

Social investment is a tool in our overall approach to create social value and contribute to the resilience of communities and the environment, in line with our broader business priorities. Our long-standing commitment is to invest not less than 1 per cent of

pre-tax

profits

(

)

in voluntary social and environmental initiatives.

In FY2021, our voluntary social investment totalled US$174.84 million, an increase of 17 per cent compared with FY2020. This investment consisted of US$100.41 million in direct community development and environmental projects and donations, US$7.96 million equity share to

non-operated

joint venture social investment programs and a US$50 million donation to the BHP Foundation and US$2.08 million under the Matched Giving Program. Administrative costs

(

)

to facilitate direct social investment activities totalled US$12.53 million and US$1.86 million supported the operations of the BHP Foundation. The BHP Foundation is a charitable organisation established and funded by BHP that addresses some of the world’s most critical sustainable development challenges relevant to the resources sector. The Foundation partners with NGO’s and international institutions to drive systemic change. For example, its partnership with the NGO Open Contracting Partnership has led to reforms in public procurement in Colombia resulting in improved school meals for 700,000 children; and in Chile where open contracting reforms contributed to a reduction in the cost of medicines, improved citizen access to affordable healthcare and resulted in government savings of an estimated US$9 million. More information is available at bhp.com/foundation.

(1)	http://www.icmm.com/en-gb/about-us/member-requirements/position-statements/indigenous-peoples.

(2)	Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.

(3)	The direct costs associated with implementing social investment activities, including labour, travel, research and development, communications and costs to facilitate the operation of the BHP Foundation.



Social Investment Framework
Theme	Aim	FY2021
Future of work	We aim to enhance human capability and social inclusion through education and vocational training and skills development.	• Through our support, approximately 19,000 people completed education or training courses in digital, technology, leadership and/or problem-solving initiatives. Over 9,750 of these participants were Indigenous people and 6,187 were female. • 313 education institutions aligned course content to business needs in order to better prepare participants for future work readiness. • 1,559 participants found paid employment following completion of their training.
Future of environment	We aim to contribute to environmental resilience through biodiversity conservation, ecosystem restoration, water stewardship and climate change mitigation and adaptation.	• We made 29 investments in nature-based solutions. • Contributed to improved management of approximately 13 million hectares. • 75 scientific or thought leadership papers or specific knowledge sharing events were supported.
Future of communities	We aim to contribute to the understanding, development and sustainable use of resources to support communities to be more adaptive and resilient.	• 836 organisations enhanced internal capability to support efficient and sustainable communities. • 505 organisations planned or delivered initiatives that increase/improve infrastructure, use of technology and/or use of resources that enhance community resilience, including 68 initiatives specific to Indigenous peoples.

In March 2020, we established the Vital Resources Fund (VRF) with a commitment of A$50 million to support response and recovery efforts associated with the impact of the

COVID-19

pandemic. Since that time, the funds have been invested to address immediate community need, support remote Indigenous communities and complement government investment as well as supporting the pandemic recovery phase to meet emerging needs and impacts across the key areas of employment and training, technology and wellbeing. Over 850,000 people have so far directly benefited from the donations and more than

one-third

of funding was invested specifically to support Indigenous communities.

More information on the VRF, including a case study and other initiatives to support communities where we operate that are experiencing the impact of

COVID-19,

is available at bhp.com.

Supporting local economic growth

To support the growth of local communities we aim to source and promote locally available products and services as an important part of our external expenditure. Our operated assets develop local procurement plans designed to identify opportunities for local suppliers, including small businesses, to deliver capacity building and employment.

In FY2021, 13 per cent of our external expenditure of US$16.9 billion was with local suppliers with an additional 83 per cent of our expenditure made within the regions where we operate, while 4 per cent was from suppliers external to the home country of operation. Of the US$16.9 billion paid to more than 9,000 suppliers across the globe, US$2.1 billion was paid to local suppliers in the communities where we operate.

Our expenditure with local suppliers in FY2021 was primarily in Chile (17 per cent), Australia (12 per cent), the United States (8 per cent) and Trinidad and Tobago (1 per cent). These percentages are of our total external expenditure.

More information on social investment is available at bhp.com/socialinvestment.

1.13.12 Environment

We are committed to minimising our adverse environmental impacts. Our operations and growth strategy depend on obtaining and maintaining the right to access environmental resources. However, with growing pressure on, and competition for these resources, and with climate change amplifying certain sensitivities of our natural systems, our environmental performance and management of our environmental impacts on the communities where we operate are critical to creating social value.

At every stage in the life cycle of our operated assets, we seek to avoid, minimise and mitigate our adverse environmental impacts in line with our defined risk appetite. We recognise our activities have an environmental footprint and commit to making voluntary contributions to support environmental resilience across the regions where we operate. Our Group-wide approach to environmental management is set out in the

Our Requirements

for Environment and Climate Change

standard and our mandatory minimum performance requirements for risk management. These standards have been designed taking account of the ISO management system requirements, including ISO14001 for Environmental Management, and set the basis for how we manage risk, including realising opportunities, to achieve our environmental objectives.

The

Our Requirements for Environment and Climate Change

standard requires us to take an integrated, risk-based approach to managing any actual or reasonably foreseeable operational impacts (direct, indirect and cumulative) on land, biodiversity, water and air. This includes establishing and implementing environmental risk monitoring and review practices throughout our business planning and project evaluation cycles. In addition to the broader environment-specific components, the standard includes climate change related requirements for our operated assets.

To support continuous improvement, each of our operated assets is required to have an Environmental Management System (EMS) that aligns with ISO14001 standards and set target environmental outcomes for land, biodiversity, air and water resources that are consistent with the assessed risks and potential impacts. Target environmental outcomes are included in the life of asset plan and approved by the relevant Asset President or equivalent. We verify our EMS by ISO14001 certification (for sites currently holding ISO14001 certification) or through our internal assurance processes.

More information on our environmental approach, the

Our Requirements for Environment and Climate Change

standard, and our environmental management and governance processes is available at bhp.com/sustainability.

Contributing to a resilient environment

Biodiversity is essential to maintain healthy ecosystems and the clean air, water and productive landscapes and seascapes we all need to survive and thrive. We are seeing an increasing societal focus on the urgent need to reverse current trends in biodiversity loss, and as a global resources company, we acknowledge we have a role to play in contributing to environmental resilience. We do this through our social investment strategy and our work with strategic partners and communities.

Our work with strategic partners, including Conservation International, and local communities is focused on contributing to enduring environmental and social benefits through biodiversity conservation and ecosystem restoration, water stewardship and climate change mitigation and adaptation. Our preference is to invest in projects that contribute to cultural, economic and community benefits in addition to environmental resilience. Since FY2011, we have invested more than US$85 million in environmental resilience initiatives.

More information on the environment and our environmental projects is available at bhp.com/environment.

Our focus on environmental resilience is complementary to the work of the BHP Foundation.

More information is available at bhp.com/foundation.

1.13.13 Water

Access to safe, clean water is a basic human right and essential to maintaining healthy ecosystems. Water is also integral to what we do and we cannot operate without it. In FY2017, we adopted a Water Stewardship Strategy to improve our management of water, increase transparency and contribute to the resolution of shared water challenges. Our Water Stewardship Position Statement was developed in FY2019 and outlines our 2030 vision.

More information is available at bhp.com/water.

We recognise our responsibility to effectively manage our interactions with and minimise our adverse impacts on water resources. Effective water stewardship begins within our operations. We use water in a number of ways, including but not limited to: extracting it for ore processing and to access ore; dust suppression; processing mine tailings; providing drinking water and sanitation facilities; and using marine water for desalination. By improving water management and stewardship within our operations, we can more credibly collaborate with others to find solutions for water challenges and opportunities, including water scarcity or high variability in water supply. We work to identify and assess opportunities to reduce stress on water resources as a result of our operations and implement actions where appropriate.

Key opportunities identified during FY2020 and FY2021 included working with stakeholders to identify shared water challenges through Water Resource Situation Analysis (WRSAs) and ongoing engagements and adoption of new water technologies. The outcomes of the WRSAs will be publicly available to support continued collaboration between stakeholders who share the same water resources we use in our operations.

During FY2021, we focused on better understanding our catchment-level risks, developing long-term water strategies at our operated assets and setting performance standards for operational water related risk. We also commenced a pilot program focused on catchment-level WRSAs to inform development of new public context-based water targets for our operated assets.

We have made progress on our current public target for water. In FY2017, we announced a five-year water target of reducing FY2022 freshwater withdrawal

(1)

by 15 per cent from FY2017 levels

(2)

across our operated assets. In FY2021, freshwater withdrawal decreased by 11 per cent (113,444 megalitres compared to 126,997 megalitres in FY2020). Our FY2021 result also represents a 27 per cent reduction on the adjusted FY2017 baseline, exceeding our 15 per cent reduction target. Progress on the target is primarily due to ongoing reduction of groundwater withdrawal over the last five years, and from the cessation of groundwater withdrawal for operational water consumption from the Salar Punta Negra and Monturaqui aquifers at Escondida in December. We remain on track to sustain reductions and meet the 15 per cent reduction target by the end of FY2022.

Our global freshwater withdrawals from FY2017 to FY2021 are shown in the chart below.

(1)

Where ‘withdrawal’ is defined as water withdrawn and intended for use (in accordance with ‘A Practical Guide to Consistent Water Reporting’, ICMM (2017)). ‘Fresh water’ is defined as waters other than seawater, wastewater from third parties and hypersaline groundwater. Freshwater withdrawal also excludes entrained water that would not be available for other uses. These exclusions have been made to align with the target’s intent to reduce the use of freshwater sources of potential value to other users or the environment.

(2)

All water performance data presented in this Annual Report is from operated assets during FY2021. We report on the water metrics, risks and management, as described in section 4.8, in the ICMM ‘A Practical Guide to Consistent Water Reporting’ (ICMM guidance), and the Minerals Council of Australia’s Water Accounting Framework (WAF). Generally, these align with the reporting requirements documented in the GRI Standards and the CEO Water Mandate. Currently, water withdrawal data reported is considered to be at a high accuracy level based on WAF determination. This is predominately driven by a high degree of accurately measured water withdrawal quantity data at our Escondida desalination facility which represents just over half of our water withdrawal volumes. For more information about water accounting, including accuracy levels with respect to our discharge volumes and water data quality, refer to bhp.com/water.

In FY2021, we began to report on water volumes for those operated assets classed by the WWF Water Risk Filter

(1)

as being located in high or extremely high water stress areas. The disclosure of water data in high-stress areas is required by numerous reporting frameworks, including the draft updated ICMM guidance.

BHP has a commitment to contribute to improved mining sector water reporting through strengthened ICMM guidance, aligned with GRI requirements. In FY2021 we collated information on change in water storage as described in the revised ICMM Water Reporting Guidance and used it to support further assessment of the validity of assumptions underpinning asset water models and water balances. Water modelling contains a degree of uncertainty due to inclusion of estimates and assumptions. The collation of information to inform reporting of change in water storage has identified areas for improvement in the estimated and simulated data within the water models as currently used at our Coal assets. We intend to undertake work during FY2022 to assess underlying assumptions in an effort to improve the water modelling at those assets, as well as further maturing the measurement of changes in water storage across the Group. For this reason, we have not included change in water storage data in our reporting for FY2021.

We seek to minimise our withdrawal of high-quality fresh water. Seawater continues to be our largest source of water withdrawal, representing more than half of total withdrawals, predominantly for desalination at Escondida and use of seawater in our Petroleum operated assets. Groundwater is our most significant freshwater source, at close to

one-quarter

of total water withdrawals. In FY2021, approximately 80 per cent of our water withdrawals consisted of water classified as low quality. The definitions for water quality types are provided in section 4.11.4 and a detailed description is available in section 2.4 of the WAF.

(1)	https://waterriskfilter.panda.org/.

Beyond our operational activities, we have committed to engaging across communities, government, business and civil society with the aim of catalysing actions to improve water governance, increase recognition of water’s diverse values and advance sustainable solutions. We continue to collaborate with the CEO Water Mandate to support harmonisation of water accounting standards as part of our commitment to strengthen transparency and collaboration across all sectors for improved water governance.

In the context of an environmental damage lawsuit in relation to the Salar de Punta Negra (SPN), Escondida, the Attorney General Office, the Indigenous Community of Peine and the Council of Atacamanian Peoples reached an environmental agreement that considers the implementation of a long-term environmental management plan, as well as a series of compensation and repair measures. A participatory governance arrangement, comprising representatives of all the involved parties, will work together for the implementation of the plan. Escondida stopped extracting water in SPN in 2017 and then completely ceased the use of groundwater from the SPN and Monturaqui Andean aquifers in December 2019 (with small quantities of groundwater extracted for pit dewatering to allow safe mining). We remain on track to sustain reductions and meet the 15 per cent reduction target by the end of FY2022.

Following a court ruling regarding Cerro Colorado’s main environmental licence in January 2021, the Chilean Environmental Authority is

re-evaluating

the licence conditions permitting Cerro Colorado to extract water from the Lagunillas aquifer, and is carrying out a consultation process with an Indigenous community to assess potential environmental impacts.

In August 2021 an individual commenced a legal action through the First Environmental Court of Antofagasta (Court) that alleges Cerro Colorado’s water extraction from the Lagunillas aquifer has caused damage to the Lagunillas aquifer, the Huantija lagoon, and nearby wetlands. The Court granted an injunction requiring Cerro Colorado to suspend water extraction from the Lagunillas aquifer commencing on 1 October 2021 for a period of 90 days which may be extended. Cerro Colorado is evaluating its legal and operational options.

For more information on our approach to water stewardship, progress against our water strategy, water performance in FY2021 and case studies on activities we are taking to progress towards meeting our water stewardship vision, refer to bhp.com/water.

1.13.14 Land and biodiversity

The nature of our activities means we have a significant responsibility for land and biodiversity management. We own or manage more than 8 million hectares of land and sea; however, only 2 per cent is disturbed (physical or chemical alteration that substantially disrupts the

pre-existing

habitats and land cover) for our operational activities.

At each of our operated assets, we look to manage threats and realise opportunities to achieve our environmental objectives. We apply the mitigation hierarchy (avoid, mitigate, rehabilitate and, where appropriate, apply compensatory measures) to any potential or residual adverse impacts on marine or terrestrial ecosystems.

We respect legally designated protected areas and commit to avoiding areas or activities where we consider the environmental risk is outside our risk appetite. As part of our commitments:

•

We do not explore or extract resources within the boundaries of World Heritage listed properties.

•

We do not explore or extract resources adjacent to World Heritage listed properties, unless the proposed activity is compatible with the outstanding universal values for which the World Heritage property is listed.

•

We do not explore or extract resources within or adjacent to the boundaries of the International Union for Conservation of Nature (IUCN) Protected Areas Categories I to IV, unless a plan is implemented that meets regulatory requirements, takes into account stakeholder expectations and contributes to the values for which the protected area is listed.

•

We do not operate where there is a risk of direct impacts to ecosystems that could result in the extinction of an IUCN Red List Threatened Species in the wild.

•

We do not dispose of mined waste rock or tailings into a river or marine environment.

Our operated assets are required to have plans and processes that reflect local biodiversity risks and regulatory requirements. In FY2021, we prepared internal guidance on biodiversity-related elements of the

Our Requirements for Environment and Climate Change

standard to support more consistent interpretation and application of those standards at our operated assets. We have a five-year target to improve marine and terrestrial biodiversity outcomes by developing a framework by the end of FY2022. This will enable us to better monitor the impacts of our activities on biodiversity and to avoid, reduce and offset adverse impacts in a coordinated way.

Development of the framework started in FY2018 and we are progressing this work with Conservation International and Proteus, a voluntary partnership between the UN Environment Programme World Conservation Monitoring Centre (UNEP WCMC) and 12 extractive industry companies. During FY2021, we assessed all our operated assets using an early stage methodology developed by UNEP WCMC and developed a prototype scorecard based on this methodology to test and refine how we track biodiversity status and trends at our operated assets. The framework will be used to track achievement of our long-term biodiversity goal: that by FY2030, we will have made a measurable contribution to the conservation, restoration and sustainable use of marine and terrestrial ecosystems in all regions where we operate in line with UNSDGs 14 and 15.

More information on our approach to biodiversity and land management and current performance, including operated assets owned, leased, managed in or adjacent to protected areas and areas of high biodiversity value outside protected areas is available at bhp.com/biodiversity.

Closure

We recognise the potentially significant social, environmental and financial risks associated with future closure of our operations. We seek to integrate closure into our planning, decision-making and operations through the entire life cycle of our operated assets.

As a global leader in the development of natural resources, we have a responsibility to demonstrate a planned and purposeful approach to closure through the life cycle of our operated assets. This process requires the consideration of risks, threats and opportunities for the communities and environment in which we operate, as well as our workforce and shareholder value. It drives towards optimised closure outcomes for our sites by balancing our values, obligations, safety, costs and the expectations of external stakeholders to enable an outcome that involves one or a combination of alternative land uses, ongoing management, relinquishment or responsible divestment.

Each of our operations (whether projects, producing, in care and maintenance or a closed site) must have a closure management plan, documenting the implementation of the closure management process. This process includes collating relevant knowledge and data, undertaking risk and opportunity assessments, framing and comparing alternative closure options, and selecting the optimised closure outcomes. Closure management plans are required to be supported by stakeholder engagement across the life cycle of the site, and should balance business and stakeholder needs while meeting the following objectives:

•

comply with legal requirements and obligations, and our mandatory minimum performance requirements for closure

•

achieve safe and stable outcomes and meet approved environment outcomes

•

manage pre and post-closure risks (including opportunities)

•

progressively reduce obligations, including progressive closure of the area disturbed by our operational footprint

•

manage and optimise closure costs

Closure management plans are also required to include long-term monitoring to verify any controls implemented to manage closure risks and seek to realise opportunities throughout the life of our operations, including closure and post-closure, are effective, and that performance standards are achieved and maintained after operations cease.

Progressive closure of areas no longer required for operational purposes is included in our closure management plans and integrated into operational plans. Our closure management plans are regularly reviewed to reflect updated asset planning and include current knowledge obtained from onsite experience, locally, across our business and globally across the industry.

Information about our financial provision related to closure and rehabilitation liabilities is available in note 15 ‘Closure and rehabilitation provisions’ in section 3.

We report annually on the status of land disturbance and rehabilitation.

More information on our approach to closure is available at bhp.com/sustainability/closure.

1.13.15 Tailings storage facilities

Ensuring the integrity of our tailings storage facilities (TSFs) is a primary focus across our business. Our aspiration is to achieve zero harm from tailings and we will continue to work with others and share our progress in an effort to make this a reality.

In 2015, after the tragic failure of the Fundão dam at Samarco BHP initiated a Dam Risk Review to assess the management of major TSFs. The catastrophic failure of the Brumadinho dam at Vale’s operation in Brazil in January 2019 further strengthened our resolve to reduce tailings failure risk. For information about the Samarco tragedy and our progress with the response, refer to section 1.15.

In CY2019 we created a Tailings Taskforce (TTF) team reporting to the Executive Leadership Team and the Board’s Sustainability Committee. The TTF, accountable for accelerating our short-, medium- and long-term strategies and embedding leading practice, was integrated into the Resource Centre of Excellence at the end of FY2021 to create a permanent Tailings Excellence team.

Governance

In FY2021, we further strengthened the governance and assurance of our operated TSFs. We updated our mandatory minimum performance requirements for the effective management of TSF failure risks, aligning our internal requirements to the Global Industry Standard on Tailings Management (GISTM). This is intended to ensure our technical TSF and cross-functional guidance is consistent with the GISTM and the requirements are embedded across the business. Our focus is on gap assessments against the GISTM, completing corporate, asset and

TSF-level

evaluations to inform our implementation planning towards conformance within the timelines outlined by the ICMM. A BHP Tailings Storage Facility Policy Statement has been published on our website, outlining our Board of Directors’ commitment to the safe management of TSFs, emergency preparedness and response, recovery in the event of a failure and transparency. We also defined our Accountable Executive (AE) positions, who are direct reports of the BHP Chief Executive Officer and answerable to the BHP Board’s Sustainability Committee in conformance with GISTM requirements. The AE roles include an AE accountable for the companywide TSF governance framework, and AEs accountable for the safety of TSFs, tasked with avoiding or minimising the potential environmental and social impacts of a TSF failure, tailings management training and emergency preparedness and response. Their responsibilities will include having regular communication with TSF operational and technical employees.

In FY2021, we continued to progress work on TSF failure risk management. We completed the independent reviews of TSF failure risks across our operations with findings incorporated into risk remediation plans. These reviews partner leading industry experts with our technical leads to review and enhance our global tailings governance framework. The process is in addition to other governance activities, including Dam Safety Reviews, Independent Tailings Review Boards and project specific Independent Peer Reviews. Key risk indicators (KRIs) set by management help to monitor the performance in dam integrity and design, overtopping/flood management and emergency response planning. These KRIs have been updated to align to the GISTM.

We engaged in a partnership with Rio Tinto and the University of Western Australia to support the Future Tails Initiative, focused on training, education, research and best-practice guides in the tailings management space. This is a major step towards supporting safe stewardship of TSFs for the industry and we intend to continue this collaboration to build capacity and knowledge within the industry.

Strategy

Our short-term strategy continues to focus on improving KRI performance in line with defined targets. We are completing studies at all our operated assets focused on reducing and mitigating potential downstream impacts particularly to populations at risk (PAR). Most assets have completed these studies resulting in a diverse range of options to reduce the PAR exposure at our TSF sites or mitigate TSF failure risk. In some cases, we have elected to proactively eliminate the risk of catastrophic failure. For example, we have relocated a TSF at a Legacy Asset (an operated asset, or part thereof, located in the Americas that is in the closure phase) site in Miami, Arizona, to a nearby depression on the interior of the mine site which is expected to eliminate the risk of failure to people in the potential impact zone.

Our medium- and long-term strategies focus on the development of technologies to improve tailings management storage, which we believe are important in our aspiration of zero harm from tailings. Asset-specific strategies have been developed for all of our operated and legacy assets and seek long-term alternative tailings solutions. In addition, while our

non-operated

joint ventures (NOJVs) are independently controlled and have their own operating and management standards, we encourage NOJVs to consider long-term alternative tailings solutions as an option in asset planning.

Transparency

We fully support the GISTM and are working towards implementation at our sites. We have prioritised and actioned a phased disclosure approach to support our journey towards conformance, starting with an update to our previously published Church of England Disclosure. We have contributed to improvements in tailings storage management across the mining industry, including through the ICMM Tailings Working Group. We are participants in other tailings working groups globally, including those associated with the Canadian Dam Association, Australian National Committee on Large Dams, Australasian Institute of Mining and Metallurgy, Minerals Council of Australia, Society for Mining, Metallurgy and Exploration, and Fundación Chile. We have continued to participate in the Investor Mining and Tailings Safety Initiative, an

investor-led

engagement convening institutional investors active in extractive industries, including major asset owners and asset managers.

Operated and

non-operated

tailings portfolio

The classifications described in this Annual Report align to the Canadian Dam Association (CDA) classification system. It is important to note the TSF classification is one element of TSF risk management, but does not represent risk itself. It reflects the modelled, hypothetical most significant possible failure and consequences without controls. It does not reflect the current physical stability of the TSF and it is possible for TSF classifications to change over time, for example, following changes to the operating context of a dam. As such, this data represents the status of the portfolio as at 30 June 2021. The TSF classification informs the design, surveillance and review components of risk management. Therefore, TSFs with a higher-level classification will have more rigorous requirements than TSFs that have a lower level of classification.

In total, there are 72 TSFs

(1)

at our operated assets, 29 of which are of upstream design. Of the 72 operated facilities, three are classified as extreme and a further 17 classified as very high. Fourteen of our operated facilities are active. A substantial portion of our inactive portfolio (58) at our assets is due largely to the number of historic tailings facilities associated with our North American legacy assets portfolio. Further detail of the risk reduction work underway for high consequence classification facilities is provided above in the Strategy and Governance sections and online in our case studies.

There are 12 TSFs at our

non-operated

joint ventures, which are all located in the Americas. The four active tailings facilities are located in Antamina in Peru, which is of downstream construction, Patilla Norte Pit, an

in-pit

TSF and two TSFs at Samarco in Brazil, Alegria Sul TSF, which is

co-mingled

dry stack, and Alegria Sul Pit, an

in-pit

TSF. In addition, there are eight inactive facilities. These comprise of two upstream facilities at Samarco (Germano) in Brazil being decommissioned following the February 2019 rulings by the Brazilian Government on upstream dams in Brazil; three upstream inactive facilities and one inactive modified centreline facility at Resolution Copper in the United States; one downstream inactive facility at Bullmoose in Canada and one inactive downstream facility, Cantor TSF, at Cerrejón in Colombia.

(1)

The number of tailings storage facilities (TSFs) is based on the definition agreed to by the ICMM Tailings Advisory Group at the original time of submission and expanded to align with the TSF definition established in the Global Industry Standard for Tailings Management (GISTM). An increase of five TSFs is reported since our Church of England submission in 2019 due to the updated BHP definition of TSF to align with the GISTM. We keep this definition under review.

(2)

The Island Copper tailing facility originally disclosed in our Church of England submission in 2019 for the purposes of transparency has been removed as it is not a dam nor considered a TSF under the GISTM definition of a TSF. Tailings at Island Copper were deposited in the ocean under an approved license and environmental impact assessment. This historic practice ceased in the 1990s. We have since committed not to dispose of mine waste rock or tailings in river or marine environments. We continue to conduct environmental effects monitoring.

(3)	The following classifications aligned to the CDA classification system. It is important to note that the classification is based on the modelled, hypothetical most significant failure mode and consequences possible without controls, and not on the current physical stability of the dam.

(4)	For the purposes of this chart, ANCOLD and other classifications have been converted to their CDA equivalent.

(5)	Hamburgo TSF at Escondida is an inactive facility where tailings were deposited into a natural depression. Hamburgo TSF is not considered a dam and is, therefore, not subject to CDA classification, the assessment to determine the GISTM classification will be completed in CY2021.

(6)	SP1/2 and SP3 TSF at NSWEC are inactive facilities which have been assessed to have no credible failure modes and are therefore shown as not having a CDA classification.

(7)	Seven TSFs are currently under assessment to determine their consequence classification.

(8)	“Other” includes dams with a raising method that combines upstream, downstream and centreline or are of in-pit design.

(9)	“Inactive” includes facilities not in operational use, under reclamation, reclaimed, closed and/or in post-closure care and maintenance.

More information on our management of TSFs and global governance strategy is available at bhp.com/tailings.

1.13.16 Independent Assurance Report to the Management and Directors of BHP Group Limited and BHP Group Plc (BHP)

Not required for US reporting.

1.14 Section 172 statement

We are committed to continuing to deliver strong value to shareholders and to growing value for other stakeholders who depend on and support BHP. We believe this focus will be a long-term source of competitive advantage. Our Directors communicate with stakeholder groups to understand their interests and priorities through various channels, including via direct engagement and delegated committees and forums.

The UK Companies Act 2006 (CA 2006) sets out a number of general duties that directors owe to the company, including the duty to promote the success of the company, while having regard to the factors, including stakeholder factors, set out in section 172(1)(a) to (f) of the CA 2006. Our Section 172 Statement sets out at a high-level how the Board considers the interests of a range of stakeholders in its discussions, decision-making and implementation of BHP’s strategy and purpose.

In addition, the Board considers the likely consequences of decisions in the long term and the importance of maintaining a reputation for high standards of business conduct. For more information on the Board’s decision-making process, refer to section 2.1.3.

Workforce

The Board uses a range of formal and informal communication channels and reporting methods to understand the views of the workforce. Key focus areas include health, safety and wellbeing matters, opportunities for career development and progression, as well as the Group’s culture and purpose. For more information, refer to sections 1.12 and 2.1.6.

How we engage and communicate

•

Direct engagement

– Directors hear from employees up to several levels below the CEO, at Board and Board Committee meetings, and at virtual and physical site visits. Issues raised by employees in these sessions have included the impact of

COVID-19

in relation to mental health and fatigue management (due to quarantine requirements), views on the effectiveness of health and safety initiatives, and engagement activities with local communities.

•

Webcasts

– webcasts are used by the CEO to deliver key messages to the workforce on topics such as financial results, strategy, health and safety performance, confirming our zero tolerance for sexual assault and sexual harassment and our

COVID-19

response; as well as for live Q&A and town hall sessions with members of management.

•

Engagement and Perception Survey (EPS) and Culture Dashboard

– these results provide insight to the Board on our culture and areas of focus, including where we are lagging in certain measures. The EPS survey was redesigned in FY2021 to include more targeted questions and a new survey platform to provide leaders with greater insight into the key metrics related to Safety, Engagement and Enablement, which were identified as critical foundations for our performance culture. For more information, refer to section 1.12.

•

EthicsPoint

– our

24-hour

speak-up

helpline enables employees and other stakeholders to raise matters of concern. This helps to ensure Board oversight of culture and management response to any alleged serious conduct contrary to

Our Charter

and

Our Code of Conduct.

For more information on EthicsPoint, refer to section 2.1.15.

Impact of our engagement on decision-making, strategy and purpose

•

Inclusion and diversity

– the Board considers and discusses progress against agreed inclusion and diversity objectives and endorses inclusion and diversity scorecard KPIs. For more information, refer to section 2.1.9.

•

Culture and capability

– the Board considers the capabilities and culture required for the effective execution of our strategy. These considerations are reflected in organisational structure decisions (including the design of our Executive Leadership Team, for example, the two new roles of Chief Technical Officer and the Chief Development Officer); as well as training, development and succession planning.

•

Mental and physical health and wellbeing

– feedback from the workforce is taken into consideration as part of health and wellbeing initiatives, such as the measures implemented in response to the

COVID-19

pandemic for people

on-site

and those working from home. Consistent with our focus on mental health within our business and recognising the particular challenges faced by the resources industry, BHP was a founding member of the Global Business Initiative for Workplace Mental Health. For more information, refer to section 1.13.5.

Community and government

We recognise mutually beneficial relationships with communities and governments are crucial to our strategy and building social value. Key focus areas include the Group’s economic and social contribution, Indigenous relations and our approach to sustainability and environmental matters. For more information, refer to section 1.13.

How we engage and communicate

•

Forum on Corporate Responsibility (FCR)

–

the Sustainability Committee and other members of the Board meet with members of the FCR, which comprises civil society leaders in various fields of sustainability, to discuss FCR members’ views on societal trends and how these may influence BHP’s emerging risks.

•

EthicsPoint

–

our

24-hour

speak-up

helpline can also be used by external stakeholders to raise matters of concern.

•

Cultural heritage practices

–

the Board and Sustainability Committee receive

updates on BHP’s cultural heritage management, including in relation to actions to enhance our systems, processes and capability. The Chair and CEO also engaged directly with the First Nations Heritage Protection Alliance. We are focused on continuing to develop our relationships with Traditional Owners, for example, in September 2020, we further strengthened our

20-year

partnership with the Banjima people in Western Australia through the establishment of the South Flank Heritage Advisory Council. This is intended to ensure ongoing high-level dialogue between us on important cultural heritage and other matters.

Impact of our engagement on decision-making, strategy and purpose

•

Relationships with Traditional Owners in Australia

– in FY2021, we established a new global Indigenous Engagement team to lead Indigenous engagement, agreement-making and advocacy to enhance our focus on our engagement with Indigenous peoples. For more information on the improvements to our systems and processes to reflect engagement with Traditional Owners, refer to section 1.13.10.

•

First Nations Heritage Protection Alliance

–

BHP and the First Nations Heritage Protection Alliance jointly designed a set of shared principles, which reaffirm BHP’s commitment to Free, Prior and Informed Consent in agreement-making. For more information, refer to section 1.13.10.

•

Social value

– we are embedding the consideration of

social value creation across BHP, including in relevant Group targets, policies and investment decision-making processes, as well as in planning cycles for our operated assets.

•

Social investment commitment

–

this is aligned with our broader business priorities and supports projects and provides donations with the primary purpose of contributing to the resilience of the communities and environment where we have a presence. For more information, refer to section 1.13.11.

•

Climate policy and other ESG issues –

the Board takes into account community and expert external views, including the FCR, in considering climate policy and other ESG issues.

Investors

Part of the Board’s commitment to high-quality governance is expressed through the approach BHP takes to engaging and communicating with our investors. Key focus areas include the Group’s overall strategy, capital allocation, social value and our financial and operational performance. For more information, refer to section 2.1.6.

How we engage and communicate

•

Investor meetings

–

we engage regularly with investors on key areas of market interest, including heritage protection, industry associations and climate matters and feedback from these meetings is shared with the Board.

•

Question and answer sessions

–

these sessions provide shareholders the opportunity to ask BHP leaders about the topics most important to them with answers webcast via BHP’s website.

•

Review of investor perspectives

–

the Board receives regular feedback on investor perceptions and opinions, including through independent survey results and associated analysis.

•

Annual General Meetings (AGMs)

–

all Board members attended the 2020 BHP Group Limited AGM virtually to engage directly with shareholders. A virtual forum for BHP Group Plc shareholders was also held as an opportunity to hear from the Chair and CEO, and to ask questions via a live text facility.

•

Industry associations

–

engaged with investors to discuss their views on industry associations in advance of and subsequent to the 2020 AGMs. For more information, refer to section 2.1.6.

Impact of our engagement on decision-making, strategy and purpose

•

Consideration of ESG issues

–

given investor interest in ESG issues, including related financial threats and opportunities the Board considers these during its strategy sessions when assessing our portfolio positions, including opportunities to create more options in future facing commodities.

•

Portfolio considerations

–

creating and securing more options in future facing commodities remains a priority in order to strengthen our portfolio and protect and grow value over the long term. In FY2021, this included our intention to exit from our energy coal assets and

non-core

metallurgical coal assets, and the agreement to sell our stake in Colombian energy coal mine Cerrejón. For more information, refer to section 1.5.

•

Industry associations

– investor feedback has been a key input to BHP’s reforms announced in August 2020 and the active role BHP plays in shaping the policy advocacy of industry associations in which it participates.

Suppliers and customers

We seek to build authentic, collaborative relationships with our local, regional and global suppliers and customers to create shared value. We see respecting human rights as critical for our ability to contribute meaningful and ongoing social value to our stakeholders. We expect businesses we work with to respect human rights throughout the value chain. Key focus areas include the Group’s supply chain management and our approach to procurement and sales. For more information, refer to section 1.13.9.

How we engage and communicate

•

Supply chain human rights

–

the Sustainability Committee considers BHP’s approach to policy developments in and management of human rights. The Board and Sustainability Committee review our approach to managing human rights risks in the supply chain through the discussion and approval of our annual Modern Slavery Statement. For more information, refer to section 1.13.9.

•

Climate change

– we are engaging with our customers and progressively with our suppliers, on opportunities to reduce Scope 3 GHG emissions. For more information, refer to section 1.13.7.

Impact of our engagement on decision-making, strategy and purpose

•

Emissions reduction partnerships

– we established emissions reduction partnerships with three major steelmakers in China and Japan whose combined output equates to around 10 per cent of global steel production.

•

Payment terms

–

from 1 July 2021, BHP implemented

seven-day

payment terms for all small, local and Indigenous businesses across our global operations. The move followed positive feedback on quicker payment terms implemented by BHP for several months in CY2020 as a temporary

COVID-19

support measure.

Environment

The Board and its Committees consider a range of environmental matters throughout the year, including detailed discussions relating to climate change, biodiversity, water, tailings storage facilities, rehabilitation and closure. For more information, refer to section 1.13.12.

How we engage and communicate

•

Climate change

–

our purpose and our strategy provide a clear direction for our climate change strategy. The Board and its relevant Committees consider climate change, including the external landscape in relation to climate risks and expectations, progress against BHP’s climate change commitments and our climate risk exposure. For more information, refer to section 1.13.7.

•

Health, safety, environment and community (HSEC) targets

–

the Sustainability Committee receives updates on how we are performing against our public HSEC targets and longer-term goals, including in relation to water and biodiversity.

For more information, refer to sections 1.13.4 and 2.1.11.

•

Environmental performance

– the Sustainability Committee considers reports from the HSE Officer covering environmental performance at every meeting and reports to the Board on its discussions.

Impact of our engagement on decision-making, strategy and purpose

•

Climate change commitments

–

the Board approved commitments, including setting a medium-term target for operational (Scope 1 and Scope 2) emissions, Scope 3 emissions goals and the link between emissions performance and executive remuneration. The Board considered stakeholder feedback and views as part of its decision-making process.

•

Capital allocation

–

in addressing our Scope 1 and Scope 2 emissions, as with all capital investments, we assess and rank each decarbonisation project through the rigour of our Capital Allocation Framework. Achieving our Scope 1 and Scope 2 emissions reduction targets and goal ranks alongside maintenance capital in the hierarchy of our decisions.

•

Renewable power contracts

–

in keeping with our target to reduce operational emissions by at least 30 per cent from FY2020 levels

(1)

by FY2030 and our long-term goal to achieve net zero operational emissions by 2050, we established renewable power contracts for our coal operations in Queensland and nickel operations in Western Australia.

(1)	FY2020 baseline will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will be used as required.

1.15 Samarco

The Fundão dam failure

On 5 November 2015, the Fundão tailings dam operated by Samarco Mineração S.A. (Samarco) failed. Samarco is a

non-operated

joint venture (NOJV) owned by BHP Billiton Brasil Ltda (BHP Brasil) and Vale S.A. (Vale), with each having a 50 per cent shareholding.

A significant volume of tailings (39.2 million cubic metres) resulting from the iron ore beneficiation process was released. Tragically, 19 people died – five community members and 14 people who were working on the dam. The communities of Bento Rodrigues, Gesteira and Paracatu de Baixo were flooded and other communities and the environment downstream in the Rio Doce basin were also affected.

In December 2020, Samarco restarted its operations at a reduced production level. For information on Samarco’s restart and its operations, refer to section 1.10.3.

Our response and support for Fundação Renova

BHP Brasil has been and remains fully committed to supporting the extensive ongoing remediation and compensation efforts of the Fundação Renova in Brazil.

The Framework Agreement entered into between Samarco, Vale and BHP Brasil and the relevant Brazilian authorities in March 2016 established Fundação Renova, a

not-for-profit,

private foundation that is implementing 42 remediation and compensatory programs. BHP Brasil provides support to Fundação Renova, including through representation on the foundation’s governance structures.

BHP Brasil has provided US$1.6 billion

(1)

to fund Framework Agreement programs when Samarco has been unable to do so.

Fundação Renova

Resettlement

One of Fundação Renova’s priorities is the resettlement of the communities of Bento Rodrigues, Paracatu de Baixo and Gesteira. This involves ongoing engagement and consultation with a large number of stakeholders, including the affected community members, their technical advisers, state prosecutors, municipal leaders, regulators and other interested parties.

The resettlement process for Bento Rodrigues and Paracatu de Baixo involves designing new towns on land that has been chosen by the communities, to be as close as possible to the previous layout, attending to the wishes and needs of the families and communities, while also meeting permitting requirements.

In Bento Rodrigues and Paracatu de Baixo, the implementation of precautionary measures in response to

COVID-19,

including a suspension of works between March and June 2020, as well as increases to the technical scope for resettlement of the communities and permitting delays have impacted the timeline for completion.

Resettlement works resumed from

mid-June

2020 and are continuing with a reduced workforce. Currently, there is no schedule to return to full workforce capacity given

COVID-19

restrictions. At Bento Rodrigues, the construction of the public school, healthcare facilities and public infrastructure has been completed and the construction of housing is continuing to progress. At Paracatu, infrastructure works and the construction of some public buildings (such as the public school) were completed and the first houses are underway.

In addition to the community resettlements, some families from the rural area chose to rebuild their houses on their previous property. Some other families have chosen not to join the resettlement of their previous community and Fundação Renova is assisting them to purchase properties.

At Gesteira, Fundação Renova offered the families a payment solution in which they would be able to purchase property through a ‘letter of credit’. Most families of Gesteira have chosen this option and the agreements are being ratified by the 12

Federal Court.

Updates on the progress of Fundação Renova’s resettlement program are available at

fundacaorenova.org/en/repair-data/resettlement-and-infrastructure.

(1)	USD amount is calculated based on actual transactional (historical) exchange rates related to Renova funding.

Compensation and financial assistance

Fundação Renova continues to provide fair compensation to people impacted by the dam failure.

Compensation and financial assistance of approximately R$4.7 billion (approximately US$1.1 billion

(1)

)

has been paid to support approximately 336,000 people affected by the dam failure up until 30 June 2021.

More than 10,500 general damages claims have been resolved and more than 270,000 people have been paid a total of approximately R$280 million (approximately US$65 million

(1)

) for temporary water interruption. The general damages component includes loss of life, injury, property damage, business impacts, loss of income and moral damages. Fundação Renova continues to provide financial assistance cards and other income support to those whose livelihoods continue to be impacted by the dam failure, including fisherfolk whose activities are affected by fishing restrictions.

In addition, approximately R$1.6 billion (approximately US$300 million

(1)

) was paid to more than 17,000 people under the court-mandated simplified indemnity system (known as the ‘Novel’ system), which is designed to provide compensation for informal workers who have had difficulty proving the damages they suffered, such as cart drivers, sand miners, artisanal miners and street vendors.

Updates on the progress of the compensation program are available at

fundacaorenova.org/en/repair-data/indemnities-and-productive-resumption.

Other socio-economic programs

Fundação Renova continues to implement a wide range of socio-economic programs in addition to the resettlement and compensation programs. These programs cover health and infrastructure projects in the Rio Doce basin, promotion of economic development in the impacted communities and sewage treatment facilities to improve the water quality in the Rio Doce.

Environmental remediation

Since December 2019, the riverbanks and floodplains have been vegetated, river margins stabilised and in general, water quality and sediment qualities have returned to historic levels. Long-term remediation work is continuing to

re-establish

agriculture and native vegetation.

A ban on fishing activities along the coast of Espírito Santo and a precautionary conservation restriction preventing fishing for native fish species in the Rio Doce in Minas Gerais remain in place. Fundação Renova continues to support the recovery of habitats and aquatic ecology and engage with the authorities with the goal of lifting the restrictions.

Legal proceedings

BHP Group Limited, BHP Group Plc and BHP Brasil are involved in legal proceedings relating to the Samarco dam failure. For more information on the significant legal proceedings involving BHP, refer to section 4.9.

1.16 Risk factors

Our principal risks are described below and may occur as a result of our activities globally, including in connection with our operated and

non-operated

assets, third parties engaged by BHP or through our value chain. Our principal risks, individually or collectively, could threaten our viability, strategy, business model, future performance, solvency or liquidity and reputation. They could also materially and adversely affect the health and safety of our people or members of the public, the environment, the communities in which we or our third-party partners operate, or the interests of our stakeholders leading to litigation (including class actions) or a loss of stakeholder and/or investor confidence. References to ‘financial performance’ includes our financial condition and liquidity, including due to decreased profitability or increased operating costs, capital spend, remediation costs or contingent liabilities. While the risks described in this section represent our principal risks, BHP is also exposed to other risks that are not described in this section.

While we implement preventative and/or mitigating controls designed to reduce the likelihood of a threat from occurring and minimise the impacts if it does, these may not be effective.

Key changes to our principal risks in FY2021 are the introduction of risks associated with inadequate business resilience and adopting technologies. The way in which we articulate our other principal risks has also changed since our FY2020 Annual Report. For example, risks associated with operational events have been consolidated into a single risk factor rather than being discussed across two risk factors. We have also disaggregated and combined elements of principal risks. For example, risks associated with third-party performance are embedded throughout our principal risks and climate change risks have been separated to provide a greater focus on transition risks, while risks associated with the potential physical impacts of climate change are addressed alongside other business resilience risks (as well as across other relevant principal risks). We have also simplified the presentation of our principal risks. These changes are designed to provide greater accessibility and value to stakeholders in understanding our principal risks.

With the exception of risks associated with operational events, exposure to all of our principal risks increased in FY2021. These increases were largely driven by uncertainties in the external environment, such as the continuing global impacts of the

COVID-19

pandemic, heightened geopolitical tensions and societal and stakeholder expectations of business (including in relation to social, environmental and climate-related risks), and increasing frequency and sophistication of cyberattacks against companies in the resources industry and governments.

OPERATIONAL EVENTS

Risks associated with operational events in connection with our activities globally, resulting in significant adverse impacts on our people, communities, the environment or our business.

Why is this important to BHP?

We engage in activities that have the potential to cause harm to our people and assets, and/or communities and the environment, including serious injuries, illness and fatalities, loss of infrastructure, amenities and livelihood and damage to sites of cultural significance. An operational event at our operated or

non-operated

assets or through our value chain could also cause damage or disruptions to our assets and operations, impact our financial performance, result in litigation or class actions and cause long-term damage to our licence to operate and reputation. The potential physical impacts of climate change could increase the likelihood and/or severity of risks associated with operational events. Impacts of operational events may also be amplified if we fail to respond in a way that is consistent with our corporate values and stakeholder expectations.

Examples of potential threats

• An offshore well blow out, including at one of our assets in the US Gulf of Mexico, Australia, Trinidad and Tobago or Algeria, or at one of our appraisal and exploration options in Mexico, Trinidad and Tobago, Western and Central Gulf of Mexico or Australia.

• Failure of a water or tailings storage facility, such as the tragic failure of the Fundão dam at Samarco in 2015 or a failure at one of our facilities in Australia, Chile, Colombia, Peru, the United States, Canada or Brazil.

• Unplanned fire events or explosions (on the surface and underground).

• Geotechnical stability events (such as an unexpected and large fall of ground at our underground or open pit mines, or potential interaction between our mining activities and community infrastructure or natural systems), including at our underground mines in Australia, the United States and Canada.

• Air, land (road and rail) and marine transportation events (such as aircraft crashes or vessel collisions, groundings or hydrocarbon release) that occur while transporting people, supplies or products to exploration, operation or customer locations, which include remote and environmentally sensitive areas in Australia, South America, Asia and the United States.

• Critical infrastructure or hazardous materials containment failures, other occupational or process safety events, or workplace exposures.

• Operational events experienced by third parties, which may result in unavailability of shared critical infrastructure (such as railway lines or ports) or transportation routes (such as the Port Hedland channel in Western Australia).

ACCESSING KEY MARKETS

Risks associated with market concentration and our ability to sell and deliver products into existing and future key markets, impacting our economic efficiency.

Why is this important to BHP?

We rely on the sale and delivery of the commodities we produce to customers around the world. Changes to laws, international trade arrangements, contractual terms or other requirements and/or geopolitical developments could result in physical, logistical or other disruptions to our operations in, or the sale or delivery of our commodities to, key markets. These disruptions could affect sales volumes or prices obtained for our products, adversely impacting our financial performance, results of operations and growth prospects.

Examples of potential threats

• Government actions, including economic sanctions, tariffs or other trade restrictions, imposed by or on countries where we operate or into which we sell or deliver our products may prevent BHP from trading or make it more difficult for BHP to trade in key markets. For example, China has imposed import restrictions and tariffs on some Australian exports, including energy and metallurgical coal. The imposition of further tariffs or other restrictions on any of our other products could adversely affect our financial performance.

• Physical disruptions to the delivery of our products to customers in key markets including due to the disruption of shipping routes, closure or blockage of ports or land logistics (road or rail) or military conflict. In some cases, physical disruptions may be driven or intensified by weather, climate variability or climate change.

• Legal or regulatory changes (such as royalties or taxes, port or import restrictions or customs requirements, shipping/maritime regulatory changes, restrictions on movements or imposition of quarantines, or changing environmental restrictions or regulations, including measures with respect to carbon-intensive imports) and commercial changes (such as changes to the standards and requirements of customers) may adversely impact our ability to sell or deliver, or realise full market value for, our products.

• Failure to maintain strong relationships with customers, or changes to customer demands for our products (such as vertical integration), may reduce our market share or adversely impact our financial performance.

• Increasing geopolitical tensions may adversely affect our strategic and business planning decisions and/or increase the time it takes us to manage our access to key markets, particularly if we fail to detect or anticipate deviations in the geopolitical environment in a timely manner.

OPTIMISING PORTFOLIO RETURNS AND MANAGING COMMODITY PRICE MOVEMENTS

Risks associated with our ability to position our asset portfolio to generate returns and value for shareholders (including securing growth options in future facing commodities) and to manage adverse impacts of short- and long-term movements in commodity prices.

Why is this important to BHP?

We take decisions and actions in pursuit of our strategy to optimise our asset portfolio and to secure and create growth options in future facing commodities (such as copper, nickel and potash). A strategy that does not support BHP’s objectives and/or

ill-timed

execution of our strategy (including as a result of not having sector-leading capabilities) or other circumstances, may lead to a loss of value that impacts our ability to deliver returns to shareholders and fund our investment and expansion opportunities. It may also result in our asset portfolio being less resilient to fluctuations in commodity prices, which are determined by or linked to prices in world markets. In the short term, this may reduce our cash flow, ability to access capital and our dividends. A failure to optimise our asset portfolio for structural movements in commodity prices over the long term may result in asset impairments and could adversely affect the results of our operations, our financial performance, and returns to investors.

Examples of potential threats

• Failure to optimise our portfolio through effective and efficient acquisitions, exploration, large project delivery, mergers, divestments or expansion of existing assets.

• Failure to identify potential changes in commodity attractiveness and missed entry or commodity exit opportunities, resulting in decreased return on capital spend for, or overpayment to acquire or invest in, new assets or projects, stranded assets or reduced divestment proceeds.

• Failure to achieve expected commercial objectives from assets or investments, such as cost savings, sales revenues or operational performance (including as a result of inaccurate commodity price assumptions or resources and reserves estimates), may result in returns that are lower than anticipated and loss of value (such as that experienced with US shale).

• Renegotiation or nullification of permits, increased royalties, or expropriation or nationalisation of our assets, or other legal, regulatory, political, judicial or fiscal or monetary policy instability may adversely impact our ability to achieve expected commercial objectives from assets or investments, access reserves, develop, maintain or operate our assets, or otherwise optimise our portfolio.

• Inability to predict long-term trends in the supply, demand and price of commodities and optimise our asset portfolio accordingly may restrict our ability to generate long-term returns from the portfolio.

• Commodity prices have historically been and may continue to be subject to significant volatility, including due to global economic and geopolitical factors, industrial activity, commodity supply and demand (including inventory levels), technological change, product substitution, tariffs and exchange rate fluctuations. Our usual policy and practice is to sell our products at prevailing market prices and as such fluctuations in commodity prices may affect our financial performance. For example, a US$1 per tonne decline in the average iron ore price and US$1 per barrel decline in the average oil price would have an estimated impact on FY2021 profit after taxation of US$163 million and US$24 million, respectively. Long-term price volatility or sustained low prices may adversely impact our financial performance as we do not generally have the ability to offset costs through price increases.

SIGNIFICANT SOCIAL OR ENVIRONMENTAL IMPACTS

Risks associated with significant impacts of our operations on and contributions to communities and environments throughout the life cycle of our assets and across our value chain.

Why is this important to BHP?

The long-term viability of our business is closely connected to the wellbeing of the communities and environments where we have a presence. At any stage of the asset life cycle, our activities and operations may have or be seen to have significant adverse impacts on communities and environments. In these circumstances, we may fail to meet the evolving expectations of our stakeholders (including investors, governments, employees, suppliers, customers and community members) whose support is needed to realise our strategy and purpose. This could lead to loss of stakeholder support or regulatory approvals, increased taxes and regulation, enforcement action, litigation or class actions, or otherwise impact our licence to operate and adversely affect our reputation, ability to attract and retain talent, operational continuity and financial performance.

Examples of potential threats

• Engaging in or being associated with activities (including through our

non-operated

joint ventures and value chain) that have or are perceived to have individual or cumulative adverse impacts on the environment, biodiversity and land management, water access and management, human rights or cultural heritage.

• Failing to meet stakeholder expectations in connection with our legal and regulatory obligations, relationships with Indigenous peoples, community wellbeing and the way we invest in communities.

• Political, regulatory and judicial developments (such as constitutional reform in Chile that could result in adjustments to water and other resource rights, or the Dasgupta Review in the United Kingdom that could result in government actions that impact the management of biodiversity and ecosystems) or changing stakeholder expectations could result in more stringent operating requirements on our business. For example, changes to regulations or stakeholder expectations may delay the timing or increase costs associated with closure and rehabilitation of assets, or expose BHP to unanticipated environmental or other legacy liabilities.

• Failing to identify and manage potential physical climate change risks to communities, biodiversity and ecosystems. For example, changes to species habitat or distribution as a result of sustained higher temperatures could result in land access restrictions or litigation, or limit our access to new opportunities.

LOW-CARBON TRANSITION

Risks associated with the transition to a low-carbon economy.

Why is this important to BHP?

Transition risks arise from policy, regulatory, legal, technological, market and other societal responses to the challenges posed by climate change and the transition to a

low-carbon

economy. As a world-leading resources company, BHP is exposed to a range of transition risks that could affect the execution of our strategy or our operational efficiency, asset values and growth options, resulting in a material adverse impact on our financial performance, share price or reputation, including litigation. The complex and pervasive nature of climate change means transition risks are interconnected with and may amplify our other principal risks. Additionally, the inherent uncertainty of potential societal responses to climate change may create a systemic risk to the global economy.

Examples of potential threats

• Introduction or improvement of

low-carbon

technologies or changes in customer preference for products that support the transition to a

low-carbon

economy may decrease demand for some of our products (which may be abrupt or unanticipated), increase our costs or decrease the availability of key inputs to production. For example:

• ‘Green steel’ technologies may reduce demand for our metallurgical coal or iron ore, or electric vehicle penetration may reduce demand for our petroleum products.

• Implementing

low-carbon

processes or new investments to respond to market demand for products that support a

low-carbon

economy (such as potential capital spend at our Jansen Potash Project to deliver fertiliser products or at our Nickel West asset to supply the battery market) may increase operating or development costs.

• Failure to address investor concerns on the potential impact of climate change on and from BHP’s portfolio and operations may result in reduced investor confidence and/or investor actions seeking to influence BHP’s climate strategy.

• Social concerns around climate change may result in investors divesting our securities, pressure on BHP to divest or close remaining fossil fuel assets and on financial institutions not to provide financing for our fossil fuel assets, or otherwise adversely impact our ability to optimise our portfolio.

• Perceived or actual misalignment of the resources industry’s or BHP’s climate actions (goals, targets and performance) with societal and investor expectations, or a failure to deliver our climate actions, may result in damage to our reputation, climate-related litigation (including class actions) or give rise to other adverse regulatory, legal or market responses.

• Changes in laws, regulations, policies, obligations, government actions, and our ability to anticipate and respond to such changes (which may be abrupt or unanticipated), including emission targets, restrictive licencing, carbon taxes, border adjustments or the addition or removal of subsidies, may give rise to adverse regulatory, legal or market responses.

ADOPTING TECHNOLOGIES AND MAINTAINING DIGITAL SECURITY

Risks associated with adopting and implementing new technologies, and maintaining the effectiveness of our existing digital landscape (including cyber defences) across our value chain.

Why is this important to BHP?

Our business and operational processes across our value chain are dependent on the effective application of technology, which we use as a lever to deliver on our current and future operational, financial and social objectives. This exposes BHP to risks originating from adopting or implementing new technologies, or failing to take appropriate action to position BHP for the digital future, which may impact the capabilities we require, the effectiveness and efficiency of our operations and our ability to compete effectively. We may also fail to maintain the effectiveness of our existing and future digital landscape, including cyber defences, exposing us to technology availability, reliability and cybersecurity risks. These could lead to operational events, commercial disruption (such as an inability to process or ship our products), corruption or loss of system data, a misappropriation or loss of funds, unintended disclosure of commercial or personal information, enforcement action or litigation. An inability to adequately implement new technology, or any sustained disruption to our existing technology, may also adversely affect our licence to operate, reputation, results of operations and financial performance. As we continue to leverage technology to improve productivity and safety, we expect the importance of safe, secure and reliable technology to our business will continue to grow.

Examples of potential threats

• Failure to achieve efficiencies through our investment in technologies, or to keep pace with advancements in technology, resulting in an inability to access systems or digital infrastructure required to support our operations or customers’ and other stakeholders’ evolving expectations. For example, delays, costs and failures to achieve efficiencies arising from difficulties in integrating new technologies with existing technologies, or from failures of new technology to perform as expected.

• Failing to identify, access and secure necessary infrastructure and key inputs (including electricity, internet bandwidth, data, software, licences or other rights in intellectual property, hardware and talent) to support new technology innovations and advanced technologies may adversely affect our ability to operate or adopt those technologies. This includes artificial intelligence and machine learning, process automation, robotics, data analytics, cloud computing, smart devices and remote working. For example, adopting new technology to reduce emissions through the use of alternative energy sources may require new infrastructure (such as at our mines and ports), and effective implementation of new digital technologies will be heavily dependent on access to relevant data.

• Failure or outage of our existing or future information and operating technology systems.

• Cyber events or attacks (including ransomware, state-sponsored and other cyberattacks) on our existing or future information and operating technology systems, including on third-party partners and suppliers (such as our cloud service providers). For example, a cyberattack on our autonomous systems for haulage and drilling may reduce operational productivity and/or adversely impact safety.

ETHICAL MISCONDUCT

Risks associated with actual or alleged deviation from societal or business expectations of ethical behaviour (including breaches of laws or regulations) and wider or cumulative organisational cultural failings, resulting in significant reputational impacts.

Why is this important to BHP?

The conduct of BHP or our people or third-party partners could result in an actual or alleged deviation from expectations of ethical behaviour or breaches of laws and regulations. This may include fraud, corruption, anti-competitive behaviour, money laundering, breaching trade or financial sanctions, market manipulation, privacy breaches, ethical misconduct and wider organisational cultural failings. A failure to act ethically or legally may result in negative publicity (including on social media), investigations, public inquiries, regulatory enforcement action (including fines), litigation or other civil or criminal proceedings, or increased regulation. It could also threaten the validity of our tenements or permits, or adversely impact our reputation, results of operations, financial performance or share price. Impacts may be amplified if our senior leaders fail to uphold BHP’s values or address actual or alleged misconduct in a way that is consistent with societal and stakeholder expectations, and our workplace culture may also be eroded, adversely affecting our ability to attract and retain talent. Ethical misconduct risks and impacts are heightened by the complex and continuously evolving legal and regulatory frameworks that apply to the jurisdictions where we operate and potentially conflicting obligations under different national laws.

Examples of potential threats

• Failing to prevent breaches of international standards, laws, regulations or other legal, regulatory, ethical, environmental, governance or compliance obligations, such as external misstatements, inaccurate financial or operational reporting or a breach of our continuous disclosure obligations.

• Corruption (particularly in high-risk or less economically developed jurisdictions), market conduct or anti-competitive behaviour, including in relation to our joint venture operations.

• Failing to comply with trade or financial sanctions (which are subject to rapid change and may potentially result in conflicting obligations), health, safety and environmental laws and regulations, native title and other land right or tax or royalty obligations.

• Failing to protect our people from harm (including to mental and physical health) due to the misconduct of others that takes place in connection with their work, such as discrimination or sexual harassment and assault.

INADEQUATE BUSINESS RESILIENCE

Risks associated with unanticipated or unforeseeable adverse events and a failure of planning and preparedness to respond to, manage and recover from adverse events (including potential physical impacts of climate change).

Why is this important to BHP?

In addition to the threats described in our other risk factors, our business could experience unanticipated, unforeseeable or other adverse events (internal or external) that could harm our people, disrupt our operations or value chain, or damage our assets or corporate offices, including our

non-operated

assets over which BHP has less control. A failure to identify or understand exposure, adequately prepare for these events (including maintaining business continuity plans) or build wider organisational resilience may inhibit our (or our third-party partners’) ability to respond and recover in an effective and efficient manner. This could cause material adverse impacts on our business, such as reduced ability to access resources, markets and the operational or other inputs required by our business, reduced production or sales of commodities, or increased regulation, which could adversely impact our financial performance, share price or reputation, and could lead to litigation or class actions.

Examples of potential threats

• Geopolitical, global economic, regional or local developments or adverse events, such as social unrest, strikes, work stoppages, labour disruptions, social activism, terrorism, bomb threats, economic slowdown, acts of war or other significant disruptions in areas where we operate or have interests (for example, in FY2020, stoppages associated with social unrest in Chile impacted copper production at Escondida).

• Natural events, including earthquakes, tsunamis, hurricanes, cyclones, fires, solar flares and pandemics (for example, earthquakes may affect the Andes region in South America where we undertake exploration activities and have operated and

non-operated

assets).

• Potential physical impacts of climate change, such as acute risks that are event-driven (including increased severity of extreme weather events) and chronic risks resulting from longer-term changes in climate patterns. Hazards and impacts may include changes in precipitation patterns, water shortages, rising sea levels, increased storm intensity, prolonged extreme temperatures and increased drought, fire and tidal flooding.

• Failure by suppliers, contractors or joint venture partners to perform existing contracts or obligations (including due to insolvency), such as construction of large projects or supply of key inputs to our business (for example, consumables for our mining equipment).

• Failure of our risk management or other processes (including controls) to prepare for or manage any of the risks discussed in this ‘Risk factors’ section may inhibit our (or our third-party partners’) ability to manage any resulting adverse events and may disrupt our operations or adversely impact our financial performance or reputation.

1.16.1 Management of risks

Each of our principal risks may present opportunities as well as threats. We take risk for strategic reward in the pursuit of our strategy and purpose, including to grow our asset portfolio and develop the right capabilities for the future of our business. Potential opportunities associated with each of our principal risks are described below, along with the key controls to manage them. These controls are not exhaustive and many Group-wide controls (such as

Our Code of Conduct

, Risk Framework, mandatory minimum performance requirements for risk management, health, safety and other matters, dedicated

non-operated

joint venture teams and our Contractor Management Framework) help to support effective and efficient management of all risks in line with our risk appetite.

Operational events

Risks associated with operational events in connection with our activities globally, resulting in significant adverse impacts on our people, communities, the environment or our business.

Examples of potential opportunities

•

Our focus on safety and the welfare of our people, communities and the environment may increase workforce and other stakeholder confidence, enhancing our ability to attract and retain talent and access (or lower the cost of) capital.

•

Collaborating with industry peers and relevant organisations on minimum standards (such as the Global Industry Standard on Tailings Management and Large Open Pit Project guidelines on

open-pit

mining design and management) supports improvements to wider industry management of operational risks and may also identify opportunities to improve our own practices.

Key management actions

•

Planning, designing, constructing, operating, maintaining and monitoring surface and underground mines, water and tailings storage facilities, wells and other infrastructure and equipment in a manner designed to maintain structural integrity, prevent incidents and protect our people, assets, communities, the environment and other stakeholders.

•

Specifying minimum requirements and technical specifications, such as for transportation (including high-occupancy vehicles, aircraft and their operators), and compliance with operating specifications, industry codes and other relevant standards, including BHP’s mandatory minimum performance requirements.

•

Defining key accountable roles, such as a dam owner (an internal BHP individual who is accountable for maintaining effective governance and integrity of each tailings storage facility), and providing training and qualifications for our people.

•

Inspections, reviews, audits and other assurance activities, such as independent dam safety reviews and geotechnical review boards.

•

Maintaining evacuation routes, supporting equipment, continuity plans and crisis and emergency response plans.

•

Incorporating future climate projections into operational event risks through ongoing assessment of potential physical climate change risks.

FY2021 insights

While our overall exposure to risks associated with operational events remained relatively stable in FY2021, our risk profile has adapted to changes in our operating context. For example, a greater focus on exploration has increased our use of helicopters to conduct geophysical surveys and transport personnel. We have also had to adapt the way we transport people to and from work due to the

COVID-19

pandemic (for example, more buses have been scheduled due to social distancing requirements).

Further information

•

Section 1.13.4 Safety

•

Section 1.13.15 Tailings storage facilities

•

Section 1.15 Samarco

•

bhp.com/sustainability

Accessing key markets

Risks associated with market concentration and our ability to sell and deliver products into existing and future key markets, impacting our economic efficiency.

Examples of potential opportunities

•

Monitoring macroeconomic, geopolitical and policy developments and trends may reveal new markets or identify opportunities to strengthen secondary markets for existing products.

•

Leveraging the opportunity to create value by developing strategic partnerships and strong, mutually beneficial relationships with our customers.

•

Building a deep understanding of the geopolitical risks faced by BHP and their potential impacts on our business could enhance our strategy, business planning and response, providing a potential competitive advantage.

•

Identifying the potential for weather, climate variability or climate change to disrupt delivery of products and implementing management measures may increase the resilience of our operations and supply chain.

•

Signal monitoring and building relationships with and understanding the perspectives of influential stakeholders may improve our ability to understand, respond to and manage any impacts from policy changes (such as trade policies).

Key management actions

•

Monitoring and assessing our ability to access key markets, and maintaining sales plans, product placement and business resilience strategies and relationships with relevant stakeholders (such as the Chinese, United States and Australian Governments, and our customers in China and elsewhere).

•

Maintaining response plans for various scenarios (including physical disruptions of logistics) to mitigate disruptions to our ability to access key markets.

•

Monitoring geopolitical and macroeconomic developments and trends, including through signal monitoring and our enterprise-level watch list of emerging themes, to provide an early indication of events that could impact our ability to access key markets.

•

Identifying weather and/or climate-related vulnerabilities and implementing controls to mitigate disruptions to our ability to physically access key markets.

•

Diversification of our asset and commodity portfolio, such as our ongoing investment in potash through the Jansen Potash Project, to reduce exposure to market concentration risks.

FY2021 insights

Exposure to risks associated with our access to key markets increased in FY2021 as a result of tensions between Australia, the United States and China, and import restrictions and tariffs imposed by China on some Australian exports (including energy and metallurgical coal). Although our influence over these aspects of our external environment is limited, adjustments to our portfolio may reduce exposure to market concentration risk in the longer term.

Further information

•

Section 4.10.2 Shareholder information – Markets

Optimising portfolio returns and managing commodity price movements

Examples of potential opportunities

•

Acquisition of new resources in future facing commodities may strengthen our portfolio and protect and grow value over the long term.

•

Ability to predict long-term commodity demand, supply and price trends may lead to BHP being able to identify and acquire new future facing commodities and assets ahead of our competitors or exit from declining commodities in a timely manner, strengthening our portfolio and leading to long-term portfolio returns.

•

BHP may be perceived as a welcome and valued or preferred partner for the development of new resource opportunities, enabling us to secure new assets or exploration opportunities to create long-term optionality in the portfolio.

Key management actions

•

Strategies, processes and frameworks to grow and protect our portfolio and to assist in delivering ongoing returns to shareholders include:

•

our exploration and business development programs, which focus on replenishing our resource base and enhancing our portfolio (including creating and securing more options in future facing commodities)

•

our long-term strategic outlook and ongoing strategic processes to assess our competitive advantage and enable the identification of threats to or opportunities for our portfolio through forecasting and scenario modelling

•

monitoring signals to interpret external events and trends, and designing commodity strategies and price protocols that are reviewed by management and the Board

•

our Capital Allocation Framework, corporate planning processes, investment approval processes and annual reviews (including resilience testing) of portfolio valuations

•

our balance sheet and liquidity framework, which is designed to maintain a robust balance sheet with sufficient liquidity and access to diverse sources of funding

•

Pursuing a considered approach to new country entry, including development of capability to operate in higher-risk jurisdictions, in order to support portfolio opportunities in new jurisdictions.

•

Further developing BHP’s social value proposition to position BHP as a preferred partner for the development of resource opportunities in line with the expectations of local communities, host governments and other global stakeholders.

•

Managing commodity price exposure through the diversity of commodities, markets, geographies and currencies provided by our portfolio, as well as our financial risk management practices in relation to our commercial activities.

FY2021 insights

Our exposure to risks associated with optimising our portfolio and managing commodity price movements increased in FY2021 as a result of volatility and uncertainty across global economies, including due to the continuing effects of the

COVID-19

pandemic. We announced the sale of Cerrejón in June 2021 as part of our intention to consolidate our portfolio of coal assets to higher-quality metallurgical coal, and remain open to all options for BMC and NSWEC. Heightened societal expectations regarding the use of coal will continue to be a portfolio consideration. On 17 August 2021, we also announced our intention to merge our Petroleum assets with Woodside,

(1)

which is designed to unlock synergies and increase value and choice for BHP’s shareholders.

Further information

•

Section 1.5 Positioning for future

•

Section 1.17 Performance by commodity

•

Note 23 ‘Financial risk management’ in section 3

(1)

On 17 August 2021, BHP announced it had entered into a merger commitment deed with Woodside to combine their respective oil and gas portfolios by an

all-stock

Significant social or environmental impacts

Risks associated with significant impacts of our operations on and contributions to communities and environments throughout the life cycle of our assets and across our value chain.

Examples of potential opportunities

•

Our support for responsible stewardship of natural resources may enhance the resilience of environments and communities to potential threats (including the potential physical impacts of climate change).

•

Strong social performance, including sustainable mining and a focus on the wellbeing of communities, could generate competitive advantage in the jurisdictions where we operate.

•

Our global social value strategy may improve stakeholder relations, build community trust and increase investor confidence and demand for our commodities.

•

Greater clarity, transparency and standards associated with regulatory regimes that support and protect communities and the environment may increase requirements across our sector, generating competitive advantage for companies that have already invested in social performance.

Key management actions

•

Our Requirements for Community

and

Our Requirements for Environment and Climate Change

standards provide requirements and practices that are designed to strengthen our social, human rights and environmental performance. Our Human Rights Policy Statement, Water Stewardship Position Statement, Climate Change Position Statement and Indigenous Peoples Policy Statement set out our commitments and approach to these matters.

•

Engaging in regular, open and honest dialogue with stakeholders to better understand their expectations, concerns and interests, and undertaking research to better understand stakeholder perceptions.

•

Building social value into our decision-making process, along with financial considerations.

•

Building stakeholder trust and contributing to environmental and community resilience, including through collaborating on shared challenges (such as climate change and water stewardship), enhanced external reporting of our operated assets’ potential impacts on biodiversity and maximising the value of social investments through our social investment strategy.

•

Conducting regular research and impact assessments for operated assets to better understand the social, environmental, human rights and economic context. This supports us to identify and analyse stakeholder, community and human rights impacts, including modern slavery risks and emerging issues. We also complete due diligence screening on suppliers through our Ethical Supply Chain and Transparency program.

•

Integrating closure into our planning, decision-making and other activities through the life cycle of our operated assets, as set out in our mandatory minimum performance requirements for closure.

FY2021 insights

Our exposure to risks with potentially significant social or environmental impacts increased in FY2021 due to environmental, political and regulatory developments, and increasing societal expectations, including of regulators and other stakeholders on Indigenous peoples’ rights and potential impacts of our operations throughout the asset life cycle. We believe the nexus between water, climate change, biodiversity and society is becoming increasingly clear as a driver of social expectations.

Further information

•

Section 1.12 People and culture

•

Section 1.13.8 Community

•

Section 1.13.10 Indigenous peoples

•

Section 1.13.11 Social investment

•

Section 1.13.12 Environment

•

Section 1.13.13 Water

•

Section 1.13.14 Land and biodiversity

•

bhp.com/sustainability

Low-carbon

transition

Risks associated with the transition to a

low-carbon

economy.

Examples of potential opportunities

•

Our copper, nickel, iron ore and metallurgical coal provide essential building blocks for renewable power generation and electric vehicles, and can play an important part in the transition to a

low-carbon

economy.

•

Our potash fertiliser options can promote more efficient and more profitable agriculture and alleviate the increased competition for arable land.

•

Increased collaboration with customers and original equipment manufacturers, such as BHP’s partnerships with each of China Baowu, JFE and HBIS for research and development of steel decarbonisation pathways, can provide opportunities for development of new products and markets.

Key management actions

•

Establishing public views and commitments on, and mandatory minimum performance requirements for managing, climate change threats and opportunities, which are set out in our Climate Change Position Statement, our Climate Change Report 2020, our Climate Transition Action Plan 2021 and the

Our Requirements for Environment and Climate Change

standard.

•

Using climate-related scenarios, themes and signposts (such as monitoring policy, regulatory, legal, technological, market and other societal developments) to evaluate the resilience of our portfolio and inform our strategy.

•

Considering transition risks (including carbon prices) when making capital expenditure decisions or allocating capital through our Capital Allocation Framework, supporting the prioritisation of capital and investment approval processes.

•

Seeking to mitigate our exposure to risks arising from policy and regulation in our operating jurisdictions and markets by reducing our operational emissions and taking a product stewardship approach to emissions in our value chain.

•

Advocating for the introduction of an effective, long-term policy framework that can deliver a measured transition to a

low-carbon

economy.

FY2021 insights

Our exposure to transition risks increased in FY2021 due primarily to political developments – with the Biden administration renewing the United States’ focus on climate and net zero goals set by China, Japan and the European Union – and greater investor and other stakeholder interest in understanding how climate change might impact our strategy and portfolio. Stakeholder expectations of BHP regarding disclosure of climate change-related information have grown accordingly (for example, Climate Action 100+ requested information from BHP to conduct its first net zero company benchmark in FY2021). Actions by investors and proxy advisers seeking to hold companies accountable for their climate strategies also accelerated during FY2021. We anticipate these and potentially other factors will continue to affect transition risks in FY2022, following publication in August 2021 of the first part of the Intergovernmental Panel on Climate Change’s Sixth Assessment Report, Climate Change 2021: The Physical Science Basis. However, our recent proposed portfolio changes would, subject to their completion, reduce our exposure to certain transition risks.

Further information

•

Section 1.5 Positioning for future

•

Section 1.13.7 Climate change and portfolio resilience

•

BHP Climate Change Report 2020

•

BHP Climate Transition Action Plan 2021

•

bhp.com/climate

Adopting technologies and maintaining digital security

Risks associated with adopting and implementing new technologies, and maintaining the effectiveness of our existing digital landscape (including cyber defences) across our value chain.

Examples of potential opportunities

•

Application of digital solutions across our operations and value chain may unlock greater productivity and safety performance. For example, using predictive analytics to enable operations to identify asset condition and efficiencies may improve safety, production and equipment availability, and reduce maintenance and other costs.

•

Technology solutions to reduce emissions may support BHP and our suppliers and customers in achieving climate action targets. For example, BHP is collaborating with other miners and suppliers to develop new technology to electrify haul trucks.

•

Developing and applying artificial intelligence in mine planning, remote operation and advanced robotic technologies may identify or provide access to previously unknown or inaccessible deposits and development of

end-to-end

autonomous mining systems.

•

Using digital simulations and predictive trend modelling may enable us to optimise the deployment of new technologies, such as automation and electrification, support early identification of process variances and faults, and support the marketing of our products to customers.

Key management actions

•

Our assets, functions and projects are responsible for managing localised or project-specific exposure to technology risks. Enterprise-level risks that are specific to technology, such as those that pose a greater threat to our wider business and strategic opportunities, are generally managed by our global Technology team and other relevant stakeholders to support delivery of our technology strategy.

•

We collaborate with industry and research partners to develop technological solutions.

•

Our Technology Risk Committee oversees the management and improvement of technology risks and controls, and supports the embedment of a sustainable risk culture in our Technology team.

•

We employ a number of measures designed to protect against, detect and respond to cyber events or attacks, including BHP’s mandatory minimum performance requirements for technology and cybersecurity, cybersecurity performance requirements for suppliers, cybersecurity strategy and resilience programs, an enterprise security framework and cybersecurity standards, cybersecurity awareness plans and training, security assessments and monitoring, restricted physical access to hardware and crisis management plans.

FY2021 insights

Risks associated with technology and the pace of technological innovation continue to evolve rapidly. The Group’s exposure to technology risks increased in FY2021 due primarily to an increase in the frequency and sophistication of cyberattacks against companies in the resources industry and governments. BHP continues to leverage technology to deliver value while taking actions to manage associated risks and strengthening cyber capabilities. During FY2021, we implemented programs to enable rapid technology development, improve operational performance and to create new analytic capabilities.

Further information

•

Section 1.6.2 How we deliver value – Technology

Ethical misconduct

Examples of potential opportunities

•

Our capability to manage ethical misconduct risks may expand portfolio growth options by providing greater assurance that we can operate legally and ethically in high-risk jurisdictions.

•

Managing ethical risks in line with societal and stakeholder expectations may distinguish BHP from competitors and enhance our ability to raise capital, attract and retain talent, obtain permits, partner with external organisations or suppliers, or market our products to customers.

Key management actions

•

Setting the ‘tone from the top’ through

Our Charter

, which is central to our business and describes our purpose, values and how we measure success.

•

Implementing internal policies, standards, systems and processes for governance and compliance to support an appropriate culture at BHP, including:

•

Our Code of Conduct

and BHP’s mandatory minimum performance requirements for business conduct, market disclosure and other matters

•

training on

Our Code of Conduct

and in relation to anti-corruption, market conduct and competition

•

ring fencing protocols to separate potentially competitive businesses within BHP

•

governance and compliance processes, including classification of sensitive transactions, as well as accounting, procurement and other internal controls, and tailored monitoring of control effectiveness

•

oversight and engagement with high-risk areas by our Ethics and Compliance function, Internal Audit and Advisory team and the Disclosure Committee

•

review and endorsement by our Ethics and Compliance function of the highest-risk transactions, such as gifts and hospitality, engagement of third parties, community donations and sponsorships above defined thresholds

•

automated counterparty and transaction screening against lists of entities subject to trade sanctions

•

our EthicsPoint anonymous reporting service, supported by an ethics and investigations framework and central investigations team

•

Continuing to enforce

Our Code of Conduct

via appropriate investigations and responses including disciplinary action, in addition to deployment of appropriate safety controls to prevent harm.

FY2021 insights

Our exposure to ethical misconduct risks increased in FY2021, including due to continued exploration of potential growth options in high-risk or less economically developed jurisdictions and escalating trade sanctions or equivalent measures (in particular, among China and Australia and the United States). Societal expectations have also increased – stakeholder dissatisfaction in response to other companies’ executive misconduct and failures to uphold corporate or societal values demonstrate the importance of implementing and maintaining effective preventative controls and responding to inappropriate conduct in a timely manner.

Further information

•

Our Charter

and

Our Code of Conduct

•

Section 2.1.15 Our conduct – EthicsPoint

•

Section 2.1 Corporate Governance Statement

•

Section 1.13.5 Health – Sexual assault and sexual harassment

•

Section 1.13.6 Ethics and business conduct

Inadequate business resilience

Examples of potential opportunities

•

Risk identification and management supports proactive, focused and prioritised deployment of resources to reduce exposure to adverse events. It may be used to inform priorities and strategies across BHP, supporting a proportionate and cost-effective response, which could provide a competitive advantage at a regional or global level.

•

Building wider organisational resilience may help us to mitigate the impacts of unforeseeable adverse events. For example, processes may be redesigned to enhance resilience to adverse events, such as pandemics.

•

Adapting to climate change across our operations and value chain could position BHP as a supplier of choice and provide competitive advantage (for example, by fulfilling our commitment to security of supply). Support for climate vulnerable communities and ecosystems may also improve our social value proposition.

Key management actions

•

Implementing Group-wide controls to enhance business resilience, including BHP’s mandatory minimum performance requirements for security, crisis and emergency management and business continuity plans.

•

Monitoring our current state of readiness (preparedness, redundancy and resilience), including through scenario analysis, to respond to and recover from adverse events to support organisational capability in our operations, functions and senior management to effectively and efficiently respond to events should they materialise.

•

Monitoring the external environment, including political and economic factors through signal monitoring, our geopolitical monitoring and public policy frameworks and our enterprise-level watch list of emerging themes, to support early identification of policy changes or adverse events for which we may need to increase preparedness.

•

Identifying security threats that could directly or indirectly impact our operations and people in countries of interest to BHP. For example, a review of BHP’s global security program was undertaken in FY2021 to better understand our security position and identify potential improvements.

•

Implementing our Climate Change Adaptation Strategy, including requiring operated assets and functions to identify and progressively assess potential physical climate change risks (including to our value chain) and build climate change adaptation into their plans, activities and investments.

FY2021 insights

Our exposure to risks associated with inadequate business resilience grew in FY2021 due to the increasing frequency and scale of crisis events, such as extreme temperatures and weather events being experienced globally and the continuing global impacts of the

COVID-19

pandemic. While the impacts on BHP have been relatively minor to date, sustained or increased geopolitical tensions, the pandemic and nationalist sentiment may exacerbate the drivers of conflict, instability and unrest, including existing inequality within and between nations. This could increase the likelihood of more significant events that can have a greater impact on our business, such as social unrest and conflict (including war and terrorism).

Further information

•

bhp.com/climate

1.16.2 Robust risk assessment and viability statement

The Board has carried out a robust assessment of BHP’s emerging and principal risks, including those that could result in events or circumstances that might threaten BHP’s business model, future performance, solvency or liquidity and reputation.

The Board has assessed the prospects of BHP over the next three years, taking into account our current position and principal risks.

The Board believes a three-year viability assessment period is appropriate for the following reasons. BHP has a

two-year

budget, a five-year plan and a longer-term life of asset outlook. As highlighted in the ‘Risk factors’ section, there is considerable uncertainty in the external environment (which has been amplified by the

COVID-19

pandemic), including due to political and policy uncertainty, evolving stakeholder expectations (for example, in relation to the environment, climate change and human rights), civil unrest or reform in some countries in which we operate, continued market volatility and geopolitical tensions that could affect our ability to access key markets. This could lead to changes to our regulatory environment and stakeholder expectations of our business, increase the risk of commodity price volatility and also affect the longer-term supply, demand and price of our commodities. These factors result in variability in plans and budgets. A three-year period strikes an appropriate balance between long and short-term influences on performance.

The viability assessment took into account, among other things:


• BHP’s commodity price protocols • the latest funding and liquidity update • the long-dated maturity profile of BHP’s debt and the maximum debt maturing in any one year • the flexibility in BHP’s capital and exploration expenditure programs under the Capital Allocation Framework • the reserve life of BHP’s minerals assets and the reserves-to-production life of BHP’s oil and gas assets		• the Group-level material risk profile (including climate-related risks) and the mitigating actions available should particular risks materialise • any actual and further anticipated impacts of the COVID-19 pandemic on BHP’s two-year budget and five-year plan

The Board’s assessment also took into account reverse stress testing of the Group’s balance sheet to determine the additional levels of debt it could support on forecast commodity prices, as well as the cyclical low price case used in monthly balance sheet stress testing. Results were compared against assessed financial impacts for all material risks recorded on the Group’s risk profile, enabling the Board to consider the resilience of the balance sheet in the context of identified threats.

In addition, the balance sheet was stress tested against three hypothetical scenarios. Each scenario modelled two or three hypothetical events, based on our principal risks, occurring simultaneously towards the start of FY2022. Scenarios were designed without regard to the effectiveness of preventative controls and reflect market, operational, and a combination of market and operational risks. The simultaneous occurrence of all four events was not considered plausible. Further details are set out in the table below.


		Scenario
Principal risk	Hypothetical event	A	B	C
Operational events	Offshore well blow out involving a drilling rig that we operate in the US Gulf of Mexico		•	•
Operational events	Catastrophic failure of a tailings storage facility at an operated asset in Australia		•
Accessing key markets	Temporary physical or logistical disruption of access to key markets preventing the sale or delivery of commodities to Asia	•		•
Optimising portfolio returns and managing commodity price movements	Low commodity price environment for two years, commencing at the start of the second half of FY2022, followed by a gradual recovery by the end of the first half of FY2026	•		•

A number of our other principal risks may have impacts that are embedded in these scenarios. For example, a cyber event or attack may lead to an operational event, while responses of governments and other stakeholders to a pandemic may result in an economic slowdown and low commodity price environment. For further information on our principal risks, see the ‘Risk factors’ section.

While scenario modelling was undertaken for the duration of BHP’s five-year plan, confidence is higher in the first three years. Stress testing demonstrated the Group’s balance sheet was put under the greatest stress by Scenario C, which reflects both market and operational risks, with net debt expected to increase to approximately US$48 billion over FY2022 to FY2024 (assuming dividends would be suspended in accordance with our Capital Allocation Framework). In such circumstances, the Board considered that the Group would have a number of further mitigating actions available to it which would be expected to allow the Group to limit net debt to approximately US$30 billion over that period, including deferral of discretionary capital expenditure and divestment of certain assets. BHP would also have access to US$5.5 billion of credit through its revolving credit facility. These mitigating actions would be expected to be sufficient to support minimum investment-grade credit ratings over FY2022 to FY2024.

For the purposes of stress testing, the Board made certain key assumptions regarding management of the portfolio, the alignment of production, capital expenditure and operating expenditure with five-year plan forecasts and the alignment of prices with the cyclical low price case used in monthly balance sheet stress testing.

In making this viability statement, the Board was also mindful of other relevant factors, including key risk indicator performance, monthly balance sheet stress testing against the cyclical low price case, the assessment of the Group’s portfolio against scenarios as part of BHP’s strategy and corporate planning processes, a Board-level risk identification session to help identify key uncertainties facing the Group, and the proposed changes to the Group’s portfolio which are currently expected to complete in FY2022.

(1)

Taking account of these matters (including the assumptions) and our current position and principal risks, the Board has a reasonable expectation that BHP will be able to continue in operation and meet its liabilities as they fall due over the next three years.

1.17 Performance by commodity

Management believes the following information presented by commodity provides a meaningful indication of the underlying financial and operating performance of the assets, including equity accounted investments, of each reportable segment. Information relating to assets that are accounted for as equity accounted investments is shown to reflect BHP’s share, unless otherwise noted, to provide insight into the drivers of these assets.

For the purposes of this financial information, segments are reported on a statutory basis in accordance with IFRS 8 ‘Operating Segments’. The tables for each commodity include an ‘adjustment for equity accounted investments’ to reconcile the equity accounted results to the statutory segment results.

For a reconciliation of alternative performance measures to their respective IFRS measure and an explanation as to the use of Underlying EBITDA in assessing our performance, refer to section 4.2. For the definition and method of calculation of alternative performance measures, refer to section 4.2.1. For more information as to the statutory determination of our reportable segments, refer to note 1 ‘Segment reporting’ in section 3.

Unit costs

(2)

is one of the financial measures used to monitor the performance of our individual assets and is included in the analysis of each reportable segment.

1.17.1 Petroleum

Detailed below is financial and operating information for Petroleum comparing FY2021 to FY2020. For more detailed financial information on our Petroleum assets, refer to section 4.4.1.


Year ended 30 June US$M	2021		2020
Revenue		3,946		4,070
Underlying EBITDA		2,300		2,207
Net operating assets		7,964		8,247
Capital expenditure		994		909
Total petroleum production (Mmboe)		103		109
Average realised prices
Oil (crude and condensate) (US$/bbl)		52.56		49.53
Natural gas (US$/Mscf)		4.34		4.04
LNG (US$/Mscf)		5.63		7.26

Key drivers of Petroleum’s financial results

Price overview

Trends in each of the major markets are outlined below.

Crude oil

Our average realised sales price for crude oil for FY2021 was US$52.56 per barrel (FY2020: US$49.53 per barrel). Brent crude oil prices steadily increased through FY2021, rising from around US$40/bbl at the beginning of FY2021 to around US$75/bbl at the close. A recovery in business activity and mobility as economies reduced

COVID-19

controls has supported oil demand. Supply side curtailments from OPEC+ and capital restraint from US operators have supported oil inventories to rebalance globally. Demand is expected to continue its recovery to

pre-COVID-19

levels in FY2022. The rate at which currently curtailed supply is expected to come back

on-stream

is uncertain. Longer term, we believe oil will remain attractive, even under a plausible low price case, for a considerable time to come.

(1)	Refer to section 1.5 Positioning for the future, Petroleum business merger proposal and Update on our non-core coal divestment process.

(2)	For more information on Alternative Performance Measures, refer to section 4.2.

Liquefied natural gas

Our average realised sales price for LNG for FY2021 was US$5.63 per Mcf (FY2020: US$7.26 per Mcf). The Japan-Korea Marker (JKM) price for LNG performed strongly in FY2021, hitting an

all-time

high in January 2021 supported by cold weather, recovery in China, high European gas prices, unplanned outages and less incremental supply coming online. Longer term, we expect the commodity to offer a combination of systematic base decline and an attractive demand trajectory, with new supply likely to be required to balance the market in the middle of this decade, or slightly later. However, gas resource is currently abundant and liquefaction infrastructure comes with large upfront costs and extended pay backs. Within global gas, LNG is expected to gain share. Against this backdrop, LNG assets advantaged by their proximity to existing infrastructure or customers, or both, in addition to being at the lower end of the emissions intensity curve, are expected to remain attractive.

Production

Total Petroleum production for FY2021 decreased by 6 per cent to 103 MMboe.

Crude oil, condensate and natural gas liquids production decreased by 6 per cent to 46 MMboe due to natural field decline across the portfolio, a highly active hurricane season in the Gulf of Mexico in the first half of the year and downtime at Atlantis, with

tie-in

activity in the first half of the year and unplanned downtime in the March 2021 quarter. These impacts were partially offset by the earlier than scheduled achievement of first production from the Atlantis Phase 3 project in July 2020 and the additional working interest acquired in Shenzi, completed on 6 November 2020.

Natural gas production decreased by 5 per cent to 341 bcf, reflecting planned shutdowns at Angostura related to the Ruby

tie-in,

lower gas demand at Bass Strait and natural field decline across the portfolio. The decline was partially offset by improved reliability at Bass Strait and higher domestic gas sales at Macedon.

For more information on individual asset production in FY2021, FY2020 and FY2019, refer to section 4.5.

Financial results

Petroleum revenue for FY2021 decreased by US$0.1 billion to US$3.9 billion reflecting lower production offset by higher average realised prices.

Underlying EBITDA for Petroleum increased by US$0.1 billion to US$2.3 billion. Price impacts, net of price-linked costs, increased

Underlying EBITDA by US$0.3 billion but were partially offset by the impacts of lower production of US$0.2 billion. Controllable cash costs decreased by US$43 million reflecting lower maintenance activity at our Australian assets due to

COVID-19

restrictions and lower exploration seismic activity. This was partially offset by higher workover activity at Atlantis, restructuring costs related to improving future competitiveness and increased business development activity in Mexico due to Trion progressing into

pre-feasibility.

Petroleum unit costs increased by 11 per cent to US$10.83 per barrel of oil equivalent due to lower volumes and unfavourable exchange rate movements, partially offset by a reduction in price-linked costs. The calculation of petroleum unit costs is set out in the table below:


Petroleum unit costs (US$M)	FY2021			FY2020
Revenue		3,946			4,070
Underlying EBITDA		2,300			2,207

Gross costs		1,646			1,863

Less: exploration expense		296			394
Less: freight		107			110
Less: development and evaluation		196			166
Less: other (1)		(68	)		131

Net costs		1,115			1,062

Production (MMboe, equity share)		103			109

Cost per Boe (US$) (2)(3)		10.83			9.74

(1)	Other includes non-cash profit on sales of assets, inventory movements, foreign exchange, provision for onerous lease contracts and the impact from revaluation of embedded derivatives in the Trinidad and Tobago gas contract.

(2)	FY2021 based on an exchange rate of AUD/USD 0.75.

(3)	FY2021 excludes COVID-19 related costs of US$0.27 per barrel of oil equivalent that are reported as exceptional items.

Delivery commitments

We have delivery commitments of natural gas and LNG of approximately 1.1 billion Mcf through 2031 and Crude commitments of 9 million barrels through 2024. We have sufficient proved reserves and production capacity to fulfil these delivery commitments.

We have obligation commitments of US$41 million for contracted capacity on transportation pipelines and gathering systems through FY2025, on which we are the shipper. The agreements have annual escalation clauses.

Other information

Drilling

The number of wells in the process of drilling and/or completion as of 30 June 2021 was as follows:

Exploratory wells

Development wells

Total

Gross

Net

(1)

Gross

Net

(1)

Gross

Net

(1)

Australia

–

United States

–

Other

(2)

–

Total

–

(1)	Represents our share of the gross well count.

(2)	Other is comprised of Trinidad and Tobago.

Petroleum

BHP’s net share of capital development expenditure in FY2021, which is presented on a cash basis within this section, was US$994 million (FY2020: US$909 million). While the majority of the expenditure in FY2021 was incurred by operating partners at our Australian and Gulf of Mexico

non-operated

assets, we also incurred capital expenditure at our operated Australian, Gulf of Mexico, and Trinidad and Tobago assets.

Australia

BHP’s net share of capital development expenditure in FY2021 was US$197 million. The expenditure was primarily related to:

•

Scarborough gas field development

•

North West Shelf: Greater Western Flank 3 and Lambert Deep subsea tie back development, Karratha Gas Plant refurbishment projects and facility integrity projects

•

Bass Strait: West Barracouta subsea tie back development

Gulf of Mexico

BHP’s net share of capital development expenditure in FY2021 was US$599 million. The expenditure was primarily related to:

•

Atlantis: execution of approved development on Atlantis Phase 3 Project and Brownfield subsea tie back to existing Atlantis facility in Gulf of Mexico

•

Mad Dog: execution phase of Phase 2 development

•

Shenzi: Drilling of Shenzi North and ongoing infill drilling

Trinidad and Tobago

BHP’s net share of capital development expenditure in FY2021 was US$152 million. The expenditure was primarily related to:

•

Ruby: execution of approved development of Block 3a resources in the Ruby and Delaware reservoirs

Outlook

Production is expected to be between 99 and 106 MMboe in FY2022, reflecting a full year of the additional 28 per cent working interest acquired in Shenzi, increased production at Shenzi from infill wells and increased volumes from Ruby following first production in May 2021, offset by natural field decline across the portfolio.

Unit costs in FY2022 are expected to be between US$11 and US$12 per barrel (based on an exchange rate of AUD/USD 0.78) reflecting the expected impact of an increase in exchange rate and expected higher price-linked costs. In the medium term, we expect an increase in unit costs to be maintained at less than US$13 per barrel (based on an exchange rate of AUD/USD 0.78) primarily as a result of expected natural field decline.

Petroleum capital and exploration expenditure of approximately US$2.3 billion is planned in FY2022.

100

On 17 August 2021, the Group announced the proposed merger of our Petroleum assets with Woodside. On completion of the proposed transaction, BHP’s oil and gas business would merge with Woodside, and Woodside would issue new shares to be distributed to BHP shareholders, at which time it is expected that Woodside would be owned 52 per cent and 48 per cent by existing Woodside and BHP shareholders, respectively. The merger, which has a proposed effective date of 1 July 2021, is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent including shareholder, regulatory and other approvals. The Group continues to assess the full financial reporting impacts of the proposed merger. However, the preliminary terms of the merger did not provide an indicator of impairment for our Petroleum assets at 30 June 2021. The merger is expected to be completed during the first half of CY2022, at which time, we would derecognise the carrying value of our Petroleum assets, which at 30 June 2021 included, but was not limited to, property plant and equipment and closure and rehabilitation provisions of approximately US$11.9 billion and US$3.9 billion, respectively. The outlook for our expected production, unit costs and capital and exploration expenditure in FY2022 does not take into account the proposed merger with Woodside.

The comparison for the year ended 30 June 2020 to 30 June 2019 has been omitted from this Form

20-F

and can be found in our Form

20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

1.17.2 Copper

Detailed below is financial and operating information for our Copper assets comparing FY2021 to FY2020. For more detailed financial information on our Copper assets, refer to section 4.4.2.


Year ended 30 June US$M	2021		2020
Revenue		15,726		10,666
Underlying EBITDA		8,489		4,347
Net operating assets		26,928		25,357
Capital expenditure		2,180		2,434
Total copper production (kt)		1,636		1,724
Average realised prices
Copper (US$/lb)		3.81		2.50

Key drivers of Copper’s financial results

Price overview

Our average realised sales price for FY2021 was US$3.81 per pound (FY2020: US$2.50 per pound). Copper rode a wave of investor optimism for much of FY2021, hitting an

all-time

high in May. We believe mine supply and scrap collection will both need to rise to meet demand growth in the medium term. Longer term, traditional

end-use

demand is expected to be solid, while broad exposure to the electrification mega-trend offers attractive upside. Prices are expected to rise compared to historical averages in the long term due to grade decline, resource depletion, increased input costs, water constraints, rising ESG standards, and a scarcity of high-quality future development opportunities after a poor decade for industry-wide exploration. Regulatory risk is an emerging theme across the industry.

Production

Total Copper production for FY2021 decreased by 5 per cent to 1,636 kt.

Escondida copper production decreased by 10 per cent to 1,068 kt as continued strong concentrator throughput of 371 ktpd, at record levels, was more than offset by the impact of expected lower concentrator feed grade and lower cathode production as a result of a reduced operational workforce due to

COVID-19

restrictions.

Pampa Norte copper production decreased by 10 per cent to 218 kt largely due to a decline in stacking feed grade at Spence of 11 per cent, planned maintenance at Spence and the impact of a reduced operational workforce as a result of

COVID-19

restrictions partially offset by the new stream of concentrate production from the Spence Growth Option that came online in December 2020.

Olympic Dam copper production increased by 20 per cent to 205 kt, the highest annual production achieved since our acquisition in 2005, reflecting improved smelter stability and strong underground mine performance. Olympic Dam also achieved record gold production of 146 koz.

Antamina copper production increased 16 per cent to 144 kt and zinc production increased 64 per cent to a record 145 Kt, reflecting both higher copper and zinc head grades.

For more information on individual asset production in FY2021, FY2020 and FY2019, refer to section 4.5.

101

Financial results

Copper revenue increased by US$5.1 billion to US$15.7 billion in FY2021 due to higher average realised Copper prices offset by lower production.

Underlying EBITDA for Copper increased by US$4.1 billion to US$8.5 billion. Price impacts, net of price-linked costs, increased Underlying EBITDA by US$4.3 billion. Lower volumes decreased Underlying EBITDA by US$258 million.

Controllable cash costs increased by US$106 million, due to higher inventory drawdowns at Olympic Dam, from stronger mill and smelter performance compared to the prior period, and at Escondida to offset lower material mined during the period due to a reduced operational workforce. This was partially offset by strong cost performance at Escondida, a US$99 million gain from the optimised outcome from renegotiation of cancelled power contracts at Escondida and Spence, and favourable leach pad inventory movements at Escondida and Spence.

Non-cash

costs decreased by US$273 million due to lower deferred stripping depletion at Escondida, reflecting the planned development phase of the mines. Inflation and foreign exchange rate negatively impacted Underlying EBITDA by US$514 million which was offset by increased equity accounted investment profits attributable to Antamina of US$411 million.

Unit costs at Escondida decreased by 1 per cent to US$1.00 per pound, reflecting continued strong concentrator throughput, at record levels, as well as lower deferred stripping costs and higher

by-product

credits. This also reflects a

one-off

gain from the optimisation of a settlement outcome for the cancellation of power contracts as part of a shift towards 100 per cent renewable energy at Escondida. The strong unit cost result was achieved despite the impact of unfavourable exchange rate movements, a 4 per cent decline in copper concentrate feed grade and lower cathode volumes as a result of a reduced operational workforce due to

COVID-19

restrictions. The calculation of Escondida unit costs is set out in the table below:


Escondida unit costs (US$M)	FY2021		FY2020
Revenue		9,470		6,719
Underlying EBITDA		6,483		3,535

Gross costs		2,987		3,184

Less: by-product credits		478		407
Less: freight		162		178

Net costs		2,347		2,599

Sales (kt)		1,066		1,164
Sales (Mlb)		2,350		2,567

Cost per pound (US$) (1)(2)(3)		1.00		1.01

(1)	FY2021 based on average exchange rates of USD/CLP 746.

(2)	FY2021 excludes COVID-19-related costs of US$0.03 per pound that are reported as exceptional items.

(3)	FY2021 includes a (one off) gain from the optimised outcome from renegotiation of cancelled power contracts of US$0.04 per pound.

Outlook

We expect the operating environment across our Chilean assets to remain challenging, with reductions in our

on-site

workforce expected to continue in FY2022.

Total Copper production of between 1,590 and 1,760 kt is expected in FY2022. Escondida production of between 1,000 and 1,080 kt is expected in FY2022, reflecting a continuing need to catch up on mine development due to reduced material movement in FY2021, as well as uncertainty around

COVID-19

impacts. Decline in the copper grade of concentrator feed in FY2022 is expected to be approximately 2 per cent. Production at Pampa Norte is expected to increase by more than 50 per cent to be between 330 and 370 kt in FY2022, reflecting the continued

ramp-up

of the Spence Growth Option (SGO), partially offset by an expected decline in stacking feed grade at Pampa Norte of approximately 9 per cent. The

ramp-up

to full production capacity at SGO is still expected to take approximately 12 months from first production in December 2020, following which Spence is currently planned to average 300 ktpa of production (including cathodes) over the first four years of operation. At Olympic Dam, production is expected to be between 140 and 170 kt in FY2022 as a result of the planned major smelter maintenance campaign and subsequent

ramp-up

planned between August 2021 and February 2022.

Antamina Copper production is expected between 120 and 140 kt in FY2022.

Escondida unit costs in FY2022 are expected to be between US$1.20 and US$1.40 per pound (based on an average exchange rate of USD/CLP 727) reflecting expected lower

by-product

credits, expected higher costs associated with an approximately 20 per cent increase in material mined required to catch up on mine development due to reduced material movement in FY2021 and study costs to increase optionality at Escondida longer term. This also reflects the inclusion of

COVID-19

costs (treated as an exceptional item in FY2021) and a further decline in concentrator feed grade of approximately 2 per cent. In the medium term, unit cost guidance remains unchanged at less than US$1.10 per pound (based on an exchange rate of USD/CLP 727).

The comparison for the year ended 30 June 2020 to 30 June 2019 has been omitted from this Form

20-F

and can be found in our Form

20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

102

1.17.3 Iron Ore

Detailed below is financial and operating information for our Iron Ore assets comparing FY2021 to FY2020. For more detailed financial information on our Iron Ore assets, refer to section 4.4.3.


Year ended 30 June US$M	2021		2020
Revenue		34,475		20,797
Underlying EBITDA		26,278		14,554
Net operating assets		18,663		18,400
Capital expenditure		2,188		2,328
Total iron ore production (Mt)		254		248
Average realised prices
Iron ore (US$/wmt, FOB)		130.56		77.36

Key drivers of Iron Ore’s financial results

Price overview

Iron Ore’s average realised sales price for FY2021 was US$130.56 per wet metric tonne (wmt) (FY2020: US$77.36 per wmt). Iron ore prices were elevated throughout FY2021, hitting record highs in the second half. Forces contributing to price gains included strong Chinese pig iron production, a rapid recovery in global markets excluding China and a shortage of branded fines products as some iron ore mining companies have been producing towards their lower end of guidance. Medium term, we believe China’s demand for iron ore is expected to be lower than it is today as crude steel production plateaus and the

scrap-to-steel

ratio rises. In the long term, we believe prices are expected to be determined by high cost production, on a

value-in-use

adjusted basis, from Australia or Brazil. Quality differentiation is expected to remain a factor in determining iron ore prices as steelmakers prefer high-quality raw materials for higher productivity and lower-emissions intensity.

Production

Total Iron Ore production increased by 2 per cent to 254 Mt.

WAIO production increased by 1 per cent to a record 252 Mt (284 Mt on a 100% basis) reflecting record production at Jimblebar and Mining Area C, which included first ore from South Flank in May 2021. This was combined with strong operational performance across the supply chain reflecting continued improvements in car dumper performance and reliability, and improved train cycle times. This was achieved despite significant weather impacts, temporary rail labour shortages due to

COVID-19

related border restrictions and the planned Mining Area C and South Flank major

tie-in

activity to integrate South Flank with the Mining Area C processing hub.

Samarco production was 1.9 Mt following the recommencement of iron ore pellet production at one concentrator in December 2020. For more information on individual asset production in FY2021, FY2020 and FY2019, refer to section 4.5.

Financial results

Total Iron Ore revenue increased by US$13.7 billion to US$34.5 billion in FY2021 reflecting higher average realised prices and production.

Underlying EBITDA for Iron Ore increased by US$11.7 billion to US$26.3 billion including favourable price impacts, net of price-linked costs, of US$12.1 billion. Higher volumes increased Underlying EBITDA by US$148 million. This was partially offset by unfavourable foreign exchange impacts of US$416 million.

Other items such as inflation and

one-off

items negatively impacted Underlying EBITDA by US$63 million.

WAIO unit costs increased by 17 per cent to US$14.82 per tonne due to the impact of a 12 per cent stronger Australian dollar, higher third-party royalties related to higher iron ore prices, incremental costs relating to the

ramp-up

of South Flank and higher labour costs relating to increased planned maintenance partially offset by record production and continued production improvements across the supply chain. The calculation of WAIO unit costs is set out in the table below:


WAIO unit costs (US$M)	FY2021		FY2020
Revenue		34,337		20,663
Underlying EBITDA		26,270		14,508

Gross costs		8,067		6,155

Less: freight		1,755		1,459
Less: royalties		2,577		1,531

Net costs		3,735		3,165

Sales (kt, equity share)		252,052		250,598

Cost per tonne (US$) (1)(2)		14.82		12.63

(1)	FY2021 based on an average exchange rate of AUD/USD 0.75.

(2)	FY2021 excludes COVID-19 related costs of US$0.51 per tonne (including US$0.25 per tonne relating to operations and US$0.26 per tonne of demurrage) that are reported as exceptional items. An additional US$0.12 per tonne relating to capital projects is also reported as an exceptional item.

103

Outlook

WAIO production of between 246 and 255 Mt, or between 278 and 288 Mt on a 100 per cent basis, is expected in FY2022 as WAIO looks to focus on incremental volume growth through productivity improvements. We continue with our program to further improve port reliability and this includes a major maintenance campaign on car dumper one planned for the September 2021 quarter. The Yandi resource has commenced its

end-of-life

ramp-down as South Flank ramps up, and this is expected to continue to provide supply chain flexibility with a lower level of production to continue for a few years.

Samarco production of between 3 and 4 Mt (BHP share) is expected in FY2022.

WAIO unit costs in FY2022 are expected to be between US$17.50 and US$18.50 per tonne reflecting updated guidance exchange rates (based on an exchange rate of AUD/USD 0.78), expected costs associated with the

ramp-up

of South Flank and ramp-down of Yandi, and elevated third-party royalties. This also reflects the inclusion of

COVID-19 costs

(treated as an exceptional item in FY2021). In the medium term, unit costs have been revised to less than US$16 per tonne predominately reflecting a number of uncontrollable factors including updated guidance exchange rates (based on an exchange rate of AUD/USD 0.78), expected higher third-party royalties and forecast higher diesel prices.

The comparison for the year ended 30 June 2020 to 30 June 2019 has been omitted from this Form

20-F

and can be found in our Form

20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

104

1.17.4 Coal

Detailed below is financial and operating information for our Coal assets comparing FY2021 to FY2020. For more detailed financial information on our Coal assets, refer to section 4.4.4.


Year ended 30 June US$M	2021		2020
Revenue		5,154		6,242
Underlying EBITDA		288		1,632
Net operating assets		7,512		9,509
Capital expenditure		579		603
Total metallurgical coal production (Mt)		41		41
Total energy coal production (Mt)		19		23
Average realised prices
Metallurgical coal (US$/t)		106.64		130.97
Hard coking coal (HCC) (US$/t)		112.72		143.65
Weak coking coal (WCC) (US$/t)		89.62		92.59
Thermal coal (US$/t)		58.42		57.10

Key drivers of Coal’s financial results

Price overview

Metallurgical coal

Our average realised sales price for FY2021 was US$112.72 per tonne for hard coking coal (HCC) (FY2020: US$143.65 per tonne) and US$89.62 per tonne for weak coking coal (WCC) (FY2020: US$92.59 per tonne). Metallurgical coal prices faced by Australian producers in the

free-on-board

(FOB) market were weak for most of FY2021. A spike in uncertainty regarding China’s import policy on Australia origin coals distorted the usual trade flows and had a key influence on the market. Demand outside China has been promising supported by strong recovery in the steel sector. Prices rebounded sharply towards the end of FY2021, on multi-regional supply disruptions and trade flow rebalancing. Going forward, while trade flow from Australia into China is inhibited, the metallurgical coal industry could face an uncertain and challenging period ahead. Over time, premium quality coking coals are expected to be particularly advantaged given the drive by steelmakers to improve blast furnace productivity, partly to reduce emissions intensity. We believe a wholesale shift away from blast furnace steelmaking, which requires metallurgical coal, is still decades in the future given the high cost of conversion and operation associated with alternative steelmaking technologies.

Energy coal

Our average realised sales price for FY2021 was US$58.42 per tonne (FY2020: US$57.10 per tonne). The Newcastle 6,000 kcal/kg price reached its high for the financial year in June 2021 amid strong demand and disrupted supply. Newcastle 5,500 kcal/kg coal found demand in India and North Asia given import restrictions into China. Longer term, our base case is that total primary energy derived from coal (power and

non-power)

is expected to modestly grow at a compound rate slower than that of global population growth. Under deep decarbonisation scenarios, demand is expected to decline in absolute terms.

Production

Metallurgical coal production decreased by 1 per cent to 41 Mt (73 Mt on a 100 per cent basis). At Queensland Coal strong operational performance, including record production at Goonyella facilitated by record tonnes from Broadmeadow mine, was offset by significant weather impacts across most operations earlier in the year, as well as planned wash plant maintenance at Saraji and Caval Ridge in the first half of the year. At South Walker Creek, despite record stripping, production decreased as a result of higher strip ratios due to ongoing impacts from geotechnical constraints and lower yields.

Energy coal production decreased by 17 per cent to 19 Mt. NSWEC production decreased by 11 per cent to 14 Mt despite increased stripping. This decrease reflects significant weather impacts and higher strip ratios, as well as lower volumes due to an increased proportion of washed coal in response to widening price quality differentials consistent with our strategy to focus on higher quality products, and reduced port capacity following damage to a shiploader at the Newcastle port in November 2020. Cerrejón production decreased by 30 per cent to 5 Mt mainly as a result of a

91-day

strike in the first half of the year and subsequent delays to the restart of production, as well as the impact of a reduced operational workforce due to

COVID-19

restrictions.

For more information on individual asset production in FY2021, FY2020 and FY2019, refer to section 4.5.

105

Financial results

Coal revenue decreased by US$1.1 billion to US$5.2 billion in FY2021 due to lower average realised prices and production.

Underlying EBITDA for Coal decreased by US$1.3 billion to US$288 million including lower price impacts, net of price-linked costs, of US$0.7 billion. Lower volumes decreased Underlying EBITDA by US$168 million. Controllable cash costs increased by US$102 million driven by increased maintenance costs at Queensland Coal (earth moving equipment maintenance and shiploader maintenance at Hay Point port) as well as increased stripping volumes, which was partially offset by cost reduction initiatives at both Queensland Coal and NSWEC.

Other items including lower fuel and energy prices favourably impacted Underlying EBITDA by US$93 million, but were more than offset by US$512 million of foreign exchange losses.

Queensland Coal unit costs increased by 21 per cent to US$82 per tonne, due to the impact of a 12 per cent stronger Australian dollar, higher planned maintenance in the first half of the year, shiploader maintenance at Hay Point, and lower yields and increased stripping volumes at Poitrel and South Walker Creek. This was partially offset by lower fuel and energy costs, driven by lower diesel prices, and cost reduction initiatives.

NSWEC unit costs increased by 14 per cent to US$64 per tonne, due to the impact of a stronger Australian dollar and lower volumes as a result of significant weather impacts, higher strip ratios, an increased proportion of washed coal in response to widening price quality differentials and reduced port capacity following damage to a shiploader at the Newcastle port in November 2020. This was partially offset by lower fuel and energy costs, driven by lower diesel prices, as well as cost reduction initiatives.

The calculation of Queensland Coal’s and NSWEC’s unit costs is set out in the table below:


	Queensland Coal unit costs				NSWEC unit costs
US$M	FY2021		FY2020		FY2021			FY2020
Revenue		4,315		5,357		839			886
Underlying EBITDA		593		1,935		(169	)		(79	)

Gross costs		3,722		3,422		1,008			965

Less: freight		69		147		–			–
Less: royalties		330		498		66			68

Net costs		3,323		2,777		942			897

Sales (kt, equity share)		40,619		41,086		14,626			15,868

Cost per tonne (US$) (1)(2)		81.81		67.59		64.41			56.53

(1)	FY2021 based on an average exchange rate of AUD/USD 0.75.

(2)	FY2021 excludes COVID-19 related costs of US$0.91 per tonne and US$0.40 per tonne that are reported as exceptional items relating to Queensland Coal and NSWEC respectively.

Outlook

Metallurgical coal production is expected to be between 39 and 44 Mt, or 70 and 78 Mt on a 100 per cent basis, in FY2022, as we expect restrictions on coal imports into China to remain for a number of years. Production is expected to be weighted to the second half of the year due to planned wash plant maintenance in the first half of the year. Energy coal production is expected to be between 13 and 15 Mt in FY2022, reflecting the announced divestment of our interest in Cerrejón in June 2021 and that Cerrejón volumes will now be separately reported from 1 July 2021 until transaction completion.

Queensland Coal unit costs are expected to be between US$80 and US$90 per tonne (based on an average exchange rate of AUD/USD 0.78) in FY2022 as a result of expected higher diesel prices, with mine plan optimisation and efficiency uplifts expected to largely offset increased stripping requirements. We remain focused on cost reduction and productivity initiatives, however given the ongoing uncertainty regarding restrictions on coal imports into China we are unable to provide medium-term volume and unit cost guidance.

NSWEC unit costs are expected to be between US$62 and US$70 per tonne (based on an average exchange rate of AUD/USD 0.78) in FY2022 reflecting a continued focus on higher quality products, mine plan optimisation, productivity improvements and cost reduction initiatives.

The comparison for the year ended 30 June 2020 to 30 June 2019 has been omitted from this Form

20-F

and can be found in our Form

20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

106

1.17.5 Other assets

Detailed below is an analysis of Other assets’ financial and operating performance comparing FY2021 to FY2020. For more detailed financial information on our Other assets, refer to section 4.4.5.

Nickel West

Key drivers of Nickel West’s financial results

Price overview

Our average realised sales price for FY2021 was US$16,250 per tonne (FY2020: US$13,860 per tonne). The average nickel price in FY2021 was 16 per cent higher than FY2020, benefitting from positive investor sentiment amidst a strong, geographically diverse rebound in

end-use

demand. An announcement by a major nickel producer during the period that it intends to convert some nickel pig iron to nickel matte in Indonesia, thereby making it suitable for use in the battery supply chain, led to a brief correction in March. Prices subsequently rebounded supported by strong demand, multi-region supply disruptions and falling London Metal Exchange stocks. Longer term, we believe that nickel will be a substantial beneficiary of the global electrification mega-trend and that nickel sulphides will be particularly attractive. This is due to their relatively lower cost of production of battery-suitable

class-1

nickel than for laterites, and the favourable position of integrated sulphide operations on the emission intensity curve.

Production

Nickel West production in FY2021 increased by 11 per cent to 89 kt reflecting strong performance from the new mines and improved operational stability following major quadrennial maintenance shutdowns in the prior year.

For more information on individual asset production in FY2021, FY2020 and FY2019, refer to section 4.5.

Financial results

Higher production combined with higher average realised sales prices resulted in revenue increasing by US$356 million to US$1.5 billion in FY2021.

Underlying EBITDA for Nickel West increased by US$296 million to US$259 million in FY2021 reflecting higher prices and volumes, and lower maintenance costs following the major quadrennial shutdowns in the prior year, as well as lower contractor costs following the transition and

ramp-up

of new mines. This was partially offset by unfavourable exchange rate movements and the adverse impacts of the stronger nickel price on third-party concentrate purchase costs.

Potash

Potash recorded an Underlying EBITDA loss of US$167 million in FY2021, and a loss of US$127 million in FY2020.

The comparison for the year ended 30 June 2020 to 30 June 2019 has been omitted from this Form

20-F

and can be found in our Form

20-F

for the fiscal year ended 30 June 2020, filed on 22 September 2020.

1.17.6 Impact of changes to commodity prices

The prices we obtain for our products are a key driver of value for BHP. Fluctuations in these commodity prices affect our results, including cash flows and asset values. The estimated impact of changes in commodity prices in FY2021 on our key financial measures is set out below.


	Impact on profit after taxation from Continuing operations (US$M)		Impact on Underlying EBITDA (US$M)
US$1/bbl on oil price		24		35
US¢1/lb on copper price		23		33
US$1/t on iron ore price		163		233
US$1/t on metallurgical coal price		24		35
US$1/t on energy coal price		9		13
US¢1/lb on nickel price		1		1

1.18 Other information

1.18.1 Company details and terms of reference

Refer to page i for further information.

1.18.2 Forward-looking statements

Refer to page i for further information.

107

Section 2

Governance at BHP

In this section:


2.1	Corporate Governance Statement	110

2.1.1	Chair’s letter	110

2.1.2	Board of Directors and Executive Leadership Team	112

	Board of Directors	112

	Executive Leadership Team	115

2.1.3	BHP governance structure	116

2.1.4	Board and Committee meetings and attendance	117

2.1.5	Key Board activities during FY2021	118

2.1.6	Stakeholder engagement	120

	Shareholder engagement	120

	Workforce engagement	123

2.1.7	Director skills, experience and attributes	124

2.1.8	Board evaluation	127

2.1.9	Nomination and Governance Committee Report	127

2.1.10	Risk and Audit Committee Report	130

2.1.11	Sustainability Committee Report	137

2.1.12	Remuneration Committee Report	138

2.1.13	Risk management governance structure	139

2.1.14	Management	139

2.1.15	Our conduct	140

2.1.16	Market disclosure	140

2.1.17	Conformance with corporate governance standards	141

2.1.18	Additional UK disclosure	143

2.2	Remuneration Report	143

2.2.1	Annual statement by the Remuneration Committee Chair	145

108



2.2.2	Remuneration policy report	150

	Remuneration policy for the Executive Director	150

	Remuneration policy for Non-executive Directors	157

2.2.3	Annual report on remuneration	159

	Remuneration for the Executive Directors (the CEOs)	159

	Remuneration for other Executive KMP (excluding the CEO)	171

	Remuneration for Non-executive Directors	174

	Remuneration governance	176

	Other statutory disclosures	177

2.3	Directors’ Report	184

2.3.1	Review of operations, principal activities and state of affairs	185

2.3.2	Share capital and buy-back programs	185

2.3.3	Results, financial instruments and going concern	186

2.3.4	Directors	186

2.3.5	Remuneration and share interests	187

2.3.6	Secretaries	188

2.3.7	Indemnities and insurance	188

2.3.8	Employee policies	188

2.3.9	Corporate governance	189

2.3.10	Dividends	189

2.3.11	Auditors	189

2.3.12	Non-audit services	189

2.3.13	Political donations	189

2.3.14	Exploration, research and development	190

2.3.15	ASIC Instrument 2016/191	190

2.3.16	Proceedings on behalf of BHP Group Limited	190

2.3.17	Performance in relation to environmental regulation	190

2.3.18	Share capital, restrictions on transfer of shares and other additional information	191

109

2.1 Corporate Governance Statement

2.1.1 Chair’s letter


		‘ This year BHP achieved some outstanding results, underpinned by strong operational performance and disciplined capital allocation. For the second consecutive year, there were no fatalities at our operated assets. We also created more value for shareholders and continued to contribute to the communities and partners who support our work. ’ Ken MacKenzie Chair

Dear Shareholder,

This year BHP achieved some outstanding results, underpinned by strong operational performance and disciplined capital allocation. For the second consecutive year, there were no fatalities at our operated assets. We also created more value for shareholders and continued to contribute to the communities and partners who support our work.

Strategy and portfolio

Our purpose is to bring people and resources together to build a better world. Our objective is to deliver sustainable long-term value and returns. We do this by owning a portfolio of world-class assets in attractive commodities, operating them exceptionally well, maintaining a disciplined approach to capital allocation and being leaders in sustainability and creating social value.

We are proactively positioning the company for the future with a portfolio and capabilities that will enable us to grow long-term value – the commodities we supply are essential to the world now and in the future. We recently announced an investment of US$5.7 billion in the Jansen Stage 1 potash project in Canada, which opens up a new growth front for BHP. We also announced our intention to merge BHP’s Petroleum business with Woodside to create a top 10 independent oil and gas company with the capability to support the world’s energy needs through the energy transition.

As well as positioning our portfolio for future growth, we have also announced our intention to move from a Dual Listed Company with two parent entities, to a single company structure under BHP Ltd with a primary listing on the Australian Securities Exchange. We believe unification will make BHP more efficient and agile, and better position the company for continued performance and growth.

Culture and capability

Successful delivery of our strategy relies on workforce capability and a strong culture. We believe that supporting our people’s wellbeing, creating and promoting an inclusive and diverse environment for our people to work, and keeping them safe in the workplace is critically important. It is core to our values. In FY2021, this has taken on an even greater emphasis as our workforce and their families and communities have adapted to new ways of working as a result of the pandemic.

This year we have created a simpler Engagement and Perception Survey that runs in

100-day

culture improvement cycles. The Board regularly reviews the results of these surveys and any actions that are taken as a result. We also continue to invest in our leaders and in new talent, through programs like our BHP Operating System learning academies, Operations Services and the FutureFit Academies which have seen us recruit hundreds of new apprentices and trainees into our operations in Australia.

110

Board composition

In FY2021, we continued to renew our Board through our structured Board succession process. The Board regularly assesses its current skills and expected requirements for the future and uses that analysis to establish clear succession plans. In October 2020, Christine O’Reilly and Xiaoqun Clever were appointed to the Board as independent

Non-executive

Directors.

Xiaoqun Clever has more than 20 years’ experience in technology with a focus on software engineering, data and analytics, cyber security and digitalisation. She held various roles with SAP SE, Ringier AG and ProSiebenSat.1 Media SE. She currently serves on the boards of Capgemini SE, Infineon Technologies AG and Amadeus IT Group SA.

Christine O’Reilly has more than 30 years’ experience in finance, public policy and transformational strategy. She held various roles with GasNet Australia Group and Colonial First State Global Asset Management. She currently serves on the boards of Stockland Limited, Medibank Private Limited, Baker Heart and Diabetes Institute, and will join the board of Australia and New Zealand Banking Group Limited from November 2021.

We have also announced the appointment of Michelle Hinchliffe as an independent

Non-executive

Director from 1 March 2022. Ms Hinchliffe has over 30 years’ experience in KPMG’s financial services division and has spent time as a partner and member of the Board of KPMG’s Australian and UK practices. She is currently the UK Chair of Audit for KPMG and will retire from KPMG prior to her appointment.

Susan Kilsby and Anita Frew will retire as BHP Directors at the end of the 2021 Annual General Meetings (AGMs). Susan was appointed as Chair of Fortune Brands in January 2021 and Anita has joined the board of Rolls-Royce Holdings Plc and will become Chair from 1 October 2021. Both directors have stepped down due to the time commitments associated with these new chair roles. I would like to acknowledge and thank both Susan and Anita for their counsel and contribution to BHP and the Board.

We are continuing our renewal process and will look to add a further independent director in 2022.

Shareholder engagement

We are committed to communicating with our shareholders and hearing your views on the company’s performance. We do this through our AGMs, shareholder forums and investor meetings where we engage with investors on key areas of market interest.

Shareholders also have the opportunity to ask questions directly of the Chief Executive Officer, Mike Henry, through shareholder question and answer sessions webcast through BHP’s website.

The Board also engages with investors and considers their perspectives, including through independent survey results, and regularly seeks feedback from other external stakeholders, such as the Forum on Corporate Responsibility, to ensure it is considering all perspectives and effecting positive change.

Conclusion

I am proud that BHP’s people and operations have been resilient, and continued to create value for our shareholders, communities, customers, suppliers and partners.

I look forward to our upcoming AGMs and to engaging with as many shareholders as I can, institutional and retail, throughout the year to hear your views and feedback.

On behalf of the Board, thank you for your continued support.

Ken MacKenzie

Chair

111

2.1.2 Board of Directors and Executive Leadership Team

Board of Directors


Committee Chair	Committee member	Risk and Audit

Nomination and Governance	Remuneration	Sustainability



	Ken MacKenzie BEng, FIEA, FAICD, 57 Independent Non-executive Director since September 2016. Chair since 1 September 2017.		Mike Henry BSc (Chemistry), 55 Non-independent Director since January 2020. Chief Executive Officer since 1 January 2020.


Mr MacKenzie has extensive global and executive experience and a deeply strategic approach, with a focus on operational excellence, capital discipline and the creation of long-term shareholder value. Ken has insight and understanding in relation to organisational culture, the external environment, and emerging issues related to the creation of social value. Ken was the Managing Director and Chief Executive Officer of Amcor Limited, a global packaging company with operations in over 40 countries, from 2005 until 2015. During his 23-year career with Amcor, Ken gained extensive experience across all of Amcor’s major business segments in developed and emerging markets in the Americas, Australia, Asia and Europe. Ken currently sits on the Advisory Board of American Securities Capital Partners LLC (since January 2016) and is a part-time advisor at Barrenjoey (since April 2021).		Mr Henry has over 30 years’ experience in the global mining and petroleum industry, spanning operational, commercial, safety, technology and marketing roles. Mike joined BHP in 2003, initially in business development and then in marketing and trading of a range of mineral and petroleum commodities based in The Hague, where he was also accountable for BHP’s ocean freight operations. He went on to hold various positions in BHP, including President Operations Minerals Australia, President Coal, President HSE, Marketing and Technology, and Chief Marketing Officer. Mike was appointed Chief Executive Officer on 1 January 2020 and has been a member of the Executive Leadership Team since 2011. Prior to joining BHP, Mike worked in the resources industry in Canada, Japan and Australia.

	Terry Bowen BAcct, FCPA, MAICD, 54 Independent Non-executive Director since October 2017.		Malcolm Broomhead AO, MBA, BE, FAICD, 69 Independent Non-executive Director since March 2010.


Mr Bowen has significant executive experience across a range of diversified industries. He has deep financial expertise, and extensive experience in capital allocation discipline, commodity value chains and strategy. Terry was formerly Managing Partner and Head of Operations at BGH Capital and an Executive Director and Finance Director of Wesfarmers Limited. Prior to this, Terry held various senior executive roles within Wesfarmers, including as Finance Director of Coles, Managing Director of Industrial and Safety and Finance Director of Wesfarmers Landmark. Terry is also a former Director of Gresham Partners and past President of the National Executive of the Group of 100 Inc. Terry is currently Chair of the Operations Group at BGH Capital, and a Director of Transurban Group (since February 2020), Navitas Pty Limited and West Coast Eagles Football Club.		Mr Broomhead has extensive experience as a non-executive director of global organisations, and as a chief executive of large global industrial and mining companies. Malcolm has a broad strategic perspective and understanding of the long-term cyclical nature of the resources industry and commodity value chains, with proven health, safety and environment, and capital allocation performance. Malcolm was Managing Director and Chief Executive Officer of Orica Limited from 2001 until September 2005. Prior to joining Orica, he held a number of senior positions at North Limited, including Managing Director and Chief Executive Officer and, prior to that, held senior management positions with Halcrow (UK), MIM Holdings, Peko Wallsend and Industrial Equity. Malcolm is currently Chair of Orica Limited (since January 2016, having served on the board since December 2015). He is also a Director of the Walter and Eliza Hall Institute of Medical Research (since July 2014).

112



	Xiaoqun Clever Diploma in Computer Science and International Marketing, MBA, 51 Independent Non-executive Director since October 2020.		Ian Cockerill MSc (Mining and Mineral Engineering), BSc (Hons.) (Geology), AMP – Oxford Templeton College, 67 Independent Non-executive Director since April 2019.


Ms Clever has over 20 years’ experience in technology with a focus on software engineering, data and analytics, cybersecurity and digitalisation. Xiaoqun was formerly Chief Technology Officer of Ringier AG and ProSiebenSat.1 Media SE. Xiaoqun previously held various roles with SAP SE from 1997 to 2013, including Chief Operating Officer of Technology and Innovation. Xiaoqun was formerly a member of the Supervisory Board of Allianz Elementar Versicherungs and Lebensversicherungs AG (from January 2015 to August 2020). She is currently a Non-executive Director of Capgemini SE (since May 2019) and Amadeus IT Group SA (since June 2020) and on the Supervisory Board of Infineon Technologies AG (since February 2020). She is also a member of the Administrative Board of Cornelsen Group (since October 2019) and the Advisory Board of Nuremberg Institute for Market Decisions e.V. (since June 2019). Xiaoqun is also the Co-Founder and Chief Executive Officer of LuxNova Suisse GmbH (since April 2018).		Mr Cockerill has extensive global mining operational, project and executive experience having initially trained as a geologist. Ian previously served as Chair of BlackRock World Mining Trust plc (from 2016 to May 2019, having served on the board since September 2013), Lead Independent Director of Ivanhoe Mines Ltd (from 2012 to June 2019, having served on the board since August 2011), and a Non-executive Director of Orica Limited (from July 2010 to August 2019) and Endeavour Mining Corporation (from September 2013 to March 2019). Ian was formerly the Chief Executive Officer of Anglo American Coal and Chief Executive Officer and President of Gold Fields Limited, and a senior executive with AngloGold Ashanti and Anglo American Group. He is currently the Chair of Polymetal International plc (since April 2019) and a Non-executive Director of I-Pulse Inc (since September 2010). Ian is a Director of the Leadership for Conservation in Africa and is the Chair of Conservation 360, a Botswanan conservation NGO dealing with anti-poaching initiatives.

	Anita Frew BA (Hons), MRes, Hon. D.Sc, 64 Independent Non-executive Director since September 2015.		Gary Goldberg BS (Mining Engineering), MBA, 62 Independent Non-executive Director since February 2020. Senior Independent Director of BHP Group Plc since December 2020.


Ms Frew has an extensive breadth of non-executive experience in diverse industries, including chemicals, engineering, industrial and finance. In particular, Anita has valuable insight and experience in the creation of value, organisational change, mergers and acquisitions, financial and non-financial risk, and health, safety and environment. Anita was previously the Deputy Chair (from December 2014 to May 2020), Senior Independent Director (from May 2017 to December 2019) and Non-executive Director (from 2010 to May 2020) of Lloyds Banking Group plc. She also previously held the roles of Chair of Victrex Plc and Senior Independent Director of Aberdeen Asset Management Plc and IMI Plc. Anita is currently the Chair of Croda International Plc (since September 2015, having joined the Board in March 2015). She is a Non-executive Director (since 1 July 2021) and Chair designate (commencing from 1 October 2021) of Rolls-Royce Holdings Plc.		Mr Goldberg has over 35 years of global executive experience, including deep experience in mining, strategy, risk, commodity value chain, capital allocation discipline and public policy. Gary served as the Chief Executive Officer of one of the largest gold producers, Newmont Corporation, from 2013 until October 2019. Prior to joining Newmont, Gary was President and Chief Executive Officer of Rio Tinto Minerals, and served in executive leadership roles in Rio Tinto’s coal, gold, copper and industrial minerals businesses. Gary previously served as Vice Chair of the World Gold Council, Treasurer of the International Council on Mining and Metals, and Chair of the National Mining Association in the United States. Gary also has non-executive director experience, having previously served on the board of Port Waratah Coal Services Limited and Rio Tinto Zimbabwe.

113



	Susan Kilsby MBA, BA, 62 Independent Non-executive Director since April 2019.		John Mogford BEng, 68 Independent Non-executive Director since October 2017.


Ms Kilsby has extensive experience in mergers and acquisitions, and finance and strategy, having held several roles in global investment banking. From 1996 to 2014, Susan held senior executive roles at Credit Suisse, including as a Senior Advisor, and Chair of EMEA Mergers and Acquisitions. Susan also has non-executive director experience across multiple industries. She was previously the Chair of Shire plc (from 2014 to January 2019, having served on the board since September 2011) and the Senior Independent Director at BBA Aviation plc (from 2016 to 2019, having served on the Board from April 2012). Susan is currently the Senior Independent Director of Diageo plc (since October 2019 having served on the board since April 2018), Chair of Fortune Brands Home & Security Inc (since January 2021 having served on the board since July 2015) and a Non-executive Director of Unilever plc (since August 2019) and NHS England (since January 2021).		Mr Mogford has significant global executive experience, including in oil and gas, capital allocation discipline, commodity value chains and health, safety and environment. John has also held roles as a non-executive director on a number of boards. John spent the majority of his career in various leadership, technical and operational roles at BP Plc. He was the Managing Director and an Operating Partner of First Reserve, a large global energy focused private equity firm, from 2009 until 2015, during which he served on the boards of First Reserve’s investee companies, including as Chair of Amromco Energy LLC and White Rose Energy Ventures LLP. John retired from the boards of Weir Group Plc and one of First Reserve’s portfolio companies, DOF Subsea AS, in 2018. John is currently a Non-executive Director of ERM Worldwide Group Limited (since 2015).

	Christine O’Reilly BBus, 60 Independent Non-executive Director since October 2020.		Dion Weisler BASc (Computing), Honorary Doctor of Laws, 54 Independent Non-executive Director since June 2020.


Ms O’Reilly has extensive experience in both executive and non-executive roles with deep financial and public policy expertise, as well as valuable experience in large-scale capital projects and transformational strategy. She has over 30 years’ executive experience in the financial and infrastructure sectors, including as the Chief Executive Officer of the GasNet Australia Group and as Co-Head of Unlisted Infrastructure Investments at Colonial First State Global Asset Management. Christine served as a Non-executive Director of Transurban Group (from April 2012 to October 2020), CSL Limited (from February 2011 to October 2020) and Energy Australia Holdings Limited (from September 2012 to August 2018). Christine is currently a Non-executive Director of Stockland Limited (since August 2018), Medibank Private Limited (since March 2014) and Baker Heart and Diabetes Institute (since June 2013), and will join the board of Australia and New Zealand Banking Group Limited from November 2021.		Mr Weisler has extensive global executive experience, including in chief executive officer and operational roles. In particular, Dion has valuable transformation and commercial experience in the global information technology sector, a focus on capital discipline, as well as perspectives on current and emerging ESG issues. Dion served as the President and Chief Executive Officer of HP Inc. from 2015 to 2019, and continued as a Director and Senior Executive Adviser until May 2020. Dion previously held a number of senior executive roles at Lenovo Group Limited. Prior to this, Dion was General Manager Conferencing and Collaboration at Telstra Corporation, and held various positions at Acer Inc., including as Managing Director, Acer UK. Dion is currently a Non-executive Director of Intel Corporation (since June 2020) and Thermo Fisher Scientific Inc. (since March 2017).

	Stefanie Wilkinson BA, LLB (Hons), LLM, 43 Group Company Secretary since March 2021. Ms Wilkinson was appointed Group Company Secretary effective March 2021. Prior to joining BHP, Stefanie was a Partner at Herbert Smith Freehills, a firm she was with for 15 years, specialising in corporate law and governance for listed companies. Earlier in her career, Stefanie was a solicitor at Allen & Overy in the Middle East. Stefanie is a fellow of the Governance Institute of Australia.

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Executive Leadership Team


		Athalie Williams, Chief People Officer (BA (Hons), FAHRI, 51) Ms Williams joined BHP in 2007 and was appointed Chief People Officer in January 2015. Athalie is responsible for delivering innovative people and culture strategies, programs and policies for the Group globally, and ensuring BHP has the right people and capabilities to deliver its strategy. Prior to joining BHP, Athalie was the General Manager Cultural Transformation at NAB and an organisation strategy adviser with Accenture (formerly Andersen Consulting).
		Caroline Cox, Chief Legal, Governance and External Affairs Officer (BA (Hons), MA, LLB, BCL, 51) Ms Cox was appointed Chief Legal, Governance and External Affairs Officer in November 2020. Caroline joined BHP in 2014 as Vice President Legal and was appointed Group General Counsel in 2016 and Group General Counsel & Company Secretary from March 2019. Prior to joining BHP, Caroline was a Partner at Herbert Smith Freehills, a firm she was with for 11 years, specialising in cross-border transactions, disputes and regulatory investigations.
		David Lamont, Chief Financial Officer (BComm, CA, 56) Mr Lamont was appointed Chief Financial Officer in December 2020. Prior to joining BHP David was the Chief Financial Officer of ASX-listed global biotech company CSL Limited. He has also held the positions of CFO and Executive Director at Minerals and Metals Group and has previously served as CFO at OZ Minerals Limited, PaperlinX Limited and Incitec Limited. David held senior roles at BHP between 2001 and 2006, including as CFO of its Carbon Steel Materials and Energy Coal businesses.
		Edgar Basto, President Minerals Australia (BSc, Metallurgy, 54) Mr Basto joined BHP in 1989 and was appointed President Minerals Australia in July 2020. Edgar is responsible for BHP’s iron ore and nickel operations in Western Australia, metallurgical and energy coal in Queensland and New South Wales, and copper in South Australia. Edgar has held key leadership roles across a range of commodities, including as Asset President of Western Australia Iron Ore (WAIO) from March 2016 and Asset President Escondida (Chile) from 2009.
		Geraldine Slattery, President Petroleum (BSc, Physics, MSc, International Management (Oil & Gas), 52) Ms Slattery joined BHP in 1994 and was appointed President Operations, Petroleum in March 2019. Geraldine has more than 25 years of experience with BHP, most recently as Asset President Conventional and prior to that in several senior operational and business leadership roles across the Petroleum business in the United Kingdom, Australia and the United States.
		Johan van Jaarsveld, Chief Development Officer (B.Eng (Chem), MCom, Applied Finance, PhD (Eng), Extractive Metallurgy, 49) Mr van Jaarsveld joined BHP in 2016 and was appointed Chief Development Officer in September 2020. Johan is responsible for strategy, acquisitions and divestments, securing early-stage growth options in future facing commodities, ventures and innovation. Prior to joining BHP, Johan held executive positions in resources and finance, including at Barrick Gold Corporation, Goldman Sachs and The Blackstone Group.
		Laura Tyler, Chief Technical Officer (BSc (Geology (Hons)), MSc (Mining Engineering), 54) Ms Tyler joined BHP in 2004 and was appointed Chief Technical Officer in September 2020. Laura has 17 years of experience with BHP, most recently as Chief Geoscientist and Asset President of Olympic Dam. Prior to joining BHP, Laura worked for Western Mining Corporation, Newcrest Mining and Mount Isa Mines in various technical and operational roles.
		Ragnar Udd, President Minerals Americas (BAppSc (Mining Engineering), MEng, MBA, 49) Mr Udd joined BHP in 1997 and was appointed President Minerals Americas in November 2020. Ragnar has held a number of senior leadership positions across BHP in operations, logistics, projects and technology, including most recently as Acting Chief Technology Officer and Asset President of BHP Mitsubishi Alliance (BMA).
		Vandita Pant, Chief Commercial Officer (BCom (Hons), MBA, Business Administration, 51) Ms Pant joined BHP in 2016 and was appointed Chief Commercial Officer in July 2019. Her global accountabilities include Marketing, Procurement, Maritime, Logistics, Global Business Services, and developing BHP’s views on global commodities markets. Prior to this role, she was Group Treasurer and Head of Europe. Prior to joining BHP, Vandita held a wide range of executive roles with ABN Amro and Royal Bank of Scotland and has lived and worked in India, Singapore, Japan and the United Kingdom.

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2.1.3 BHP governance structure

The Board currently has 12 members. The Directors of BHP, along with their profiles, are listed in section 2.1.2.

The Board believes there is an appropriate combination of Executive and

Non-executive

Directors to promote shareholder interests and govern BHP effectively. The Board has fewer Executive Directors than is common for

UK-listed

companies, but its composition is considered appropriate for the Dual Listed Company structure and is in line with Australian-listed company practice.

The Board has extensive access to members of senior management who frequently attend Board meetings. Management makes presentations and engages in discussions with Directors, answers questions and provides input and perspective on their areas of responsibility. The Chief Executive Officer (CEO) is accountable to the Board for the authority that is delegated to the CEO and for the performance of the Group. The CEO works in a constructive partnership with the Board and is required to report regularly to the Board on progress. The Chief Financial Officer (CFO) also attends all Board meetings. The Board, led by the Chair, also holds discussions in the absence of management at each Board meeting.

The Chair is responsible for leading the Board and ensuring it operates to the highest governance standards. In particular, the Chair facilitates constructive Board relations and the effective contribution of all

Non-executive

Directors.

The Group Company Secretary is accountable to the Board and advises the Chair and, through the Chair, the Board and individual Directors on all matters of governance process.

The role of the Board, as set out in the

Board Governance Document,

to represent shareholders and promote and protect the interests of BHP in the short and long term. The Board considers the interests of the Group’s shareholders as a whole and the interests of other relevant stakeholders.

The

Board Governance Document

is a statement of the practices and processes the Board has adopted to fulfil its responsibilities. It includes the processes the Board has implemented to undertake its own tasks and activities; the matters it has reserved for its own consideration and decision-making; the authority it has delegated to the CEO, including the limits on the way the CEO can execute that authority; and guidance on the relationship between the Board and the CEO.

The matters reserved for the Board include:

•

CEO appointment and determination of the terms of the appointment

•

approval of the appointment of Executive Leadership Team (ELT) members, and material changes to the organisational structure involving direct reports to the CEO

•

strategy, annual budgets, balance sheet management and funding strategy

•

determination of commitments, capital and

non-capital

items, acquisitions and divestments above specified limits

•

performance assessment of the CEO and the Group

•

approving the Group’s values,

Our Code of Conduct

, purpose and risk appetite

•

management of Board composition, processes and performance

•

determination and adoption of documents (including the publication of reports and statements to shareholders) that are required by the Group’s constitutional documents, statute or by other external regulation

The

Board Governance Document

available at bhp.com/governance.

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The Board has established Committees to assist it in exercising its authority, including monitoring the performance of BHP to gain assurance that progress is being made towards our purpose within the limits imposed by the Board. These Committees include the Risk and Audit Committee, the Nomination and Governance Committee, the Remuneration Committee and the Sustainability Committee. Each of these permanent Committees has terms of reference under which authority is delegated by the Board. These are available at bhp.com/governance. Reports from these Committees are set out at sections 2.1.9 to 2.1.12.

2.1.4 Board and Committee meetings and attendance

The Board meets as often as required. During FY2021, the Board met 12 times. The normal schedule, which includes Board meetings in the United Kingdom and in another global office location, was disrupted due to the impacts of the

COVID-19

pandemic. During FY2021, all Board meetings were held virtually. An additional ad hoc meeting was held in FY2021.

Members of the ELT and other members of senior management attend meetings of the Board by invitation, with the CFO attending each meeting.

Each Board Committee provides a standing invitation for any

Non-executive

Director to attend Committee meetings (rather than just limiting attendance to Committee members). Committee agendas and papers are provided to all Directors to ensure they are aware of matters to be considered.

Board and Board Committee attendance in FY2021

Board

Risk and Audit
Committee

Nomination
and Governance
Committee

Remuneration
Committee

Sustainability
Committee

Terry Bowen

12/12

11/11

4/4

(1)

Malcolm Broomhead

12/12

6/6

5/5

Xiaoqun Clever

(2)

8/8

7/7

Ian Cockerill

12/12

11/11

5/5

Anita Frew

12/12

11/11

6/6

Gary Goldberg

12/12

2/2

(3)

6/6

5/5

Mike Henry

12/12

Susan Kilsby

11/12

(4)

4/4

(5)

6/6

(5)

Ken MacKenzie

12/12

6/6

Lindsay Maxsted

(6)

4/4

John Mogford

12/12

4/4

(7)

5/5

Christine O’Reilly

(8)

8/8

7/7

2/2

3/3

(5)

Shriti Vadera

(9)

4.5/4.5

(9)

2/2

2/3

(10)

Dion Weisler

12/12

6/6

Table indicates the number of scheduled and ad hoc meetings attended and held during the period the Director was a member of the Board and/or Committee.

(1)	Terry Bowen became a member of the Nomination and Governance Committee on 2 December 2020.

(2)	Xiaoqun Clever became a member of the Board and the Risk and Audit Committee on 1 October 2020.

(3)	Gary Goldberg became a member of the Nomination and Governance Committee on 1 March 2021.

(4)	Susan Kilsby was unable to attend the Board meeting on 5 May 2021 as the meeting time was rescheduled and Susan had a pre-existing Board commitment. Susan provided detailed comments to the Chair in advance of the meeting.

(5)	Susan Kilsby ceased being a member of the Nomination and Governance Committee on 1 March 2021, and was replaced as Chair of the Remuneration Committee by Christine O’Reilly effective 1 March 2021.

(6)	Lindsay Maxsted retired as a member of the Board and the Risk and Audit Committee on 4 September 2020.

(7)	John Mogford became a member of the Nomination and Governance Committee on 2 December 2020.

(8)	Christine O’Reilly became a member of the Board, the Risk and Audit Committee and the Remuneration Committee on 12 October 2020, and a member of the Nomination and Governance Committee on 1 March 2021.

(9)	Shriti Vadera retired as a member of the Board, the Nomination and Governance Committee and the Remuneration Committee on 15 October 2020. The October Board meeting was held over two days on 13 and 16 October, and Shriti attended the first session prior to her retirement.

(10)	Shriti Vadera was unable to attend the Remuneration Committee meeting on 23 September 2020 due to pre-existing Board commitments. Shriti provided detailed comments to the Chair of the Committee ahead of the meeting.

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2.1.5 Key Board activities during FY2021

Key matters considered by the Board during FY2021 are outlined below.


Chair’s matters	Board composition, succession planning, performance and culture	• CEO and ELT succession • Committee succession • Board composition and succession • Board evaluation • Director training and development • Corporate governance updates • Employee indemnification policy
Strategic matters	Capital allocation (Capital Allocation Framework, capital prioritisation and development outcomes)	• Dividend policy and dividend recommendations • Capital prioritisation and portfolio development options • Capital execution watch list • Capital allocation for pathways to net zero and other social value projects
Strategic matters	Funding (annual budgets, balance sheet management, liquidity management)	• Finance and business performance reports • Two-year budget • Funding updates
	Portfolio and strategy (Group scenarios, commodity and asset review, growth options, approving commitments, capital and non-capital items and acquisitions and divestments above a specified threshold, and geopolitical and macro-environmental impacts)	• Growth projects and transactions • Commodity strategies • Dual Listed Company structure • Strategic roadmap • Risk Appetite Statement • Climate change – approval of commitments and updates on progress against commitments • Climate change – external landscape and risk exposure • Equity alternatives • New world trends post COVID-19 pandemic • COVID-19 updates, including safety measures, wellbeing steps, workforce planning and community support • Samarco strategy, funding and communications • Strategic options for Petroleum • Acquisition of additional interest in Shenzi • Jansen Potash Project • Trion project and Mexico country risk update • Commodity price protocols • China strategy • Chile country update • Economic and geopolitical landscape • Nickel West power purchase agreement • Innovation and technology update • Minerals exploration briefing
	People, culture, social value and other significant items	• Culture and capability, including capability deep dives • Culture dashboard and Engagement and Perception Survey (EPS) results, including actions that will be taken based on the findings • Inclusion and diversity update • Sexual assault and sexual harassment • Payroll review • Cultural heritage review, including in relation to Project Resolution • Shareholder requisitioned resolutions

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Monitoring and assurance matters		Includes matters and/or documents required by the Group’s constitutional documents, statute or by other external regulation		• Investor relations reports, including investor perception survey results • CEO reports, including updates on safety and sustainability, financial and operational performance, external affairs, markets, people and projects • Risk review session • Non-financial risk management • Tailings Storage Facility Policy • Approval of the CEO’s remuneration • Review and approval of half-year and full-year financial results • Review and approval of the Annual Reporting suite and Climate Change Report • Virtual site visits and site visit reports • Director evaluations

Policies and procedures

During FY2021, we transitioned to full compliance with the fourth edition of the ASX Corporate Governance Principles and Recommendations (ASX Fourth Edition) published by the ASX Corporate Governance Council.

We implemented new arrangements in line with the ASX Fourth Edition and reviewed them to ensure they remained in line with the 2018 edition of the UK Corporate Governance Code (UK Code).

In line with the ASX Fourth Edition, BHP also disclosed its Periodic Disclosure – Disclosure Controls

policy, which sets out our process to verify the integrity of the periodic corporate reports we release to the market, including those that are not audited or reviewed by the external auditor (refer to section 2.1.16).

ELT succession

A critical component of succession at the Executive Leadership Team (ELT) level and below is the existence of a robust senior leadership program that operates across multiple organisational levels to build, develop, renew, recruit and promote our leaders. The Board is actively engaged and oversees the development of the senior leadership team.

On 1 December 2020, David Lamont’s appointment as Chief Financial Officer (CFO) took effect. Peter Beaven continued as CFO until 30 November 2020 to provide ongoing leadership through to David’s commencement, and supported David with handover into early CY2021.

In August 2020, the Board approved new roles and appointments on the ELT. Ragnar Udd became President Minerals Americas, effective 1 November 2020, replacing Daniel Malchuk. Daniel continued in the role until that time and left BHP at the end of CY2020. Laura Tyler commenced in the new role of Chief Technical Officer on 1 September 2020. This role is an expansion of her previous position on the ELT as Chief Geoscientist. She relinquished her role as Asset President Olympic Dam. Caroline Cox became Chief Legal, Governance and External Affairs Officer, effective 1 November 2020, replacing Geoff Healy. Geoff continued in the role until that time and left BHP at the end of CY2020. Johan van Jaarsveld commenced in the new role of Chief Development Officer on 1 September 2020.

Culture

The delivery of our strategy is predicated on our culture and capability. The Board, supported by the Committees, considers a range of qualitative and quantitative information in relation to culture at BHP and monitors and assesses culture on an ongoing basis for alignment with our strategy, purpose and values. Board and Committee papers include workforce planning in the context of

COVID-19,

EPS results, inclusion and diversity update, Risk and Audit Committee report-outs on

Our Code of Conduct

investigations, the culture and capability required to execute our strategy, and culture as a part of asset reviews. Recognising our culture cannot be measured using a single number or index, a culture dashboard was developed in FY2021 to provide the Board with an additional tool to monitor our culture. The dashboard includes simple measures to provide key signposts on the health of our culture. This data combined with the EPS results provides the Board with insight on safety, engagement and enablement. The culture dashboard will be further developed over the next year to provide insight into the execution of our strategy.

Directors also gain insights into culture through direct engagement with a cross-section of the workforce where they can gain direct feedback on a range of issues, including

COVID-19

impacts, diversity, health, safety, environment and community (HSEC) topics and social value. For more information, refer to sections 1.14, 2.1.6 and 1.12.

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Climate change

Climate change is a material governance and strategic issue and is routinely on the Board agenda, including as part of strategy discussions, portfolio reviews and investment decisions, risk management oversight and monitoring, and performance against our commitments. The Sustainability Committee assists the Board in overseeing the Group’s climate change performance and governance responsibilities. The Risk and Audit Committee and Sustainability Committee assist the Board with the oversight of climate-related risk management, although the Board retains overall accountability for BHP’s risk profile. Below the level of the Board, key management decisions are made by the CEO and management, in accordance with their delegated authority.

Following discussion by the ELT and Sustainability Committee, in August 2020 the Board approved our medium-term target, Scope 3 emissions goals and the strengthening of links between executive remuneration and climate change performance measures.

For information regarding our approach to climate change and sustainability, refer to sections 1.13.7 and 1.13.1.

2.1.6 Stakeholder engagement

There are multiple ways the views of stakeholders, beyond shareholders, are brought to the Board and its Committees. For example, HSEC updates, site visits (physical and virtual where necessary) involving engagement with community members and government, and engagement with the Forum on Corporate Responsibility. In addition, the Risk and Audit Committee receives reports on engagement with regulators. It also receives reports on material litigation and disputes with third parties and complaints raised through the

speak-up

hotline, EthicsPoint, which allows our workforce to raise concerns in confidence. The strategic framework, focus on social value, our purpose and Risk Appetite Statement reflect the significance of external stakeholders in decision-making.

The Annual Report includes additional information on our stakeholders, including

non-governmental

organisations, how we have elicited the views of stakeholders and the outcomes of our engagements with stakeholders, in particular in relation to the Board’s decision-making. For more information, refer to sections 1.12, 1.13 and 1.14.

Shareholder engagement

Part of the Board’s commitment to high-quality governance is expressed through the approach BHP takes to engaging and communicating with our shareholders. As part of our investor relations program to facilitate effective

two-way

communication with investors, the Board uses formal and informal communication channels to understand and take into account the views of shareholders. BHP provides information about itself and its governance to investors via its website at bhp.com.

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Investor engagement in FY2021


Method of engagement		FY2021 activity
Chair investor meetings The Chair regularly meets with investors to discuss Board priorities and seek shareholder feedback.		Virtual meetings were held in July 2020 between the Chair and investors in Australia, the US, the UK and mainland Europe, with additional meetings held in June 2021. The Chair also held a UK Virtual Shareholder Forum with the CEO in September 2020 to allow shareholders to ask questions in advance of the AGMs. This was arranged after consultation with the UK Shareholders’ Association and ShareSoc.

Live webcasts and Q&A sessions Provides a forum to update shareholders on results or other key announcements.		Annual and half-year results, as well as key announcements are webcast and the materials are made available on our website. The CEO held a shareholder question and answer session in August 2020 via webcast in relation to BHP’s FY2020 performance.

Presentations and briefings Presentation materials are set out on the BHP website.		Presentations delivered relating to our climate change strategy in September 2020, cultural heritage in October 2020, decarbonising steel in November 2020 and tailings storage facilities in June 2021.

Direct engagement Provides a conduit to enable the Board and its Committees to be up to date with investor expectations and continuously improve the governance processes of BHP. We also engage with other capital providers, for example, through meetings with bondholders.		The CEO, CFO, senior management and Investor Relations team held virtual meetings with investors worldwide, including: Australia, Canada, Germany, Hong Kong SAR (China), Japan, Malaysia, Singapore, South Africa, Sweden, United Arab Emirates, the UK and the US. Topics covered include corporate governance and ESG matters, strategy, finance and operating performance. We engaged with investors on cultural heritage issues, including the withdrawn shareholder resolution and our updated approach. This included a number of presentations and investor one-on-one meetings through the first half of FY2021 to set out the detail of our approach to cultural heritage both in the Pilbara and worldwide. We engaged regularly with the Climate Action 100+ lead investors and the broader investor group of the CA100+ on a range of decarbonisation and emissions related topics. We also engaged with the Transparency Pathway Initiative and FTSE Russell about their methodologies relating to the transition and approach to mined commodities. The CEO had a series of meetings with the CEOs and chief investment officers of major investors globally to discuss a range of topics including decarbonisation and the criticality of minerals and metals to the transition. In addition, we engaged with a range of ESG data providers about their methodologies and responded to enquiries on topics including cultural heritage, industry associations, thermal coal, decarbonisation, Scope 3 emissions, diversity and inclusion, tailings dams, Samarco, non-operated joint ventures, biodiversity, water stewardship and COVID-19. The Risk and Audit Committee considered and oversaw management work in relation to a letter from the Institutional Investors Group on Climate Change (IIGCC) setting out ‘investor expectations for Paris-aligned accounts’. The Remuneration Committee also engages with investors on remuneration-related matters. The Chair of the Remuneration Committee wrote an open letter to shareholders and proxy advisers in September 2020, summarising key aspects of BHP’s FY2020 remuneration outcomes and welcoming investor feedback. This letter was published on BHP’s website.

Annual General Meetings Our AGMs provide an opportunity for all investors to question and engage with the Board.		Due to COVID-19 restrictions, the BHP Group Limited AGM for FY2020 was held as a virtual meeting and the BHP Group Plc AGM for FY2020 was held as a closed meeting. A virtual forum for BHP Group Plc shareholders was held in September 2020 to provide an opportunity to hear from the Chair and CEO and to ask questions via a live text facility. BHP Group Plc shareholders were also invited to attend the BHP Group Limited AGM virtually. Information on our AGMs is available at bhp.com/meetings.

We encourage shareholders to make their views known to us. Shareholders can contact us at any time through our Investor Relations team, with contact details available at bhp.com. In addition, shareholders can communicate with us and our registrar electronically.

We facilitate and encourage shareholder participation at our AGMs. These meetings provide an update for shareholders on our performance and offer an opportunity for shareholders to ask questions and vote. Before an AGM, shareholders are provided with all material information in BHP’s possession relevant to their decision on whether or not to elect or

re-elect

a Director.

Proceedings at shareholder meetings are webcast live from our website. Copies of the speeches delivered by the Chair and CEO at the AGMs are released to the relevant stock exchanges and posted on our website. A summary of proceedings and the outcome of voting on the items of business are released to the relevant stock exchanges and posted on our website as soon as they are available. The External Auditor will also be available to answer questions at the AGMs.

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At our AGMs in 2020, resolution 25 (a shareholder-requisitioned resolution to suspend memberships of industry associations that are involved in

COVID-19-related

advocacy that is inconsistent with the goals of the Paris Agreement) received the support of 22 per cent of votes cast.

The key messages received from engagement with shareholders include:

•

an emphasis that BHP constructively influence its trade associations to further enhance the global energy transition

•

ensuring the

COVID-19

pandemic was not used (or seen to be used) as a rationale by associations to impede progress on alignment with the Paris Agreement goals and that the economic recovery measures being considered present a unique opportunity to accelerate clean energy innovation

•

enhancing transparency on the alignment between the policy positions held by BHP and those of industry associations of which BHP is a member is important but not sufficient. If an industry association is advocating for policy changes inconsistent with the goals of the Paris Agreement, companies must take tangible action to drive consistency

We are confident our existing processes, combined with the reforms outlined below, provide strengthened oversight over industry association advocacy and will help ensure our commitment to responsible and constructive advocacy is shared by the associations of which we are a member.

Prior to the 2020 AGMs, BHP announced a series of industry association reforms, including a new set of Global Climate Policy Standards (applicable to BHP in its direct advocacy and also to the associations of which we are a member) and disclosure enhancements, such as publishing a list of material association memberships (including membership fees) on our website. Since the AGMs, BHP has continued to work to implement the reforms announced in August 2020. This has included:

•

working with the minerals sector associations of which BHP is a member in Australia (i.e. the Minerals Council of Australia (MCA) and the various state-based minerals sector associations) to develop and agree an advocacy protocol. This protocol delineates the policy areas on which the associations will advocate, having regard to their jurisdictional responsibilities

•

working with the key associations of which BHP is a member in Australia (i.e. the MCA, the various state-based minerals sector associations, the Australian Petroleum Production and Exploration Association (APPEA) and the Business Council of Australia (BCA)) to develop plans outlining their expected advocacy priorities and activities for the coming year. These plans are now available on the websites of the respective associations or will soon be available pending board approval by the relevant associations

•

implementing BHP’s new model of disclosing material departures from our Global Climate Policy Standards in ‘real time’ on the BHP website

BHP has also played an active role in shaping the policy advocacy of its industry associations. This has included working with other members to:

•

change the American Petroleum Institute’s position on methane regulation and carbon pricing

•

update the APPEA’s climate change policy principles (which now call for Australia to achieve net zero emissions by 2050)

•

enable the BCA to provide

in-principle

support for the Climate Change (National Framework for Adaptation and Mitigation) Bill 2020 that was introduced before the Australian Parliament in November 2020

We will be conducting our next industry association review in CY2022. Consistent with BHP’s culture of continuous improvement, we will work to strengthen the review process. More information on our approach to industry associations is available at bhp.com.

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Workforce engagement

Our global workforce is the foundation of our business and we believe supporting the wellbeing of our people and promoting an inclusive and diverse culture are vital for maintaining a competitive advantage. The Board considers effective workforce engagement a key element of its governance and oversight role.

The Board has arrangements in place for managing workforce engagement. The Board and its Committees receive information related to the workforce through a range of channels, including direct engagement at Board and Committee meetings and site visits, the Employee Perception Survey (EPS) findings, culture dashboard insights, gender pay gap reports and updates from the Chief Executive Officer and the Chief People Officer.

Alongside section 1.14, the table below further describes the ways the Board engaged with our workforce in FY2021 and how workforce considerations impacted key decisions.

Having reviewed these workforce engagement arrangements in FY2021, the Board considers these arrangements to be effective as they enable the Board to hear first-hand from a cross-section of the workforce and to engage with them interactively (e.g. during site visits and Board and Committee meetings), with the opportunity to consider the feedback received in subsequent Board discussions.


Engagement practice		Description
Site visits		Directors participated in site visits (many of these were virtual in FY2021 due to COVID-19 travel restrictions) to engage directly with a cross-section of the workforce. These engagements deliberately included a cross-section of staff in various regions and provide insight into matters that are front of mind for Directors and the workforce. For more information, refer to section 2.1.9.

Board and Committee meetings		Directors hear from employees, up to several levels below the CEO, at each Board and Committee meeting. Topics raised by employees include the health and safety of our people, culture, ethics and compliance, workforce relations, sexual assault and sexual harassment, response to COVID-19, our purpose, social value, conduct concerns and diversity.

EthicsPoint		Members of our workforce are able to raise matters of concern through our 24-hour speak-up helpline, EthicsPoint (refer to sections 1.13.6 and 2.1.15). This helps to ensure Board oversight of culture and management response to serious conduct contrary to Our Charter and Our Code of Conduct .

Employee survey results and culture dashboard		Metrics from the EPS and culture dashboard provide Directors with insight into our culture and areas of focus, including where we are lagging in certain measures. The EPS was redesigned in FY2021 to include more targeted questions and a new survey platform to provide leaders with greater insight into the key metrics related to safety, engagement and enablement, which were identified as critical foundations for our performance culture. The culture dashboard was also developed in FY2021 to provide key signposts on the health of our culture.

Management engagement through webcasts, Q&A sessions and emails		Management regularly engages with the workforce through a range of formal and informal channels, including webcasts, live Q&A sessions and emails from the CEO and other ELT members. Live Q&A sessions were particularly helpful in providing an opportunity for employees to ask questions of our leaders and receive responses in real time.

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2.1.7 Director skills, experience and attributes

Overarching statement of Board requirements

The BHP Board will be diverse in terms of gender, nationality, geography, age, personal strengths and social and ethnic backgrounds. The Board will comprise Directors who have proven past performance and the level of business, executive and

non-executive

experience required to:

•

provide the breadth and depth of understanding necessary to effectively create long-term shareholder value

•

protect and promote the interests of BHP and its social licence to operate

•

ensure the talent, capability and culture of BHP to support the long-term delivery of our strategy

Attributes and commitment to role

All Directors are expected to comply with

Our

Code of Conduct,

act with integrity, lead by example and promote the desired culture.

The Board believes each

Non-executive

Director has demonstrated the attributes of sufficient time to undertake the responsibilities of the role; honesty and integrity; and a preparedness to question, challenge and critique throughout the year through their participation in Board meetings, as well as the other activities that they have undertaken in their roles.

In accordance with provision 15 of the UK Code, during FY2021 the Board considered Ken MacKenzie’s appointment as a part-time adviser at Barrenjoey and approved it on the basis that it did not consider it adversely impacted his role or commitment to BHP. In particular, the Board noted it was not an executive role and Mr MacKenzie committed to the Board that BHP would remain Mr MacKenzie’s number one priority. It was also agreed that Barrenjoey will not advise BHP and that Mr MacKenzie himself will not advise on transactions or advise BHP competitors or our significant customers or suppliers.

Skills matrix

The Board skills matrix identifies the skills and experience the Board needs for the next period of BHP’s development, considering BHP’s circumstances and the changing external environment as referred to above.

The Board collectively possesses all the skills and experience set out in the skills matrix, and each Director satisfies the Board requirements and attributes discussed above. For more information on the individual skills and attributes of the Directors, refer to section 2.1.2.

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Skills and experience	Board
Total Directors		12

Mining		4

Senior executive who has deep operating or technical mining experience with a large company operating in multiple countries; successfully optimised and led a suite of large, global, complex operating assets that have delivered consistent and sustaining levels of high performance (related to cost, returns and throughput); successfully led exploration projects with proven results and performance; delivered large capital projects that have been successful in terms of performance and returns; and a proven record in terms of health, safety and environmental performance and results.

Oil and gas Senior executive who has deep technical and operational oil and gas experience with a large company operating in multiple countries; successfully led production operations that have delivered consistent and sustaining levels of high performance (related to cost, returns and throughput); successfully led exploration projects with proven results and performance; delivered large capital projects that have been successful in terms of performance and returns; and a proven record in terms of health, safety and environmental performance and results.		2

Global experience Global experience working in multiple geographies over an extended period of time, including a deep understanding of and experience with global markets, and the macro-political and economic environment.		10

Strategy Experience in enterprise-wide strategy development and implementation in industries with long cycles, and developing and leading business transformation strategies.		11

Risk Experience and deep understanding of systemic risk and monitoring risk management frameworks and controls, and the ability to identify key emerging and existing risks to the organisation.		12

Commodity value chain expertise End-to-end value or commodity chain experience – understanding of consumers, marketing demand drivers (including specific geographic markets) and other aspects of commodity chain development.		8

Financial expertise Extensive relevant experience in financial regulation and the capability to evaluate financial statements and understand key financial drivers of the business, bringing a deep understanding of corporate finance, internal financial controls and experience probing the adequacy of financial and risk controls.		12 (1)

Relevant public policy expertise Extensive experience specifically and explicitly focused on public policy or regulatory matters, including ESG (in particular climate change) and community issues, social responsibility and transformation, and economic issues.		5

Health, safety, environment and community Extensive experience with complex workplace health, safety, environmental and community risks and frameworks.		10

Technology Recent experience and expertise with the development, selection and implementation of leading and business transforming technology and innovation, and responding to digital disruption.		5

Capital allocation and cost efficiency Extensive direct experience gained through a senior executive role in capital allocation discipline, cost efficiency and cash flow, with proven long-term performance.		11

(1)	Twelve Directors meet the criteria of financial expertise outlined above. The Risk and Audit Committee Report contains details of how its members meet the relevant legal and regulatory requirements in relation to financial experience.

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Board skills and experience: Climate change

Board members bring experience from a range of sectors, including resources, energy, finance, technology and public policy. The Board also seeks the input of management and other independent advisers. This equips them to consider potential implications of climate change on BHP and its operational capacity, as well as understand the nature of the debate and the international policy response as it develops. In addition, there is a deep understanding of systemic risk and the potential impacts on our portfolio.

The Board has taken measures designed to ensure its decisions are informed by climate change science and expert advisers. The Board seeks the input of management (including Dr Fiona Wild, our Vice President Sustainability and Climate Change) and other independent advisers. In addition, our Forum on Corporate Responsibility (which includes Don Henry, former CEO of the Australian Conservation Foundation and Changhua Wu, former Greater China Director, the Climate Group) advises operational management teams and engages with the Sustainability Committee and the Board as appropriate.

For more information, refer to section 1.13.7.

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2.1.8 Board evaluation

The Board is committed to transparency in assessing the performance of Directors. The Board conducts regular evaluations of its performance, the performance of its Committees, the Group Chair, Directors and the governance processes that support the Board’s work.

The evaluation considers the balance of skills, experience, independence and knowledge of the Group and the Board, its diversity, including gender diversity, and how the Board works together as a unit.

An evaluation was conducted during the year in accordance with this process. More information is provided below.

Director review

In FY2021, an assessment was conducted of Directors’ performance with the assistance of an external service provider (Lintstock). Lintstock does not have any other connection with the Group or individual Directors.

The assessment of Directors focused on the contribution of each Director to the work of the Board and its Committees, and the expectations of Directors as set out in BHP’s governance framework. In addition, the assessment focused on how each Director contributes to Board cohesion and effective relationships with fellow Directors, commits the time required to fulfil their role and effectively performs their responsibilities. Directors were asked to comment on areas where their fellow Directors contribute the greatest value and on potential areas for development. With the introduction of virtual Board and Committee meetings (as a consequence of

COVID-19

health and safety protocols), the assessment also focused on the effectiveness of the Board’s virtual interactions.

Lintstock provided feedback received to the Chair, which was then discussed with Directors. Feedback relating to the Chair was discussed with the Chair by the Senior Independent Director. As a result of these outcomes, the review supported the Board’s decision to endorse those Directors standing for

re-election.

Committee assessments

Following an assessment of its work, each Committee concluded that it had met its terms of reference in FY2021.

External Board review

The Board conducted an external evaluation in FY2019 using Consilium Board Review, which considered Board, Committee and Chair effectiveness, and assessed the Directors’ contributions. The review was concluded in FY2020 and the Nomination and Governance Committee considered the status of implementation of the review findings in FY2021.

In accordance with the UK Code, the Board intends to conduct an external Board review in FY2022.

2.1.9 Nomination and Governance Committee Report

Role and focus

The Nomination and Governance Committee oversees and monitors renewal and succession planning, Board and Director performance evaluation, Director training and development, and advises and makes recommendations on the Group’s governance practices.

More information on the role and responsibilities of the Nomination and Governance Committee can be found in its terms of reference, which are available at bhp.com/governance.

Committee activities in FY2021 included:

Succession planning processes

•

Implementation of the skills and experience matrix

•

Identification of suitable

Non-executive

Director candidates

•

Board and Committee succession

•

Partnering with search firms regarding candidate searches

Evaluation and training

•

Board evaluation and Director development

•

2021 training and development program

•

Director induction

Corporate governance practices

•

Independence of

Non-executive

Directors

•

Authorisation of situations of actual or potential conflict

•

Crisis management

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Policy on inclusion and diversity

The Board and management believe diversity is required to meet our purpose and strategy, which is outlined in section 1.4. Diversity is key to ensuring the Board and its Committees have the right blend of perspectives so that the Board oversees BHP effectively for shareholders. In FY2021, we adopted an Inclusion and Diversity Position Statement, which sets out our diversity policy in relation to the Board, senior management and our workforce, and our priorities to accelerate the development of a more inclusive work environment and enhanced overall workplace diversity. The Inclusion and Diversity Position Statement

is available at

bhp.com/careers/diversity-and-inclusion/our-approach/

and is summarised in section 1.12.

As described in our Inclusion and Diversity Position Statement, our aspiration is to achieve gender balance on our Board, among our senior executives and across our workforce by CY2025. Our aspiration includes a fixed target of maintaining the level of Board diversity above 33 per cent, which we achieved last year and we continue to maintain. We therefore satisfy the guidance of having at least 30 per cent of Directors of each gender in accordance with the ASX Fourth Edition and the target set by the Hampton-Alexander Review in the United Kingdom for all FTSE 100 Boards to have at least 33 per cent female representation by the end of CY2020.

We also welcome the final Parker Report into ethnic diversity of UK boards and continue to seek additional ethnic diversity on our Board and throughout BHP. Our Board meets the target of having ‘at least one Director of colour by 2021’ as recommended by the Parker Review.

In accordance with the UK Code, our gender diversity among senior management (defined as the ELT plus the Company Secretary and their direct reports) was 36 per cent.

Part of the Board’s role continues to be to consider and approve BHP’s measurable objectives for workforce diversity each financial year and to oversee our progress in achieving those objectives. For more information, including our progress against our FY2021 measurable objectives and our employee profile more generally, refer to section 1.12.

Board appointments and succession planning

When considering new appointments, the Board’s Nomination and Governance Committee takes the following approach:


Step 1: Rigorous approach		BHP adopts a structured and rigorous approach to Board succession planning and oversees the development of a diverse pipeline. Succession plans consider both unforeseen departures as well as the orderly replacement of current members of the Board. When considering succession planning and a diverse pipeline of talent, the Nomination and Governance Committee considers Board diversity, size, tenure and the skills, experience and attributes needed to effectively govern and manage risk within BHP.

Step 2: Continuous approach		This process is continuous and for Non-executive Directors planning is based on a nine-year tenure as a guide, allowing the Board to ensure the right balance on the Board between experience and fresh perspectives. It also ensures the Board continues to be fit-for-purpose and evolves to take account of the changing external environment and BHP’s circumstances. It also prepares pipelines for Nomination and Governance Committee membership, considering relevant skills and requirements.

Step 3: Role description		When considering new appointments to the Board, the Nomination and Governance Committee oversees the preparation of a role description, which includes the criteria and attributes described in the Board Governance Document and section 2.1.7.

Step 4: Selection and appointment of search firm		The role description is provided to an external search firm retained to conduct a global search based on the Board’s criteria.

Step 5: Board interviews		The shortlisted candidates are considered by the Nomination and Governance Committee and interviewed by the Chair initially. Meetings for selected candidates are held with each Board member ahead of the Board deciding whether to appoint the candidate.

Step 6: Committee recommendation		The Nomination and Governance Committee recommends the Board appoint the preferred candidate.

Step 7: Background checks		The Board, with the assistance of external consultants, conducts appropriate background and reference checks.

Step 8: Letter of appointment		The Board has adopted a letter of appointment that contains the terms on which Non-executive Directors will be appointed, including the basis upon which they will be indemnified by the Group. The letter of appointment defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. Written agreements are in place for all Non-executive Directors.

A copy of the terms of appointment for

Non-executive

Directors is available at

bhp.com/governance.

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Senior management succession

A robust senior management succession process is also conducted to ensure pipeline stability for critical roles. A talent deep dive is conducted by the Board at least once a year to evaluate these pipelines, including the diversity of the pipeline.

Senior management succession is viewed from a five-year perspective that considers the readiness of successors across time horizons, contexts and future capability demands. Select Board members are involved in the interview process for executive-level appointments one level below the CEO, and occasionally for roles two levels below the CEO. Appropriate checks are undertaken before appointing a member of the ELT. BHP has a written agreement with each ELT member setting out the terms of their appointment. For more information about CEO and ELT succession, refer to sections 2.1.1 and 2.1.5.

External recruitment specialists

The Committee retained the services of external recruitment specialists. Russell Reynolds and MWM Consulting assisted with

Non-executive

Director candidate searches during FY2021. These recruitment specialists do not have any connection with the Group or any Director.

Director induction, training and development

Upon appointment, each new

Non-executive

Director undertakes an induction program tailored to their needs.

Following the induction program,

Non-executive

Directors participate in continuous improvement activities (training and development program), which are overseen by the Nomination and Governance Committee. The training and development program covers matters of a business nature, including environmental, social and governance matters and provides updates on BHP’s assets, commodities, geographies and markets. Programs are designed and periodically reviewed to maximise effectiveness, and the results of Director performance evaluations are incorporated into these programs.

Training and development in FY2021


Area	Purpose	FY2021 activity
Briefings and development sessions	Provide each Director with a deeper understanding of the activities, environment, key issues and direction of the assets, along with HSEC and public policy considerations.	• Strategy day with the ELT • Strategy presentation from external presenter • Climate change sessions • Briefing on ESG issues from senior investor representative • Innovation and Technology

Site visits	Briefings on the assets, operations and other relevant issues and meetings with key personnel. During FY2021, a number of site visits were held virtually due to COVID-19 travel restrictions, but where possible, some Directors also participated in physical site visits.	• Olympic Dam • Legacy assets • Pilbara • Jansen Potash Project • Petroleum Offshore • Nickel West • Western Australia Iron Ore

Throughout the year, the Chair discusses development areas with each Director. Board Committees review and agree their needs for more briefings. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ Committee memberships, as well as the Board’s specific areas of focus. This approach also ensures a coordinated process on succession planning, Board renewal, training and development and Committee composition. These processes are all relevant to the Nomination and Governance Committee’s role in identifying appropriate

Non-executive

Director candidates.

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Independence

The Board is committed to ensuring a majority of Directors are independent.

The Board has adopted a policy that it uses to determine the independence of its Directors. This determination is carried out upon appointment, annually and at any other time where the change in circumstances of a Director warrant reconsideration. The Board confirms that it considers all of the current

Non-executive

Directors, including the Chair, to be independent of management and free from any business relationship or other circumstance that could materially interfere with the exercise of objective, unfettered or independent judgement.

A copy of the policy on Independence of Directors is available at bhp.com/governance.

Tenure

At the end of FY2021, Malcolm Broomhead, who was appointed in March 2010, had served on the Board for more than nine years. In light of the retirement of both Susan Kilsby and Anita Frew at the end of the 2021 AGMs, the Board has requested that Mr Broomhead seek

re-election

at the 2021 AGMs for a further year. Mr Broomhead would step down from the Sustainability Committee and Nomination and Governance Committee following the AGMs but remain on the Board. The Board supports Mr Broomhead’s

re-election

given his extensive knowledge of BHP and the mining and resources sector and the proposed corporate transaction that the Group is undertaking at this time. The Board does not believe his tenure interferes with his ability to act in the best interests of BHP. The Board believes he continues to demonstrate strong independence of character and judgement, and has not formed associations with management (or others) that might compromise his ability to exercise independent judgement or act in the best interests of the Group. The Board has been undergoing a process of renewal and, recognising the importance of continuity on the Board and Mr Broomhead’s expertise, considers his continued service to be in the best interests of shareholders.

Relationships and associations

Some of the Directors hold or have previously held positions in companies that BHP has commercial relationships with. Those positions and companies are listed in the Director profiles in section 2.1.2 and in past Annual Reports. The Board has assessed the relationships between the Group and the companies in which our Directors hold or held positions and has concluded that the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interests of BHP.

For example, Mr Broomhead was a Director of Orica Limited (a company BHP has commercial dealings with) during FY2021, and Mr Cockerill was also a Director of Orica until August 2019. Orica provides commercial explosives, blasting systems and mineral processing chemicals and services to the mining and resources industry, among others. Mr Cockerill was appointed to the Orica Board in 2010 (prior to his appointment to the BHP Board) and Mr Broomhead was appointed to the Orica Board in 2016 (after his appointment to the BHP Board). At the time of Mr Broomhead’s appointment to the Board of Orica, and at the time of Mr Cockerill’s appointment to the Board of BHP, the BHP Board assessed the relationship between BHP and Orica and determined (and remains satisfied) that Mr Broomhead and Mr Cockerill were (and Mr Broomhead remains during FY2021) able to apply objective, unfettered and independent judgement and to act in the best interests of BHP.

Conflicts of interest

BHP Group Plc’s Articles of Association allow the Directors to authorise conflicts and potential conflicts where appropriate. A procedure operates to ensure the disclosure of conflicts and for the consideration and, if appropriate, the authorisation of those conflicts by

non-conflicted

Directors. The Nomination and Governance Committee supports the Board in this process by reviewing requests from Directors for authorisation of situations of actual or potential conflict and making recommendations to the Board. It also regularly reviews any situations of actual or potential conflict that have previously been authorised by the Board and makes recommendations on whether the authorisation remains appropriate. In addition, in accordance with Australian law, if a situation arises for consideration where a Director has a material personal interest, the affected Director takes no part in decision-making unless authorised by

non-interested

Directors. Provisions for Directors’ interests are set out in the Constitution of BHP Group Limited.

2.1.10 Risk and Audit Committee Report

Role and focus

The Risk and Audit Committee (RAC) oversees and monitors financial reporting, other periodic reporting, external and internal audit, capital management, and risk (including effectiveness of the systems of risk management and internal control).

More information on the role and responsibilities of the Risk and Audit Committee can be found in its terms of reference, which are available at bhp.com/governance.

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UK committee membership requirements

The Board is satisfied that Terry Bowen meets the criteria for recent and relevant financial experience as outlined in the UK Code, the competence in accounting and auditing as required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rules and the audit committee financial expert requirements under the US Securities and Exchange Commission Rules. In addition, he is the Board’s nominated ‘audit committee financial expert’ for the purposes of the US Securities and Exchange Commission Rules.

The Board is satisfied that the members of the Committee as a whole have competence relevant to the mining sector for the purposes of the FCA Disclosure Guidance and Transparency Rules. The Board is also satisfied that the Committee meets the independence criteria under Rule

10A-3

of the Exchange Act. For information on Committee members’ qualifications, which include competence relevant to the mining sector, refer to section 2.1.2.

Committee activities in FY2021 included:

Integrity of Financial Statements and funding matters

•

Accounting matters for consideration, materiality limits, half-year and full-year results

•

Sarbanes-Oxley Act of 2002 (SOX) compliance

•

Financial governance procedures

•

Funding, loans and guarantees updates

External auditor and integrity of the audit process

•

External audit report

•

Management and external auditor closed sessions

•

Audit plan, review of performance and quality of service

•

External auditor independence and

non-audit

services

Effectiveness of systems of internal control and risk management

•

Material risk reports and consideration of approach to emerging risks

•

Group risk profile and monitoring performance against risk appetite through key risk indicators

•

Internal audit reports, annual internal audit plan and review of performance of the Internal Audit and Advisory team

•

Ethics and Investigations reports including on sexual harassment, compliance reports, and grievance and investigation processes

Risks of climate change and its potential impacts on measurement in the financial statements

•

Climate change financial statement disclosures

•

Climate change considerations in key judgements and estimates

•

Consistency between narrative reporting on climate risks with the accounting assumptions

Other governance matters

•

Samarco dam failure provision, closure and rehabilitation provision

•

Disputes and litigation updates

•

Closure, rehabilitation and reserves updates

Fair, balanced and understandable

The RAC confirmed its view to the Board that BHP’s 2021 Annual Report taken as a whole is fair, balanced and understandable. For the Board’s statement on the Annual Report, refer to the Directors’ Report in section 2.3.

In making this assessment, the RAC considers the substantial governance framework that is in place for the Annual Report. This includes management representation letters, certifications, RAC oversight of the Financial Statements and other financial governance procedures focused on the financial section of the Annual Report, together with verification procedures for the narrative reporting section of the Annual Report.

Integrity of Financial Statements

The RAC assists the Board in assuring the integrity of the Financial Statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with accounting standards, stock exchange and legal requirements and the results of the external audit.

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CEO and CFO assurance

For the FY2021 full year and half year, the CEO and CFO have certified that in their opinion, BHP’s financial records have been properly maintained and the FY2021 Financial Statements present a true and fair view of our financial condition and operating results and are in accordance with accounting standards and applicable regulatory requirements.

The CEO and CFO have also certified to the Board that this opinion was formed on the basis of a sound system of risk management and internal control and the system is operating efficiently and effectively. The RAC considered these certifications when recommending the Financial Statements to the Board for approval.

Significant issues

In addition to the Group’s key judgements and estimates disclosed throughout the FY2021 Financial Statements, the Committee also considered the following significant issues relating to financial reporting:

Divestment of interests in certain of the Group’s assets

The Committee examined management’s review of impairment triggers and potential impairment charges for certain of the Group’s assets that were subject to divestment processes throughout the year. While the processes were underway, prior to receipt of bids, considerations were consistent with the approach to the Group’s other long-term assets as presented below.

The Committee concurred with management’s conclusion on significant impairments recognised in relation to New South Wales Energy Coal and Cerrejón, including associated deferred tax assets.

The Committee also reviewed other potential Financial Statements impacts, including classification and disclosure as assets held for sale and Discontinued operations.

Conclusions from these reviews are reflected in notes 3 ‘Exceptional items’, 13 ‘Impairment of

non-current

assets’ and 31 ‘Investments accounted for using the equity method’ in section 3.

Carrying value of other long-term assets

The assessment of carrying values of long-term assets uses a number of significant judgements and estimates.

The Committee examined management’s review of impairment triggers and potential impairment charges or reversals for the Group’s cash generating units.

Specific consideration was given to market conditions for the Group’s commodities, including the impacts of climate change, along with key assumptions underpinning asset valuations. Assumptions include the most recent short, medium and long-term price forecasts, expected production volumes and updated development plans, operating and capital costs, discount rates and other market indicators of fair value.

The Committee concurred with management’s conclusion on the significant impairment recognised in relation to the Group’s Potash assets, including associated deferred tax assets, and that no impairment reversals were appropriate.

The results of the Olympic Dam impairment assessment were reviewed and the Committee concurred with management that no impairment was required.

Conclusions from these reviews are reflected in note 13 ‘Impairment of

non-current

assets’ in section 3.

Climate change in financial reporting

While the Group’s understanding of evolving climate risks continues to develop, the potential financial implications, along with appropriate disclosure, are an area of focus for the Committee.

The Committee was informed of and acknowledged global trends, including increased disclosure within financial statements and more broadly. Specifically, the Committee considered a request from the Institutional Investors Group on Climate Change (IIGCC) for Paris-aligned financial statements and disclosure of material climate risks and the potential impacts to financial statements.

The Committee considered financial statement disclosures and how the Group’s greenhouse gas emissions reduction commitments and climate change scenarios, including those aligned with the Paris Agreement goals, are reflected in the Group’s key judgements and estimates used in the preparation of the Group’s FY2021 finance statements. This included consideration of portfolio impacts, demand for the Group’s commodities and associated price outlooks, costs of decarbonisation and Scope 3 emissions considerations. Specific focus was also given to the potential impact on impairment assessments and the expected timing and cost of closure activities.

The Committee reviewed the approach proposed by management to provide additional disclosure in relation to the potential financial statement impacts of climate change, including under a Paris-aligned 1.5°C scenario.

The Committee, recognising the evolving nature of climate change risks and responses, concluded that climate change has been appropriately considered by management in key judgements and estimates and concurred with the disclosures proposed by management.

For more information, refer to the Basis of Preparation in section 3 and the Climate change risk factor in section 1.16.

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Samarco dam failure

On 5 November 2015, the Samarco Mineração S.A (Samarco) iron ore operation in Minas Gerais, Brazil experienced a tailings dam failure that resulted in a release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream. Samarco is jointly owned by BHP Brasil and Vale S.A.

BHP Brasil’s 50 per cent interest in Samarco is accounted for as an equity accounted joint venture investment.

Samarco’s provisions and contingent liabilities

The Committee reviewed updates to matters relating to the Samarco dam failure, including developments on existing and new legal proceedings, judicial reorganisation and changes to the estimated costs of remediation and compensation.

BHP Brasil’s loss from Equity Accounted Investments includes impairments arising from working capital funding provided to Samarco and revisions to the Samarco dam failure and Germano decommissioning provisions during the year ended 30 June 2021.

Potential direct financial impacts to BHP Brasil

The Committee considered:

•

changes to the estimated cost of remediation and compensatory programs under the Framework Agreement

•

developments in existing and new legal proceedings, including judicial reorganisation, on the provision related to the Samarco dam failure and related disclosures

•

the provisions recognised and contingent liabilities disclosed by BHP Brasil or other BHP entities

Based on currently available information, the Committee concluded that the accounting for the equity investment in Samarco, the provision recognised by BHP Brasil (including the decommissioning of the Germano tailings dam complex) and contingent liabilities disclosed in the Group’s Financial Statements are appropriate.

For more information, refer to note 4 ‘Significant events – Samarco dam failure’ in section 3.

Closure and rehabilitation provisions

Determining the closure and rehabilitation provision is a complex area requiring significant judgement and estimates, particularly given the timing and quantum of future costs, the unique nature of each site and the long timescales involved.

The Committee considered the various changes in estimates for closure and rehabilitation provisions recognised during the year, including a reduction to the discount rates applied.

Specific consideration was given to ongoing and recently completed study, survey and characterisation activity, changes to current cost estimates and the expected timing of closure activities. The Committee concluded that the assumptions and inputs for closure and rehabilitation cost estimates were reasonable and the related provisions recorded were appropriate.

For more information, refer to note 15 ‘Closure and rehabilitation provisions’ in section 3.

Impact of amended accounting standards and changes to accounting policies

The Group implemented the IFRS Interpretations Committee agenda decision ‘Income Taxes – Multiple tax consequences of recovering an asset’ on a retrospective basis. The Committee reviewed management’s analysis of the accounting outcomes, including the recognition of goodwill relating to Olympic Dam.

In addition, the Committee considered and approved the early adoption, for FY2021, of further amendments to certain accounting standards relating to interest rate benchmark reforms.

For more information, refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ in section 3.

Impact of

COVID-19

The Committee considered the impacts of the global

COVID-19

pandemic on the Group’s FY2021 financial reporting, including the recognition and disclosure of costs incurred by the Group that are directly attributable to

COVID-19.

The Committee concluded that the disclosure of costs directly attributable to

COVID-19

was appropriate. For more information, refer to note 3 ‘Exceptional items’ in section 3.

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United Kingdom (UK) Financial Reporting Council (FRC) reviews

Audit Quality Review of the audit of the Company’s 2019 Financial Statements

During 2020, the Audit Quality Review Team (AQRT) from the UK FRC undertook a review of KPMG LLP’s (KPMG) audit of BHP Group Plc’s financial statements for the year ended 30 June 2019. KPMG were the auditors of BHP Group prior to Ernst & Young (EY). There were no key findings arising from the AQRT’s review. The review findings, which were not considered to be significant, were discussed with KPMG. The company made EY aware of the actions that KPMG had proposed to implement had they still been the auditors of the company and if similar circumstances were to prevail.

Review of BHP Group’s Annual Report and Accounts

The UK FRC carried out a review of the Group’s published Annual Report and Accounts for the year ended 30 June 2020. This review considered compliance with reporting requirements and, given the inherent limitations of the review, provided no assurance that the Annual Report and Accounts were correct in all material respects. There were no exchanges of substantive correspondence as a result of this review and the FRC confirmed, based on the review performed, it had no questions or queries that it wished to raise.

External Auditor

The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the independence and reappointment of the External Auditor each year, as well as remuneration and other terms of engagement and makes a recommendation to the Board.

Audit tender and transition

BHP confirms that during FY2021, it was in compliance with the provisions of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014.

Consistent with the UK and EU requirements in regard to audit firm tender and rotation, the Committee conducted an audit tender process during FY2017 to appoint a new external auditor to replace KPMG, resulting in the appointment of EY in 2019.

Evaluation of External Auditor and external audit process

The RAC evaluates the objectivity and independence of the External Auditor and the quality and effectiveness of the external audit arrangements. As part of this evaluation, the RAC considers specified criteria, including delivering value to shareholders and BHP, and also assesses the adequacy of the external audit process with emphasis on quality, effectiveness and performance. It does so through a range of means, including:

•

the Committee considers the External Audit Plan, in particular to gain assurance that it is tailored to reflect changes in circumstances from the prior year

•

throughout the year, the Committee meets with the audit partners, particularly the lead Australian and UK audit engagement partners, without management present

•

following the completion of the audit, the Committee considers the quality of the External Auditor’s performance drawing on survey results. The survey is based on a

two-way

feedback model where the BHP and EY teams assess each other against a range of criteria. The criteria against which the BHP team evaluates EY’s performance include ethics and integrity, insight, service quality, communication, reporting and responsiveness

•

reviewing the terms of engagement of the External Auditor

•

discussing with the audit engagement partners the skills and experience of the broader audit team

•

reviewing audit quality inspection reports on EY published by the UK Financial Reporting Council in considering the effectiveness of the audit

In addition, the RAC reviews the integrity, independence and objectivity of the External Auditor and assesses whether there is any element of the relationship that impairs or appears to impair the External Auditor’s judgement or independence. The External Auditor also certifies its independence to the RAC.

Non-audit

services

Although the External Auditor does provide some

non-audit

services, the objectivity and independence of the External Auditor are safeguarded through restrictions on the provision of these services with some services prohibited from being undertaken.

134

Pre-approved

services

The RAC has adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’ covering the RAC’s

pre-approval

policies and procedures to maintain the independence of the External Auditor, which reflects the requirements for External Auditors contained in the Ethical Standards published by the UK Financial Reporting Council.

The categories of

‘pre-approved’

services are:

•

Audit services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of BHP and its entities (including interim reviews). This category also includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope. The RAC monitors the audit services engagements and if necessary, approves any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events.

•

Audit-related and other assurance services – work that is outside the scope of the statutory audit but is consistent with the role of the external statutory auditor, is of an assurance or compliance nature, is work the External Auditor must or is best placed to undertake and is permissible under the relevant applicable standard.

Activities outside the scope of the categories above are not

‘pre-approved’

and must be approved by the RAC prior to engagement, regardless of the dollar value involved. In addition, any engagement for other services with a value over US$100,000, even if listed as a

‘pre-approved’

service, requires the approval of the RAC.

All engagements for other services whether

‘pre-approved’

or not and regardless of the dollar value involved are reported quarterly to the RAC. While not prohibited by BHP’s policy, any proposed

non-audit

engagement of the External Auditor relating to internal control (such as a review of internal controls) requires specific prior approval from the RAC. With the exception of the external audit of BHP’s Financial Statements, any engagement identified that contains an internal control-related element is not considered to be

pre-approved.

In addition, while the categories of

‘pre-approved’

services include a list of certain

pre-approved

services, the use of the External Auditor to perform these services will always be subject to our overriding governance practices as articulated in the policy.

In addition, the RAC did not approve any services during the year ended 30 June 2021 pursuant to paragraph (c)(7)(i)(C) of Rule

2-01

of SEC Regulation

S-X

(provision of services other than audit).

Fees paid to BHP’s external auditor during FY2021 for audit and other services were US$15.5 million, of which 77 per cent comprised audit fees (including in relation to SOX matters), 11 per cent for audit-related fees and 12 per cent for all other fees. No fees were paid in relation to tax services. Details of the fees paid are set out in note 36 ‘Auditor’s remuneration’ in section 3.

Our policy on Provision of Audit and Other Services by the External Auditor is available at bhp.com/governance.

Business Risk and Audit Committees

Business Risk and Audit Committees (Business RACs), covering each asset group, assist management in providing the information to enable the RAC to fulfil its responsibilities. They are management committees and perform an important monitoring function in the governance of BHP. Meetings take place annually as part of our financial governance framework.

As management committees, the appropriate member of the ELT participates, but the Committee is chaired by a member of the RAC. Each Committee also includes the Group Financial Controller, the Chief Risk Officer and the Group Assurance Officer.

Significant operational and risk matters raised at Business RAC meetings are reported to the RAC by management.

Risk function

The Risk function’s role is to create and maintain the Group’s Risk Framework, and to support, verify, oversee and provide insight on the effective application of the Risk Framework for all risks, including strategic, operational and emerging risks.

The RAC assists the Board with the oversight of risk management, although the Board retains accountability for BHP’s risk profile. In addition, the Board requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established, regularly review the effectiveness of those systems and monitor that necessary actions have been taken to remedy any significant failings or weaknesses identified from that review. The RAC regularly reports to the Board to enable the Board to review our Risk Framework at least annually to confirm that the Risk Framework continues to be sound and that BHP is operating with regard to the risk appetite set by the Board. A review was undertaken during FY2021, resulting in refinements to BHP’s Risk Framework. For more information, refer to section 1.9.

135

Internal Audit

The Internal Audit function is carried out by the Internal Audit and Advisory team (IAA). IAA provides assurance on whether risk management, internal control and governance processes are adequate and functioning. The Internal Audit function is independent of the External Auditor. The RAC evaluates and, if thought fit, approves the terms of reference of IAA, the staffing levels and its scope of work to ensure it is appropriate in light of the key risks we face. It also reviews and approves the annual internal audit plan and monitors and reviews the effectiveness of the internal audit activities.

The RAC approves the appointment and dismissal of the Group Assurance Officer and assesses their performance, independence and objectivity. During FY2021, the Group Assurance Officer reported directly to the RAC, and functional oversight of IAA was provided by the Chief Legal, Governance and External Affairs Officer.

Effectiveness of systems of internal control and risk management (RAC and Board)

In delegating authority to the CEO, the Board has established CEO limits, outlined in the

Board Governance Document

. Limits on the CEO’s authority require the CEO to ensure there is a system of control in place for identifying and managing risk in BHP. Through the RAC, the Directors regularly review these systems for their effectiveness. These reviews include assessing whether processes continue to meet evolving external governance requirements.

The RAC oversees and reviews the internal controls and risk management systems (including procedures, processes and systems for, among other things, budgeting and forecasting, provisions, financial controls, financial reporting and reporting of reserves, compliance, preventing fraud and serious breaches of business conduct and whistle-blowing procedures, protecting information and data systems, and operational effectiveness of the Business RAC structures). Any material breaches of

Our Code of Conduct

, including breaches of our anti-bribery and corruption requirements, as well as any material incidents reported under our ‘speaking up with confidence’ requirements are reported quarterly to the RAC by the Chief Compliance Officer. These reports are then communicated to the Board through the

report-out

process.

During FY2021, management presented an assessment of the material risks facing BHP and the level of effectiveness of risk management over the material business risks. The reviews were overseen by the RAC, with findings and recommendations reported to the Board. In addition to considering key risks facing BHP, the Board assessed the effectiveness of internal controls over key risks identified through the work of the Board Committees.

Having carried out a review during FY2021, the Board is satisfied with the effectiveness of risk management and internal control systems.

Management’s assessment of internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule

13a-15(f)

and Rule

15d-15(f)

under the Exchange Act).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, the effectiveness of BHP’s internal control over financial reporting was evaluated based on the framework and criteria established in Internal Controls – Integrated Framework (2013), issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that internal control over financial reporting was effective as at 30 June 2021. There were no material weaknesses in BHP’s internal controls over financial reporting identified by management as at 30 June 2021.

BHP has engaged our independent registered public accounting firm, EY, to issue an audit report on our internal control over financial reporting for inclusion in the Financial Statements section of the Annual Report and the Annual Report on Form

20-F

as filed with the Securities Exchange Commission (SEC).

There were no changes in our internal control over financial reporting during FY2021 that materially affected or were reasonably likely to materially affect our internal control over financial reporting. This included

COVID-19,

which only had a minor impact on internal controls over financial reporting in relation to the number and nature of controls that were impacted.

During FY2021, the RAC reviewed our compliance with the obligations imposed by SOX, including evaluating and documenting internal controls as required by section 404 of SOX.

136

Management’s assessment of disclosure controls and procedures

Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as at 30 June 2021. Disclosure controls and procedures are designed to provide reasonable assurance that the material financial and

non-financial

information required to be disclosed by BHP, including in the reports it files or submits under the Exchange Act, is recorded, processed, summarised and reported on a timely basis. This information is accumulated and communicated to BHP’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, management (including the CEO and CFO) concluded that, as at 30 June 2021, our disclosure controls and procedures are effective in providing that reasonable assurance.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

In the design and evaluation of our disclosure controls and procedures, management was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures.

2.1.11 Sustainability Committee Report

Role and focus

The Sustainability Committee oversees and monitors material HSEC matters, including the adequacy of the Group’s HSEC Framework and HSEC Management Systems, and the Group’s HSEC reporting and performance. This includes consideration of existing HSEC issues, such as climate, safety and Indigenous and human rights, as well as emerging areas of HSEC risk for the Group.

More information on the role and responsibilities of the Sustainability Committee can be found in its terms of reference, which are available at bhp.com/governance.

HSEC Framework

The Group’s HSEC Framework consists of:

•

the Sustainability Committee, which is responsible for assisting the Board in overseeing the adequacy of the Group’s HSEC Framework and HSEC Management Systems (among other things)

•

the

Board Governance Document

, which establishes the remit of the Board and delegates authority to the CEO, including in respect of the HSEC Management Systems

•

the HSEC Management Systems, established by management in accordance with the CEO’s delegated authority. The HSEC Management Systems provide the processes, resources, structures and performance standards for the identification, management and reporting of HSEC risks and the investigation of any HSEC incidents

•

a robust and independent internal audit process overseen by the RAC, in accordance with its terms of reference

•

independent advice on HSEC matters, which may be requested by the Board and its Committees where deemed necessary in order to meet their respective obligations

Our approach to sustainability is reflected in

Our Charter

, which defines our values, purpose and how we measure success, and in our sustainability performance targets, which define our public commitments to HSEC. HSEC considerations are also taken into account in employee and executive remuneration. For more information, refer to Sustainability in section 1.13 and section 2.2.

Committee activities in FY2021 included:

Assurance and adequacy of HSEC Framework and HSEC Management Systems

•

Key HSEC risks, including tailings storage facility failure, climate change related risks, fatalities, aviation and underground fire or explosion

•

Asset deep dives providing updates on key HSEC matters and HSEC performance

•

Audit planning and reporting on HSEC risks and processes

•

Review of the HSE function and Group HSE Officer

Compliance and reporting

•

Compliance with HSEC legal and regulatory requirements and updates on key legal and regulatory changes

•

Sustainability reporting, including consideration of processes for preparation and assurance provided by EY

•

Modern Slavery Statement

•

Social value metrics

Performance

•

Performance of BHP on HSEC matters, including cultural heritage, community relations, emissions targets, closure and rehabilitation, biodiversity, and human rights

•

Monitoring against the FY2018–FY2022 HSEC performance targets and goals

•

Performance outcomes under the HSEC performance targets and setting targets for FY2021

137

Other governance matters

•

Training and development of Committee members

•

Updates to the Committee’s terms of reference

Members of the Sustainability Committee also participated in several site visits during FY2021. Where not limited by

COVID-19

travel restrictions, these were

in-person

site visits, but otherwise were attended virtually. During these site visits, Committee members received briefings on HSEC matters and the management of material HSEC risks, and met with key personnel. These visits offer access to a diverse cross-section of the workforce from frontline through to the leadership team, including, where possible, risk and control owners.

For information on the key areas of focus for the Committee, management and the HSE and Community functions, refer to section 1.13.

Sustainability disclosures

The Sustainability Committee oversees the preparation and presentation of sustainability disclosures by management. This year, BHP has again included material sustainability content in this Annual Report. The Sustainability Committee reviewed and recommended to the Board the approval of these disclosures in section 1.12 and 1.13, along with the FY2021 Modern Slavery Statement. These disclosures identify our targets for HSEC matters and our performance against those targets. Our targets rely on fact-based measurement and quality data, and reflect a desire to move BHP to a position of industry leadership.

Our sustainability reporting, including additional case studies and a databook of key ESG and sustainability data is available at bhp.com.

For information on our material exposure to environmental and social risks and how we manage or intend to manage those risks, refer to sections 1.9 and 1.16.

2.1.12 Remuneration Committee Report

Role and focus

The Remuneration Committee oversees and monitors remuneration policy and practices (including the adoption of incentive plans and levels of reward for the CEO and other ELT members), compliance with applicable requirements associated with remuneration matters and the review, at least annually, of remuneration by gender.

More information on the role and responsibilities of the Remuneration Committee can be found in its terms of reference, which are available at bhp.com/governance.

UK committee membership requirements

Christine O’Reilly was appointed Chair of the Remuneration Committee with effect from 1 March 2021. She served on the Committee from her appointment to the Board in October 2020, which provided an appropriate transition to become Chair. She has relevant skills and experience, including her former appointment as a member of the Human Resources and Remuneration Committee of CSL Limited. She therefore satisfies the position in the UK Code that the incoming Chair should have served on a remuneration committee for at least 12 months.

Committee activities in FY2021 included:

Remuneration of the ELT and the Board

•

Remuneration of the CEO, other ELT members and the Group Company Secretary

•

Remuneration arrangements for new ELT members

•

The impact of the

COVID-19

pandemic on remuneration

•

Performance measures, performance levels and incentive award outcomes

•

Long-Term Incentive Plan sector peer group review

•

Chair fees

Other remuneration matters

•

Workforce remuneration, policies, practices and engagement

•

Remuneration by gender

•

Annual remuneration report

•

Shareholder engagement

•

Corporate Governance Code provisions compliance

•

Shareplus enrolment update

138

Other

•

Induction, training and development program

•

Board Committee procedures, including closed sessions

•

Update of the Committee terms of reference

The Sustainability Committee and the RAC assist the Remuneration Committee in determining appropriate HSEC and financial metrics, respectively, to be included in senior executive scorecards and in assessing performance against those measures.

For more information on the Committee’s work, refer to the Remuneration Report in section 2.2.

2.1.13 Risk management governance structure

Identifying and managing risk are central to achieving our purpose. For information on our approach to risk and risk governance, including the role of the BHP Board and its Committees, refer to section 1.9.

2.1.14 Management

Below the level of the Board, key management decisions are made by the CEO, the ELT, management committees and members of management who have delegated authority.

Management committees consider BHP’s risks and controls. Strategic risks (threats and opportunities) arising from changes in our business environment are regularly reviewed by the ELT and discussed by the Board.

Performance evaluation for executives

The performance of executives and other senior employees is reviewed on an annual basis. For the members of the ELT, this review includes their contribution, engagement and interaction at Board level. The annual performance review process considers the performance of executives against criteria designed to capture ‘what’ is achieved and ‘how’ it is achieved. All performance assessments of executives include how effective they have been in undertaking their role; what they have achieved against their specified key performance indicators; how they match up to the behaviours prescribed in our leadership model; and how those behaviours align with

Our Charter

values.

A performance evaluation was conducted for all members of the ELT during FY2021. For the CEO, the performance evaluation was led by the Chair of the Board on behalf of all the

Non-executive

Directors, and was discussed with the Remuneration Committee.

139

2.1.15 Our conduct

Our Code of Conduct and Our Charter

Our Code of Conduct (Our Code)

is based on

Our Charter

values.

Our Code

sets out standards of behaviour for our people and includes our policies on speaking up, anti-bribery and corruption.

Our

Code

and

Our Charter

are accessible to all our people and external stakeholders

at bhp.com.

BHP’s EthicsPoint

We have mechanisms in place for anyone to raise a query about

Our Code

, or make a report if they feel

Our Code

has been breached.

EthicsPoint is our system for reporting misconduct and can be used by employees, contractors and external stakeholders, including members of the public to raise concerns about misconduct that has either happened to them or they have witnessed. Reports can be raised in EthicsPoint directly, via an employee or contractor’s line leader or via the

24-hour,

multilingual call service. Reporters of misconduct can choose to raise their concern anonymously.

Reports received are assigned by the Ethics Team to an investigator, line leader or team for investigation or resolution as appropriate, in accordance with internal policy and process documents. The reporting and investigations processes are transparent and summary information is accessible to all BHP employees via BHP’s intranet.

All reports received in EthicsPoint are reviewed and categorised by the Ethics Team. Once categorised, reports are assigned in accordance with internal policy and processes to an investigator, line leader or appropriate team for resolution. The processes for reporting and investigation are transparent and BHP employees and contractors can access this information via BHP’s intranet. External stakeholders can access this via the BHP website.

Reports raised via EthicsPoint provide valuable insight into culture and organisational learning. All significant

Code of Conduct

matters and key trends from investigations are reported to the RAC. These are then reported to the Board as part of its

report-out

as set out in section 2.1.5. The most serious breaches of

Our Code

are also reported to the Integrity Working Group, which is accountable for oversight of the operational effectiveness of the Investigations Framework, including oversight of investigations completed by the Central Investigations team. The Integrity Working Group is chaired by the Chief Compliance Officer and comprises of a number of senior leaders across BHP.

2.1.16 Market disclosure

We have disclosure controls in place for periodic disclosures, including the Operational Review, our results announcements, debt investor documents (such as the prospectus for the Euro or Australian Medium Term Notes) and Annual Report documents, which must comply with relevant regulatory requirements.

More information about these verification processes can be found in the Periodic Disclosure – Disclosure Controls document available at bhp.com.

To safeguard the effective dissemination of information, we have developed mandatory minimum performance requirements for market disclosure, which outline how we identify and distribute information to shareholders and market participants and sets out the role of the Disclosure Committee in managing compliance with market disclosure obligations. In addition, where an announcement is determined to be material by the Disclosure Committee, the Board receives a copy promptly after it has been made. Where BHP gives a new and substantive investor or analyst presentation, it releases a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation.

In response to

COVID-19,

we have introduced extra monitoring and disclosure controls. These have included: increasing the regularity and breadth of information gathered from management (including the Finance, Supply, Marketing, Legal, and Operational teams); more regular updates to the Disclosure Committee; and more regular discussions with UBS (our corporate broker in the UK), as well as our Investor Relations team. This enables BHP to assess the materiality of developments and stay across market expectations, dynamics and emerging best practice.

A copy of the market disclosure and communications document is available at bhp.com/governance.

Copies of announcements to the stock exchanges on which BHP is listed, investor briefings, Financial Statements, the Annual Report and other relevant information can be found at bhp.com

To receive email alerts of news releases, subscribe at bhp.com.

140

2.1.17 Conformance with corporate governance standards

Our compliance with the governance standards in our home jurisdictions of Australia and the United Kingdom, and with the governance requirements that apply to us as a result of our New York Stock Exchange (NYSE) listing and our registration with the Securities Exchange Commission (SEC) in the United States is summarised in this Corporate Governance Statement, the Remuneration Report, the Directors’ Report and the Financial Statements.

The UK Code (available at frc.org.uk) and the ASX Principles and Recommendations (available at

asx.com.au

) require the Board to consider the application of the relevant corporate governance principles, while recognising departures from those principles are appropriate in some circumstances. The Board considers that during FY2021 it applied the Principles and complied with the provisions set out in the 2018 edition of the UK Code and complied with the ASX Fourth Edition, with no exceptions.

Our Appendix 4G, which summarises our compliance with the ASX Fourth Edition is available at bhp.com/governance.

BHP Group Limited and BHP Group Plc are registrants with the SEC in the United States. Each company is classified as a foreign private issuer and each has American Depositary Shares listed on the NYSE.

We have reviewed the governance requirements applicable to foreign private issuers under SOX, including the rules promulgated by the SEC and the rules of the NYSE, and are satisfied that we comply with those requirements.

Under NYSE rules, foreign private issuers such as BHP are required to disclose any significant ways our corporate governance practices differ from those followed by US companies under the NYSE corporate governance standards. After a comparison of our corporate governance practices with the requirements of Section 303A of the NYSE-Listed Company Manual followed by US companies, a significant difference was identified:

•

Rule

10A-3

of the Exchange Act requires NYSE-listed companies to ensure their audit committees are directly responsible for the appointment, compensation, retention and oversight of the work of the External Auditor unless the company’s governing law or documents or other home country legal requirements require or permit shareholders to ultimately vote on or approve these matters. While the RAC is directly responsible for remuneration and oversight of the External Auditor, the ultimate responsibility for appointment and retention of the External Auditor rests with our shareholders, in accordance with UK law and our constitutional documents. However, the RAC does make recommendations to the Board on these matters, which are reported to shareholders.

141


Compliance with the UK Code This table describes how BHP has applied the Principles of the UK Code
Board leadership and our purpose • Long-term sustainable success – we believe we put the long-term sustainable success of BHP at the centre of what we do (sections 1.6 and 1.14). • Purpose, values, strategy and culture – we renewed our purpose in FY2019 to better capture the aspirations of all our stakeholders (sections 1.6, 1.14, 1.13, 2.1.5 and 2.1.7). • Performance measurement and control framework (section 4.8). • Responsibilities to shareholders and stakeholders (sections 1.14, 1.12 and 2.1.6). • Workforce policies and practices (sections 1.6.2, 1.14, 1.12 and 2.1.6).		Composition, succession and evaluation • Appointments and succession planning – we have a rigorous process in place for Board appointments and to consider succession having regard to diversity of gender, social and ethnic backgrounds and personal strengths (section 2.1.9). • Skills matrix – we have an appropriate mix of skills, experience and knowledge on the Board and in 2018 revised our skills matrix (section 2.1.7). Section 2.1.9 provides information on tenure and Board renewal. • Director review – reviews are undertaken on the contribution of each Director to the work of the Board and its Committees, the expectations of Directors as specified in BHP’s governance framework and the performance of Directors. The review confirmed that each Director continues to contribute effectively (section 2.1.8).

Division of responsibilities • Chair of the Board – the Chair leads the Board and is responsible for its effectiveness and the effective contribution from all Non-executive Directors (section 2.1.3). • Board composition – the Board operates effectively with the appropriate balance of executives and non-executives and believes the roles of the Chair and the CEO should be separated (section 2.1.3). • Non-executive Directors have sufficient time to meet their responsibilities – when we appoint new Directors we ensure they have sufficient time to undertake their responsibilities and are able to offer challenge, strategic guidance and specialist advice (sections 2.1.2 and 2.1.7). • Time and resources – the Board ensures it has the necessary time, resources, policies and processes in place as part of its evaluation process (sections 2.1.3 and 2.1.8).		Audit Risk and Internal Control • Internal and external audit independence – we understand the importance of ensuring these lines of defence remain independent (section 2.1.10). • Fair balanced and understandable – the Board presents a fair balanced and understandable assessment of BHP’s position and prospects (section 2.1.10). • Management and oversight of risk – our risk and control environment is monitored and overseen by the Risk and Audit Committee. The Board, Risk and Audit Committee, and Sustainability Committee considered emerging and principal risk during the year (sections 1.9, 2.1.5, 2.1.10 and 2.1.11).
		Remuneration • Policies and practices – remuneration is designed to support our strategy and long-term sustainable success (section 2.2). • Formal and transparent procedure – we have formal and transparent procedures in place, and routinely engage with investors for their feedback (section 2.2 and ‘Shareholder engagement’ in section 2.1.6). • Use of discretion – we have used discretion to adjust the formulaic remuneration outcomes (section 2.2).

142

2.1.18 Additional UK disclosure

The information specified in the UK FCA Disclosure Guidance and Transparency Rules, DTR 7.2.6, is located elsewhere in this Annual Report. The Directors’ Report in section 2.3 provides cross-references to where the information is located.

This Corporate Governance Statement was current and approved by the Board on 2 September 2021 and signed on its behalf by:

Ken MacKenzie

Chair

2 September 2021

2.2 Remuneration Report

In this section

This Remuneration Report describes the remuneration policies, practices, outcomes and governance for the KMP of BHP.

BHP’s DLC structure means that we are subject to remuneration disclosure requirements in the United Kingdom and Australia. This results in some complexity in our disclosures, as there are some key differences in the requirements and the information that must be disclosed. For example, UK requirements give shareholders the right to a binding vote on the remuneration policy every three years and as a result, the remuneration policy needs to be described in a separate section in the Remuneration Report. Our remuneration policy is set out in section 2.2.2. In Australia, BHP is required to make certain disclosures for KMP as defined by the Australian Corporations Act 2001, Australian Accounting Standards and IFRS.

The UK requirements focus on the remuneration of Executive and

Non-executive

Directors. At BHP, this is our Board, including the CEO, who is our sole Executive Director. In contrast, the Australian requirements focus on the remuneration of KMP, defined as those who have authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly. KMP includes the Board, as well as certain members of our senior executive team.

After due consideration, the Committee has determined the KMP for FY2021 comprised the following roles: all

Non-executive

Directors, the CEO, the Chief Financial Officer, the President Minerals Australia, the President Minerals Americas, and the President Petroleum.

The following individuals have held their positions and were KMP for the whole of FY2021, unless stated otherwise:

•

Mike Henry, CEO and Executive Director

•

Edgar Basto, President Minerals Australia

•

Peter Beaven, Chief Financial Officer (to 30 November 2020)

•

David Lamont, Chief Financial Officer (from 1 December 2020)

•

Daniel Malchuk, President Minerals Americas (to 31 October 2020)

•

Geraldine Slattery, President Petroleum

•

Ragnar Udd, President Minerals Americas (from 1 November 2020)

•

Non-executive

Directors - see ‘Remuneration for

Non-executive

Directors’ in section 2.2.3 for details

of the

Non-executive

Directors, including dates of appointment or cessation (where relevant)

143


Contents
2.2.1	Annual statement by the Remuneration Committee Chair	145

2.2.2	Remuneration policy report	150

	Remuneration policy for the Executive Director	150

	Remuneration policy for Non-executive Directors	157

2.2.3	Annual report on remuneration	159

	Remuneration for the Executive Directors (the CEOs)	159

	Remuneration for other Executive KMP (excluding the CEO)	171

	Remuneration for Non-executive Directors	174

	Remuneration governance	176

	Other statutory disclosures	177


Abbreviation		Item
AGM		Annual General Meeting

CDP		Cash and Deferred Plan

CEO		Chief Executive Officer

DEP		Dividend Equivalent Payment

DLC		Dual Listed Company

ELT		Executive Leadership Team

GHG		Greenhouse Gas

HSEC		Health, Safety, Environment and Community

IFRS		International Financial Reporting Standards

KMP		Key Management Personnel

KPI		Key Performance Indicator

LTIP		Long-Term Incentive Plan

MAP		Management Award Plan

MSR		Minimum Shareholding Requirement

ROCE		Return on Capital Employed

STIP		Short-Term Incentive Plan

TSR		Total Shareholder Return

144

2.2.1 Annual statement by the Remuneration Committee Chair

‘The Committee believes the remuneration outcomes for FY2021 are aligned with BHP’s performance and the experience of shareholders, and are also fair in terms of the wider context of global circumstances.’

Dear Shareholders,

I am pleased to introduce BHP’s Remuneration Report for the financial year to 30 June 2021, my first as Chair of BHP’s Remuneration Committee. During FY2021, the Committee continued its focus on achieving remuneration outcomes that fairly reflect the performance of BHP and the contribution of our employees, and which are aligned to the interests of shareholders and other key stakeholders.

During FY2021,

COVID-19

has remained a significant source of uncertainty across the world. While the emergence and deployment of successful vaccines is reason for optimism, the pandemic continues to have widespread impacts on lives, society and the global economy. In the face of this, BHP employees have operated in line with our purpose and values, working effectively to keep the business performing strongly, and keeping each other safe.

Our approach

Our Charter

sets out our values, placing health and safety first, upon which the Remuneration Committee places great weight in the determination of performance-based remuneration outcomes for BHP executives.

Our Charter

also sets out our purpose, our strategy and how we measure success. The Committee is guided by

Our Charter

and aims to support our executives in taking a long-term approach to decision-making in order to build a sustainable and value-adding business.

The Committee is focused on having and applying a remuneration policy and approach that supports the Group’s strategy and enables us to attract, retain and motivate the executives in different geographies critical to delivering the best outcomes for all BHP stakeholders. In addition, as BHP is a global organisation, the Committee is cognisant of the need to navigate the priorities and expectations of multiple jurisdictions.

Our policy and approach to remuneration remains unchanged; however, we continue to strive for simplification in our programs. We were pleased to again receive strong support for our remuneration policy at the 2020 AGMs, with over 95 per cent voting ‘for’ the Remuneration Report, and, on average, over 96 per cent support over the past five years. The Committee and the Board continue to incorporate shareholder feedback into our deliberations on pay to ensure it supports BHP’s strategy.

Remuneration policy

FY2021 represents the second year of application of the revised remuneration policy, which was approved by shareholders at the 2019 AGMs with almost 94 per cent of votes in favour. We believe the policy is serving stakeholders well. The key changes approved in 2019 for the CEO, which took effect from 1 July 2019, were:

•

a change in the balance of incentive arrangements comprising:

•

a significantly reduced LTIP grant size of 200 per cent of base salary (on a face value basis), down from 400 per cent

•

a rebalancing to a CDP award with a longer term focus than the former STIP. The CDP outcome is delivered

one-third

as a cash award, with

two-thirds

delivered in equity, as

two-year

and five-year deferred share awards each of equivalent value to the cash award. This aligns participants’ incentive remuneration with performance over the short, medium and long-term

•

this rebalancing from LTIP to CDP reduced the leverage in the overall pay arrangements resulting in a 12 per cent reduction in the maximum remuneration for a year

•

a significant reduction in the pension contribution rate to 10 per cent of base salary, down from 25 per cent (noting the estimated workforce average is approximately 11.5 per cent of base salary). As a result of this change, fixed remuneration for the CEO role was reduced by 12 per cent and overall target remuneration reduced by 4 per cent

•

the introduction of a

two-year

post-retirement shareholding requirement for the CEO

A consequence of the transition to the revised remuneration policy is that the FY2021 single total figure of remuneration for the CEO under UK requirements requires disclosure of the total amount of the CDP award earned during FY2021 (i.e. irrespective that some elements of the CDP award are deferred and five-year deferred shares were not a feature of the former STIP), together with the full amount of the

pre-existing

LTIP award vesting at the end of FY2021, which was granted in 2016 when the CEO was President Operations, Minerals Australia (i.e. when the LTIP award size was double the current grant size). This legacy consequence of remuneration policy transition will continue each year through to FY2024.

The Committee strives to implement the remuneration policy in a considered way. We test the CEO’s remuneration against CEO roles in other global companies of similar complexity, size, reach and industry. The remuneration also reflects the CEO’s responsibilities, location, skills, performance, qualifications and experience. This detailed benchmarking ensures BHP’s executive remuneration packages are competitive enough to attract and retain talented executives, without being excessive. External benchmarking shows the CEO’s target remuneration package is below the average for similar global companies. Importantly, a significant portion of the CEO’s target remuneration package can only be realised as actual remuneration if performance targets are met.

In addition, the CEO’s remuneration is deliberately tied to the performance of the business, with the majority of the remuneration package intended to be delivered in BHP equity, not cash. The CEO also has a minimum shareholding requirement of five times

pre-tax

base salary, which continues for two years post-retirement. This aligns the CEO to the experience of BHP’s shareholders.

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Business performance

Given the strong link at BHP between executive remuneration and performance, I am pleased to be able to report BHP has performed strongly across a wide range of areas in FY2021.

Our people have continued their focus on safety. Our global safety improvement programs are progressing well and our safety leading indicators have continued a strong positive trend underpinning the current safety performance. We have now had over two and a half years without a fatality at our operated assets and we continue to focus on fostering a culture of respect and ensuring our workplace is safe at all times.

We have delivered strong underlying operational performance during the year, with record volumes achieved at Western Australia Iron Ore, Goonyella and Olympic Dam, and Escondida maintained average concentrator throughput at record levels. We successfully achieved first production at four major development projects: South Flank, Spence Growth Option, Atlantis Phase 3 and Ruby, all of which were delivered on or ahead of schedule and on budget. We have also progressed significant strategic initiatives during FY2021, including preparing for the investment in Jansen Stage 1, pursuing a merger of our Petroleum business with Woodside, and unifying our corporate structure.

We have made strong progress on actions required to meet our commitments to reduce operational GHG emissions. We have established significant renewable power supply agreements for our Kwinana nickel refinery, Queensland Coal operations, and Escondida and Spence copper mines. We have established emissions reduction partnerships with three major steelmakers in China and Japan whose combined output equates to around 10 per cent of global steel production. In shipping, we have also taken a number of actions to help reduce emissions in our value chain: awarded the world’s first liquified natural gas fuelled bulk carriers contract and took part in a successful marine biofuel trial.

With respect to

COVID-19,

we remain vigilant and will continue with social distancing and hygiene practices, and other additional protocols as appropriate to protect our workforce and communities. Our Australian operations have effectively managed the rapidly changing environment relating to interstate travel and border access. In Chile, the operating environment is expected to continue to be challenging. The Remuneration Committee is proud of the way BHP’s employees have continued to collaborate to solve problems and support each other and their communities.

Despite the challenges the

COVID-19

pandemic has presented, in FY2021 BHP has again not needed to furlough any employees without pay, did not seek any government assistance, and did not raise additional equity. In addition, BHP’s strong, safe operational performance through this year, together with strong profitability, enabled the Board to announce record dividends for FY2021. This continues the delivery of strong and consistent returns to shareholders.

Activities of the Committee

I would like to thank all members of the Remuneration Committee for their contributions during the past year. In particular, I would like to express my appreciation to my predecessor as Chair, Susan Kilsby, who has provided strong leadership and guidance during her term, as BHP navigated one of the most tumultuous periods in our history.

A key element of the Committee’s work during the year was the remuneration implications of changes to the BHP ELT, with a number of appointments and departures taking place. David Lamont, Edgar Basto and Ragnar Udd join Mike Henry and Geraldine Slattery as Executive KMP for the purposes of this Remuneration Report, and Peter Beaven and Daniel Malchuk departed BHP having been Executive KMP during FY2021. Information on remuneration arrangements for David, Edgar and Ragnar and the departure arrangements for Peter and Daniel is set out in ‘Arrangements for KMP leaving and joining the Group’ and ‘Executive KMP remuneration table’ in section 2.2.3.

Other key decisions and activities of the Committee during FY2021 included:

•

considering remuneration for members of the ELT and the Group Company Secretary

•

setting targets for and reviewing outcomes against performance measures and conditions of relevant incentive plans, including the Committee considering its discretion over FY2021 plan outcomes

•

reviewing the fee for the BHP Chair, which remains unchanged

•

commencing early preparations for the

re-approval

of the remuneration policy at the 2022 AGMs

•

reviewing and adopting changes and improvements flowing from regulatory requirements and guidance, which in turn helps us improve our processes and approaches

•

engaging with shareholders and other key stakeholders

•

undertaking regular reviews of workforce engagement, workforce remuneration and related policies, remuneration by gender and the annual Shareplus enrolment

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FY2021 CDP

The scorecard against which Mike Henry’s annual performance as BHP’s CEO is assessed comprises stretching performance measures, including HSEC, financial and individual performance elements. For FY2021, the Remuneration Committee has assessed the CEO’s performance and determined a CDP outcome of 115 per cent, against the target of 100 per cent (and the maximum of 150 per cent).

These outcomes took into account BHP’s strong HSEC performance during the year, with no fatalities recorded, and good progress against our Fatality Elimination Program. We also saw positive progress against our climate change targets, which were expanded and strengthened for FY2021 from prior years, and our progress in the management of priority tailings storage facilities was pleasing.

As previously mentioned,

Our Charter

sets out our values, placing health and safety first, upon which the Remuneration Committee places great weight in determining performance-based remuneration outcomes for BHP executives. Good progress has been made at BHP through significant efforts since 2018 to address sexual assault and sexual harassment in the workplace, and completion of work to implement controls has been incorporated into the FY2022 CDP HSEC scorecard. The Committee considers that the efforts to address the risk of sexual assault and sexual harassment could have been further accelerated through stronger coordination of work streams and integrated planning. Accordingly, the Committee has exercised its discretion to make a downwards adjustment to the HSEC outcome of the CDP scorecard by 10 per cent from an initial 33 per cent to a final outcome of 30 per cent out of a target of 25 per cent. This downwards adjustment was applied to the CEO and all other ELT members.

Financial and operating performance was strong, even after fully eliminating the very positive impacts of commodity prices during the year, particularly for iron ore. Accordingly, performance was better than the stretching targets set at the commencement of the year.

While the

COVID-19

pandemic continued to impact BHP, society and the global economy, the Group maintained continuity of operations while keeping employees healthy and safe. Despite this, as occurred in FY2020, there were costs and other impacts of

COVID-19

to BHP’s financial results for FY2021. The direct costs have been recorded as an exceptional item in the Financial Statements, as they were in FY2020. Nevertheless, the Committee concluded that, to the extent the

COVID-19

related costs were higher than those included in the approved budget, they should flow through to the financial measures for CDP scorecard purposes, thereby reducing the remuneration outcome for executives from what they would have otherwise been. The Committee considered this was appropriate in light of the global impacts of the

COVID-19

pandemic. The CDP outcome for the financial measure was 60 per cent out of a target of 50 per cent.

The Committee also considered Mike’s performance against his individual objectives. These included projects and initiatives in respect of performance (material improvement in the system that supports exceptional performance), social value (long-term growth in value and returns for all stakeholders), people (right people, right skills, coming together in the right way to support exceptional performance) and portfolio (progress on our strategic objectives to create a winning portfolio and set BHP up for the next 20 years). The Committee considered Mike’s performance against his individual objectives to be in line with the target of 25 per cent.

While the CEO’s CDP scorecard outcome was determined at 115 per cent of target, the CDP scorecard outcomes for other Executive KMP were also on average ahead of target. Likewise, the short-term incentive pool applicable to the majority of BHP employees below the ELT level was above target. These outcomes were considered appropriate and due recognition, given the excellent performance across BHP’s whole workforce in the face of the continuing

COVID-19

pandemic, where strong safety performance and operational continuity were achieved during FY2021.

2016 LTIP award

The vesting outcome for the 2016 LTIP award against the relative TSR performance conditions was 100 per cent. BHP outperformed both the sector peer group and the MSCI World Index significantly. This 100 per cent level of vesting is aligned with the projected vesting outcome communicated to shareholders in the 2019 Remuneration Report at the time of the changes to our remuneration policy, which were approved by shareholders at the 2019 AGMs, and is set out in the chart below.

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As shareholders will recall, one of the key elements of our revised remuneration policy was to reduce the weighting of future LTIP grants as part of the overall CEO remuneration package; however,

pre-existing

grants would stay on foot and their vesting would be determined with existing service and performance conditions.

The Committee is conscious that the granting of the 2016 LTIP awards and the early part of the five-year performance period coincided with a period of lower share prices, driven in part by the Samarco dam failure having occurred on 5 November 2015.

At the time of the grant of the 2016 LTIP award, the Committee sought to ensure the Samarco dam failure did not result in an inappropriate LTIP award size due to the lower share price, and reduced the number of awards by 26 per cent from that which would have resulted from the standard grant size calculation. The Committee has reviewed this approach and concluded it was appropriate. In reaching this conclusion, the Committee noted the positive feedback received from shareholders and other investor groups in 2016 on the approach adopted.

Having considered the LTIP grant size, the Committee undertook a further exercise to satisfy itself that the TSR performance, which formulaically would result in 100 per cent vesting, had not been inappropriately enhanced by the starting position of the performance period being lower as a consequence of a fall in share price following the Samarco dam failure. This analysis included estimating and removing the impact of the dam failure from the start of the performance period (i.e. removing the impact this would have otherwise had on the TSR outcome due to the lower starting position), reducing the TSR outcome for estimated payments in relation to the Samarco dam failure that may take place beyond the end of the performance period and examining the construct of the comparator group against which TSR performance is measured.

While this analysis uses inputs and assumptions that are theoretical, the Committee concluded the analysis was sufficiently robust to provide confidence that the underlying TSR performance was sufficient to support the formulaic vesting of the 2016 LTIP award at 100 per cent.

The Committee notes the value of the vested 2016 LTIP award is higher than the value of the award at the time it was granted. With the share price having risen appreciably during the five-year period and strong dividends, 36 per cent of the value realised is the value at grant time and 64 per cent of the value realised is due to share price appreciation and dividends. This value increment due to share price appreciation and dividends is consistent with the experience of shareholders over the period.

Consistent with prior practice, the Board and Committee has also conducted a holistic review of business performance over the five years since grant to ensure this level of vesting was appropriate. More information on the 2016 LTIP vesting outcome, including the five-year holistic business review covering HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct, is included in ‘LTIP performance outcomes’ and ‘Overarching discretion and vesting underpin’ in section 2.2.3.

More information on the overall remuneration outcomes for the CEO for the year, and how the outcomes are aligned to performance during FY2021, is provided in ‘Single total figure of remuneration’ in section 2.2.3. Having considered the overall remuneration outcomes for the CEO carefully, as set out above and in section 2.2.3, the Committee concluded it was a fair reflection of performance and the experience of shareholders, and the application of any downwards discretion was not warranted. As at the date of this Report, the CEO’s BHP shareholding is in excess of his minimum shareholding requirement of five times

pre-tax

base salary.

FY2022 remuneration

For FY2022, the Committee determined that the CEO’s base salary remains unchanged at US$1.700 million per annum, as it was at the time of his appointment at the beginning of 2020. In addition, the other components of his total target remuneration (pension contributions, benefits, CDP and LTIP) also remain unchanged. A summary of the CEO’s arrangements for FY2022 is set out below.

The Committee has also reviewed the base salaries and total target remuneration packages for other Executive KMP and determined there would be no changes to base salaries in September 2021, and other aspects of their remuneration arrangements would also remain unchanged.

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Remuneration outcomes for the Chair and

Non-executive

Directors

Fees for the Chair and

Non-executive

Directors are reviewed annually and are benchmarked against peer companies. No changes to the Chair’s fee will be made for FY2022. This follows a review in 2017, where a decision was made to reduce the Chair’s annual fee by approximately 8 per cent from US$0.960 million to US$0.880 million with effect from 1 July 2017, which followed an earlier reduction, effective 1 July 2015, of approximately 13 per cent from US$1.100 million to US$0.960 million.

Base fee levels for

Non-executive

Directors will also remain unchanged, after they were also reduced effective 1 July 2015 by approximately 6 per cent, from US$0.170 million to US$0.160 million per annum. Prior to the above reductions in fee levels for the Chair and

Non-executive

Directors, their fees had remained unchanged since 2011.

Summary

It is with much pleasure that I note the strong performance by BHP across a wide range of areas during FY2021. We deliberately align our executive remuneration outcomes to performance – in particular, in our incentive plans where executives’ variable remuneration will reflect circumstances where shareholders have been rewarded very well, as delivered this year and measured in share price and dividend performance. As such, the remuneration outcomes for our executives in FY2021 reflect BHP’s strong performance, even after favourable commodity price movements for the year are backed out in full under the CDP. Given our need to attract, retain and motivate the executives critical to delivering the best outcomes for all BHP stakeholders, this is an especially pleasing result this year for all concerned, after recent years where the variable pay outcomes have been at the lower end for our executive team.

With the

COVID-19

pandemic continuing to impact this year, not only for BHP, but also for many other companies, governments, employees, families and communities across the world, I note the ongoing challenges. On behalf of the Remuneration Committee, I would like to recognise the hard work, dedication and sacrifices of our employees. Through their steadfast commitment, they have remained safe and healthy, continued to support their communities, and enabled BHP to generate strong results for all stakeholders.

The Committee believes the remuneration outcomes for FY2021 are aligned with BHP’s performance and the experience of shareholders, and are also fair in terms of the wider context of global circumstances. We are confident shareholders will recognise this as a continuation of our long-held approach. We look forward to ongoing dialogue with and the support of BHP’s shareholders, and I very much look forward to meeting shareholders

face-to-face

when we are able to do so. As always, we welcome your feedback and comments on any aspect of this Report.

Christine O’Reilly

Chair, Remuneration Committee

2 September 2021

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2.2.2 Remuneration policy report

BHP has an overarching remuneration policy that guides the Remuneration Committee’s decisions. Under UK legislation, shareholders have the opportunity to vote on our remuneration policy every three years, with binding effect in regard to the Directors (including the CEO). Under Australian legislation, shareholders also have the opportunity to vote on our remuneration policy in conjunction with the broader Remuneration Report each year at the AGMs as it applies to all KMP under a

non-binding

advisory vote. Our remuneration policy, which was approved by shareholders at the 2019 AGMs, has not changed and is repeated below.

Remuneration policy for the Executive Director

This section only refers to the remuneration policy for our CEO, who is our sole Executive Director. If any other executive were to be appointed an Executive Director, this remuneration policy would apply to that new role.

Components of remuneration

The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance frameworks, and the maximum opportunity for each component.


Remuneration component and link to strategy	Operation and performance framework	Maximum (1)
Base salary A competitive base salary is paid in order to attract and retain a high-quality and experienced CEO, and to provide appropriate remuneration for this important role in the Group.	• Base salary, denominated in US dollars, is broadly aligned with salaries for comparable roles in global companies of similar global complexity, size, reach and industry, and reflects the CEO’s responsibilities, location, skills, performance, qualifications and experience. • Base salary is reviewed annually with effect from 1 September. Reviews are informed, but not led, by benchmarking to comparable roles (as above), changes in responsibility and general economic conditions. Substantial weight is also given to the general base salary increases for employees. • Base salary is not subject to separate performance conditions.	8% increase per annum (annualised) or inflation if higher in Australia.
Pension contributions (2) Provides a market-competitive level of post-employment benefits provided to attract and retain a high-quality and experienced CEO.	• Pension contributions are benchmarked to comparable roles in global companies and have been determined after considering the pension contributions provided to the wider workforce. • A choice of funding vehicles is offered, including a defined contribution plan, an unfunded retirement savings plan, an international retirement plan or a self-managed superannuation fund. Alternatively, a cash payment may be provided in lieu.	A pension contribution rate of 10% of base salary applies.
Benefits Provides personal insurances, relocation benefits and tax assistance where BHP’s structure gives rise to tax obligations across multiple jurisdictions, and a market-competitive level of benefits to attract and retain a high-quality and experienced CEO.	• Benefits may be provided, as determined by the Committee, and currently include costs of private family health insurance, death and disability insurance, car parking and personal tax return preparation in the required countries where BHP has requested the CEO relocate internationally, or where BHP’s DLC structure requires personal tax returns in multiple jurisdictions. • Costs associated with business-related travel for the CEO’s spouse/partner, including for Board meetings, may be covered. Where these costs are deemed to be taxable benefits for the CEO, BHP may reimburse the CEO for these tax costs. • The CEO is eligible to participate in Shareplus, BHP’s all-employee share purchase plan. • A relocation allowance and assistance is provided only where a change of location is made at BHP’s request. The Group’s mobility policies generally provide for ‘one-off’ payments with no material trailing entitlements.	Benefits as determined by the Committee but to a limit not exceeding 10% of base salary and (if applicable) a one-off taxable relocation allowance up to US$700,000.

150

Remuneration component and link to strategy		Operation and performance framework		Maximum (1)
CDP The purpose of the CDP is to encourage and focus the CEO’s efforts on the delivery of the Group’s strategic priorities for the relevant financial year to deliver short, medium and long-term success, and to motivate the CEO to strive to achieve stretch performance objectives. The performance measures for each year are chosen on the basis that they are expected to have a significant short, medium and long-term impact on the success of the Group. Delivery of two-thirds of CDP awards in deferred shares encourages a longer-term focus aligned to that of shareholders.		Setting performance measures and targets • The Committee sets a balanced scorecard of short, medium and long-term elements including HSEC, financial and individual performance measures, with targets and relative weightings at the beginning of the financial year in order to appropriately motivate the CEO to achieve outperformance that contributes to the long-term sustainability of the Group and shareholder wealth creation. • Specific financial measures will constitute the largest weighting and are derived from the annual budget as approved by the Board for the relevant financial year. • Appropriate HSEC measures that are consistent with the Group’s long-term five-year public HSEC targets, and their weightings, are determined by the Remuneration Committee with the assistance of the Sustainability Committee. • Individual measures are an important element of effective performance management, and are a combination of quantitative and qualitative targets. They are aligned with medium and long-term strategy aspirations that are intended to drive long-term value for shareholders and other stakeholders. • For HSEC and for individual measures the target is ordinarily expressed in narrative form and will be disclosed near the beginning of the performance period. However, the target for each financial measure will be disclosed retrospectively. In the rare instances where this may not be prudent on grounds of commercial sensitivity, we will seek to explain why and give an indication of when the target may be disclosed. • Should any other performance measures be added at the discretion of the Committee, we will determine the timing of disclosure of the relevant target with due consideration of commercial sensitivity. Assessment of performance • At the conclusion of the financial year, the CEO’s achievement against each measure is assessed by the Remuneration Committee and the Board, with guidance provided by other relevant Board Committees in respect of HSEC and other measures, and a CDP award determined. If performance is below the threshold level for any measure, no CDP award will be provided in respect of that portion of the CDP award opportunity. • The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate, objective and comprehensive assessment of performance. • In the event that the Remuneration Committee does not consider the outcome that would otherwise apply to be a true reflection of the performance of the Group or should it consider that individual performance or other circumstances makes this an inappropriate outcome, it retains the discretion to not provide all or a part of any CDP award. This is an important mitigation against the risk of unintended award outcomes.		Maximum award A cash award of 120% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively. Target performance A cash award of 80% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for target performance on all measures. Threshold performance A cash award of 40% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for threshold performance on all measures. Minimum award Zero.

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Remuneration component and link to strategy	Operation and performance framework	Maximum (1)
	Delivery of award • CDP awards are provided under the CDP as cash and two awards of deferred shares, each of equivalent value to the cash award, vesting in two and five years respectively. • The awards of deferred shares comprise rights to receive ordinary BHP shares in the future at the end of the deferral periods. Before the awards vest (or are exercised), these rights are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided on vested awards. The Committee also has a discretion to settle CDP awards in cash. Underpin, malus and clawback • To ensure any vesting of five-year deferred shares under the CDP is underpinned by satisfactory performance post-grant, the vesting will be subject to an underpin. This will encompass a holistic review of performance at the end of the five-year vesting period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. • Both cash and deferred share CDP awards are subject to malus and clawback as described in ‘Malus and clawback’ in this section 2.2.2.
LTIP The purpose of the LTIP is to focus the CEO’s efforts on the achievement of sustainable long-term value creation and success of the Group (including appropriate management of business risks). It also encourages retention through long-term share exposure for the CEO over the five-year performance period (consistent with the long-term nature of resources), and aligns the long-term interests of the CEO and shareholders. The LTIP aligns the CEO’s reward with sustained shareholder wealth creation in excess of that of relevant comparator group(s), through the relative TSR performance condition.	Relative TSR performance condition • The LTIP award is conditional on achieving five-year relative TSR (3) performance conditions as set out below. • The relevant comparator group(s) and the weighting between relevant comparator group(s) will be determined by the Committee in relation to each LTIP grant. Level of performance required for vesting • Vesting of the award is dependent on BHP’s TSR relative to the TSR of relevant comparator group(s) over a five-year performance period. • 25% of the award will vest where BHP’s TSR is equal to the median TSR of the relevant comparator group(s), as measured over the performance period. Where TSR is below the median, awards will not vest. • Vesting occurs on a sliding scale between the median TSR of the relevant comparator group(s) up to a nominated level of TSR outperformance (4) over the relevant comparator group(s), as determined by the Committee, above which 100% of the award will vest. • Where the TSR performance condition is not met, there is no retesting and awards will lapse. The Committee also retains discretion to lapse any portion or all of the award where it considers the vesting outcome is not appropriate given Group or individual performance. This is an important mitigation against the risk of unintended outcomes.	Maximum award Face value of 200% of base salary. (6)

152


Remuneration component and link to strategy	Operation and performance framework	Maximum (1)
Relative TSR has been chosen as an appropriate measure as it allows for an objective external assessment over a sustained period on a basis that is familiar to shareholders.	Further performance measures • The Committee may add further performance conditions, in which case the vesting of a portion of any LTIP award may instead be linked to performance against the new condition(s). However, the Committee expects that in the event of introducing an additional performance condition(s), the weighting on relative TSR would remain the majority weighting. Delivery of award • LTIP awards are provided under the LTIP approved by shareholders at the 2013 AGMs. When considering the value of the award to be provided, the Committee primarily considers the face value of the award, and also considers its fair value which includes consideration of the performance conditions. (5) • LTIP awards consist of rights to receive ordinary BHP shares in the future if the performance and service conditions are met. Before vesting (or exercise), these rights are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided on vested awards. The Committee has a discretion to settle LTIP awards in cash. Underpin, malus and clawback • If the specified performance conditions are satisfied in part or in full, to ensure any vesting of LTIP awards is underpinned by satisfactory performance through the performance period, the vesting will be subject to an underpin. This will encompass a holistic review of performance at the end of the five-year performance period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. • LTIP awards are subject to malus and clawback as described in ‘Malus and clawback’ in this section 2.2.2.

(1)

UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase that is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each year, and instead it is a maximum required to be disclosed under the regulations.

(2)

Pension contributions maximum column wording has been updated to reflect the leadership transition of Executive Director and CEO on 1 January 2020 and the current application of policy with respect to pension contribution rate for Mike Henry. The FY2019 remuneration report policy table wording reflected the application of Andrew Mackenzie’s contribution rate: ‘For the existing CEO, the current pension contribution rate of 25 per cent of base salary will reduce as follows: 25 per cent of base salary to 30 June 2020; 20 per cent of base salary from 1 July 2020; 15 per cent of base salary from 1 July 2021; 10 per cent of base salary from 1 July 2022 onwards. For a new appointment, the pension contribution rate will be 10 per cent of base salary immediately.’

(3)	BHP’s TSR is a weighted average of the TSRs of BHP Group Limited and BHP Group Plc.

(4)	Maximum vesting is determined with reference to a position against each comparator group.

(5)

Fair value is calculated by the Committee’s independent adviser and is different to fair value used for IFRS disclosures (which do not take into account forfeiture conditions on the awards). It reflects outcomes weighted by probability, taking into account the difficulty of achieving the performance conditions and the correlation between these and share price appreciation, together with other factors, including volatility and forfeiture risks. The current fair value is 41 per cent of the face value of an award, which may change should the Committee vary elements (such as adding a performance measure or altering the level of relative TSR outperformance).

(6)

In order to ensure there was a fair transitional outcome for participants, the LTIP grant made in late CY2019 was based on 400 per cent face value basis in accordance with the remuneration policy approved by shareholders in 2017, with potential vesting five years later in

mid-CY2024.

The first five-year deferred shares that result from performance under the CDP for FY2020 were granted in late CY2020 and will first vest five years later in

mid-CY2025.

The LTIP grant in late CY2020 was made on the reduced 200 per cent face value basis, with potential vesting five years later in

mid-CY2025.

The Remuneration Committee’s discretion in respect of each remuneration component applies up to the maximum shown in the table above. Any remuneration elements awarded or granted under the previous remuneration policies approved by shareholders in 2014 and 2017, but which have not yet vested or been awarded or paid, shall continue to be capable of vesting, awarded or payment made on their existing terms.

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Malus and clawback

The CDP, STIP and LTIP rule provisions allow the Committee to reduce or clawback awards in the following circumstances:

•

the participant acting fraudulently or dishonestly or being in material breach of their obligations to the Group

•

where BHP becomes aware of a material misstatement or omission in the Financial Statements of a Group company or the Group

•

any circumstances occur that the Committee determines in good faith to have resulted in an unfair benefit to the participant

These malus and clawback provisions apply whether or not awards are made in the form of cash or equity, whether or not the equity has vested, and whether or not employment is ongoing.

Potential remuneration outcomes

The Remuneration Committee recognises market forces necessarily influence remuneration practices and it strongly believes the fundamental driver of remuneration outcomes should be business performance. It also believes overall remuneration should be fair to the individual, such that remuneration levels accurately reflect the CEO’s responsibilities and contributions, and align with the expectations of our shareholders, while considering the positioning and relativities of pay and employment conditions across the wider BHP workforce.

The amount of remuneration actually received each year depends on the achievement of superior business and individual performance generating sustained shareholder value. Before deciding on the final incentive outcomes for the CEO, the Committee first considers the achievement against the

pre-determined

performance conditions. The Committee then applies its overarching discretion on the basis of what it considers to be a fair and commensurate remuneration level to decide if the outcome should be reduced. When the CEO was appointed in January 2020 the Board advised him the Committee would exercise its discretion on the basis of what it considered to be a fair and commensurate remuneration level to decide if the outcome should be reduced.

In this way, the Committee believes it can set a remuneration level for the CEO that is sufficient to incentivise him and is also fair to him and commensurate with shareholder expectations and prevailing market conditions.

The diagram below provides the scenario for the potential total remuneration of the CEO at different levels of performance.

Minimum

: consists of fixed remuneration, which comprises base salary (US$1.700 million), pension contributions (10 per cent of base salary) and other benefits (notional 10 per cent of base salary).

Target

: consists of fixed remuneration, target CDP (a cash award of 80 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively) and target LTIP. The LTIP target value is based on the fair value of the award, which is 41 per cent of the face value of 200 per cent of base salary. The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards.

Maximum

: consists of fixed remuneration, maximum CDP (a cash award of 120 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively), and maximum LTIP (face value of 200 per cent of base salary). The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards. All other things being equal, if the share price at vesting of LTIP awards was 50 per cent higher than the share price at grant, then the total maximum value would be US$13.260 million.

The maximum opportunity represented above is the most that could potentially be paid of each remuneration component, as required by UK regulations. It does not reflect any intention by the Group to award that amount. The Remuneration Committee reviews relevant benchmarking data and industry practices, and believes the maximum remuneration opportunity is appropriate.

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Approach to recruitment and promotion remuneration

The remuneration policy as set out in ‘Components of remuneration’ in this section 2.2.2 will apply to the remuneration arrangements for a newly recruited or promoted CEO, or for another Executive Director should one be appointed. A market-competitive level of base salary will be provided. The pension contributions, benefits and variable pay will be in accordance with the remuneration policy table in ‘Components of remuneration’ in this section 2.2.2.

For external appointments, the Remuneration Committee may determine that it is appropriate to provide additional cash and/or equity components to replace any remuneration forfeited or not received from a former employer. It is anticipated any foregone equity awards would be replaced by equity. The value of the replacement remuneration would not be any greater than the fair value of the awards foregone or not received (as determined by the Committee’s independent adviser). The Committee would determine appropriate service conditions and performance conditions within BHP’s framework, taking into account the conditions attached to the foregone awards. The Committee is mindful of limiting such payments and not providing any more compensation than is necessary. For any internal CEO (or another Executive Director) appointment, any entitlements provided under former arrangements will be honoured according to their existing terms.

Service contracts and policy on loss of office

The terms of employment for the CEO are formalised in his employment contract. Key terms of the current contract and relevant payments on loss of office are shown below. If a new CEO or another Executive Director was appointed, similar contractual terms would apply, other than where the Remuneration Committee determines that different terms should apply for reasons specific to the individual or circumstances.

The CEO’s current contract has no fixed term. It can be terminated by BHP on 12 months’ notice. BHP can terminate the contract immediately by paying base salary plus pension contributions for the notice period. The CEO must give 12 months’ notice for voluntary resignation

(1)

. The table below sets out the basis on which payments on loss of office may be made.


Leaving reason (2)(3)
	Voluntary resignation	Termination for cause	Death, serious injury, illness, disability or total and permanent disablement	Cessation of employment as agreed with the Board (4)
Base salary	• Paid as a lump sum for the notice period or progressively over the notice period.	• No payment will be made.	• Paid for a period of up to six months, after which time employment may cease.	• Paid as a lump sum for the notice period or progressively over the notice period.
Pension contributions	• Paid as a lump sum for the notice period or progressively over the notice period.	• No contributions will be provided.	• Paid for a period of up to six months, after which time employment may cease.	• Paid as a lump sum for the notice period or progressively over the notice period.

Benefits	• May continue to be provided during the notice period. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will lapse.	• No benefits will be provided. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will lapse.	• May continue to be provided for a period of up to six months, after which time employment may cease. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will vest in full.	• May continue to be provided for year in which employment ceases. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will vest in full.

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Leaving reason (2)(3)
	Voluntary resignation	Termination for cause	Death, serious injury, illness, disability or total and permanent disablement	Cessation of employment as agreed with the Board (4)
CDP/STIP – cash and deferred shares Where the CEO leaves either during or after the end of the financial year, but before an award is provided.	• No cash award will be paid. • Unvested CDP/STIP deferred shares will lapse. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period unless the Committee determines they will lapse. • Vested but unexercised CDP/STIP awards remain subject to malus and clawback.	• No cash award will be paid. • Unvested CDP/STIP deferred shares will lapse. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period unless the Committee determines they will lapse. • Vested but unexercised CDP/STIP awards remain subject to malus and clawback.	• The Committee has discretion to pay and/or award an amount in respect of the CEO’s performance for that year. • Unvested CDP/STIP deferred shares will vest in full and, where applicable become exercisable. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period. • Unvested and vested but unexercised CDP/STIP awards remain subject to malus and clawback.	• The Committee has discretion to pay and/or award an amount in respect of the CEO’s performance for that year. • Unvested two-year CDP/STIP deferred shares and a pro rata portion (based on the proportion of the vesting period served) of unvested five-year CDP deferred shares continue to be held on the existing terms for the deferral period before vesting (subject to Committee discretion to lapse some or all of the award). • Vested but unexercised CDP/STIP deferred shares remain exercisable for the remaining exercise period, or a reduced period, or may lapse, as determined by the Committee. • Unvested and vested but unexercised CDP/STIP awards remain subject to malus and clawback.

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Leaving reason (2)(3)
	Voluntary resignation	Termination for cause	Death, serious injury, illness, disability or total and permanent disablement	Cessation of employment as agreed with the Board (4)
LTIP – unvested and vested but unexercised awards	• Unvested awards will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Vested but unexercised awards remain subject to malus and clawback.	• Unvested awards will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Vested but unexercised awards remain subject to malus and clawback.	• Unvested awards will vest in full. • Vested but unexercised awards will remain exercisable for remaining exercise period. • Unvested and vested but unexercised awards remain subject to malus and clawback.	• A pro rata portion of unvested awards (based on the proportion of the performance period served) will continue to be held subject to the LTIP rules and terms of grant. The balance will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Unvested and vested but unexercised awards remain subject to malus and clawback.

(1)	Notice period for voluntary resignation updated to reflect the terms of the new Executive Director and CEO employment contract effective on 1 January 2020.

(2)

If the Committee deems it necessary, BHP may enter into agreements with a CEO, which may include the settlement of liabilities in return for payment(s), including reimbursement of legal fees subject to appropriate conditions; or to enter into new arrangements with the departing CEO (for example, entering into consultancy arrangements).

(3)	In the event of a change in control event (for example, takeover, compromise or arrangement, winding up of the Group) as defined in the CDP, STIP and LTIP rules:

•

base salary, pension contributions and benefits will be paid until the date of the change of control event

•

in relation to the CDP and STIP: the Committee may determine that a cash payment be made in respect of performance during the current financial year and all unvested

two-year

deferred shares would vest in full and, in relation to the CDP, all unvested five-year deferred shares would vest pro rata (based on the proportion of the vesting period served up to the date of the change of control event)

•

the Committee may determine unvested LTIP awards will either (i) be prorated (based on the proportion of the performance period served up to the date of the change of control event) and vest to the extent the Committee determines appropriate (with reference to performance against the performance condition up to the date of the change of control event and expectations regarding future performance) or (ii) be lapsed if the Committee determines the holders will participate in an acceptable alternative employee equity plan as a term of the change of control event

(4)	Defined as occurring when a participant leaves BHP due to forced early retirement, retrenchment or redundancy, termination by mutual agreement or retirement with the agreement of the Group, or such other circumstances that do not constitute resignation or termination for cause.

Remuneration policy for

Non-executive

Directors

Our

Non-executive

Directors are paid in line with the UK Corporate Governance Code (2018 edition) and the Australian Securities Exchange Corporate Governance Council’s Principles and Recommendations (3

Edition).

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Components of remuneration

The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance frameworks, and the maximum opportunity for each component


Remuneration component and link to strategy	Operation and performance framework	Maximum (1)
Fees Competitive base fees are paid in order to attract and retain high-quality individuals, and to provide appropriate remuneration for the role undertaken. Committee fees are provided to recognise the additional responsibilities, time and commitment required.	• The Chair is paid a single fee for all responsibilities. • Non-executive Directors are paid a base fee and relevant committee membership fees. • Committee Chairs and the Senior Independent Director are paid an additional fee to reflect their extra responsibilities. • All fee levels are reviewed annually and any changes are effective from 1 July. • Fees are set at a competitive level based on benchmarks and advice provided by external advisers. Fee levels reflect the size and complexity of the Group, the multi-jurisdictional environment arising from the DLC structure, the multiple stock exchange listings and the geographies in which the Group operates. The economic environment and the financial performance of the Group are taken into account. Consideration is also given to salary reviews across the rest of the Group. • Where the payment of pension contributions is required by law, these contributions are deducted from the Director’s overall fee entitlements.	8% increase per annum (annualised), or inflation if higher in the location in which duties are primarily performed, on a per fee basis.

Benefits Competitive benefits are paid in order to attract and retain high-quality individuals and adequately remunerate them for the role undertaken, including the considerable travel burden.	• Travel allowances are paid on a per-trip basis reflecting the considerable travel burden imposed on members of the Board as a consequence of the global nature of the organisation and apply when a Director needs to travel internationally to attend a Board meeting or site visits at our multiple geographic locations. • As a consequence of the DLC structure, Non-executive Directors are required to prepare personal tax returns in Australia and the UK, regardless of whether they reside in one or neither of those countries. They are accordingly reimbursed for the costs of personal tax return preparation in whichever of the UK and/or Australia is not their place of residence (including payment of the tax cost associated with the provision of the benefit).	8% increase per annum (annualised), or inflation if higher in the location in which duties are primarily performed, on a per-trip basis. Up to a limit not exceeding 20% of fees.

Variable pay (CDP and LTIP)	• Non-executive Directors are not eligible to participate in any CDP or LTIP award arrangements.

Payments on early termination	• There are no provisions in any of the Non-executive Directors’ appointment arrangements for compensation payable on early termination of their directorship.

(1)

UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase that is annualised, it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each year, and instead it is a maximum required to be disclosed under the regulations.

Approach to recruitment remuneration

The ongoing remuneration arrangements for a newly recruited

Non-executive

Director will reflect the remuneration policy in place for other

Non-executive

Directors, comprising fees and benefits as set out in the table above. No variable remuneration (CDP and LTIP award arrangements) will be provided to newly recruited

Non-executive

Directors.

Letters of appointment and policy on loss of office

The standard letter of appointment for

Non-executive

Directors is available on our website. The Board has adopted a policy consistent with the UK Corporate Governance Code, under which all

Non-executive

Directors must seek

re-election

by shareholders annually if they wish to remain on the Board. As such, no

Non-executive

Directors seeking

re-election

have an unexpired term in their letter of appointment. A

Non-executive

Director may resign on reasonable notice. No payments are made to

Non-executive

Directors on loss of office.

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How remuneration policy is set

The Remuneration Committee sets the remuneration policy for the CEO and other Executive KMP. The Committee is briefed on and considers prevailing market conditions, the competitive environment and the positioning and relativities of pay and employment conditions across the wider BHP workforce. The Committee takes into account the annual base salary increases for our employee population when determining any change in the CEO’s base salary. Salary increases in Australia, where the CEO is located, are particularly relevant as they reflect the local economic conditions.

The principles that underpin the remuneration policy for the CEO are the same as those that apply to other employees, although the CEO’s arrangements have a greater emphasis on and a higher proportion of remuneration in the form of performance-related variable pay. Similarly, the performance measures used to determine variable pay outcomes for the CEO and all other employees are linked to the delivery of our strategy and behaviours that are aligned to the values in

Our Charter.

Although BHP does not consult directly with employees on CEO and other Executive KMP remuneration, the Group conducts regular employee engagement surveys that give employees an opportunity to provide feedback on a wide range of employee matters. Further, many employees are ordinary shareholders through our

all-employee

share purchase plan, Shareplus, and therefore have the opportunity to vote on AGM resolutions. In addition, in line with changes to the UK Corporate Governance Code, the Remuneration Committee is considering additional means of engaging with the workforce to explain how executive remuneration aligns with wider Group pay policy.

As part of the Board’s commitment to good governance, the Committee also considers shareholder views, together with those of the wider community, when setting the remuneration policy for the CEO and other Executive KMP. We are committed to engaging and communicating with shareholders regularly and, as our shareholders are spread across the globe, we are proactive with our engagement on remuneration and governance matters with institutional shareholders and investor representative organisations. Feedback from shareholders and investors is shared with and used as input into decision-making by the Board and Remuneration Committee in respect of our remuneration policy and its application. The Committee considers that this approach provides a robust mechanism to ensure Directors are aware of matters raised, have a good understanding of current shareholder views and can formulate policy and make decisions as appropriate. We encourage shareholders to always make their views known to us by directly contacting our Investor Relations team (contact details available at bhp.com).

2.2.3 Annual report on remuneration

This section of the Report shows the impact of the remuneration policy in FY2021 and how remuneration outcomes are linked to actual performance.

Remuneration for the Executive Directors (the CEOs)

Single total figure of remuneration

This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration received, rather than a figure calculated in accordance with IFRS (which is detailed in note 24 ‘Employee share ownership plan’ in section 3.1). The components of remuneration are detailed in the remuneration policy table in section 2.2.2.


US$(’000)			Base salary		Benefits (1)		Pension (2)		Total fixed		CDP (3)		LTIP (4)		Total variable		Single total figure
Mike Henry	FY2021			1,700		20		170		1,890		4,692		7,939		12,631		14,521
	FY2020	(5)		850		6		85		941		1,959		3,169		5,128		6,069
Andrew Mackenzie	FY2020	(5)		850		55		213		1,118		1,306		–		1,306		2,424

(1)	Includes private family health insurance, spouse business-related travel, car parking and personal tax return preparation in required countries.

(2)

Mike Henry’s FY2021 and FY2020 pension contributions were made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 10 per cent of base salary which applied for a new Executive Director appointment). Pension contributions for Andrew Mackenzie in FY2020 (until the date he ceased as CEO and Executive Director) were also made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 25 per cent of base salary). Pension contributions for both were made into an international retirement plan.

(3)	FY2021 CDP award is provided one-third in cash and two-thirds in deferred equity (on the terms of the CDP) as shown in the table below. No discretion was applied to STIP awards when determining vesting of awards in FY2021 or FY2020.

(4)

Mike Henry’s LTIP award value for FY2021 is based on the full award he received in 2016 when he was President Operations, Minerals Australia (prior to becoming, and with no proration applied for time as, CEO and Executive Director). The value is based on 100 per cent of the award vesting, including a DEP amount of US$1.291 million paid in shares. The value delivered through share price appreciation between the date of grant and the vesting date as prescribed under UK requirements was US$3.800 million. Mike Henry’s LTIP award value for FY2020 is based on the full award he received in 2015 when he was President Coal (prior to becoming, and with no proration applied for time as, CEO and Executive Director). The value is based on 48 per cent of the award vesting, including a DEP amount of US$0.548 million paid in shares. The value delivered through share price appreciation between the date of grant and the vesting date was US$0.774 million.

(5)

For Mike Henry, the single total figure of remuneration is calculated on the basis of his appointment on 1 January 2020. There have been no changes to his base salary, benefit entitlements or pension contributions since that date. For Andrew Mackenzie, the single total figure of remuneration is calculated on the basis of his period as CEO and Executive Director up until 31 December 2019. There were no changes to his base salary, benefit entitlements or pension contributions prior to the date of his cessation as CEO and Executive Director.

159

A consequence of the transition to the revised remuneration policy approved by shareholders at the 2019 AGMs which took effect from 1 July 2019, is that the FY2021 single total figure of remuneration for Mike Henry requires disclosure of the full amount of the CDP award earned during FY2021 (i.e. irrespective that some elements of the CDP award are deferred and five-year deferred shares were not a feature of the former STIP) together with the full amount of the

pre-existing

LTIP award vesting at the end of FY2021 which was granted in 2016 (i.e. when the LTIP award size was double the current grant size). Had the current approved remuneration policy been in place when Mike’s 2016 LTIP grant was made, the reported LTIP value for FY2021 would have been US$3.970 million (instead of US$7.939 million in the table above) and the reported single total figure of remuneration for FY2021 would have been US$10.552 million (instead of US$14.521 million in the table above).

Changes from prior year outcomes of CDP/STIP and LTIP are set out below.


		CDP	LTIP
Mike Henry	FY2021	CDP awarded for FY2021 performance. One-third was provided in cash in September 2021, one-third deferred in an equity award that is due to vest in FY2024, and one-third deferred in an equity award that is due to vest in FY2027.	Based on performance during the five-year period to 30 June 2021, 100% of Mike’s 192,360 awards from the 2016 LTIP (granted to him when he was President Operations, Minerals Australia before he was appointed CEO and Executive Director) have vested. The value of the vested awards is inclusive of a DEP, which is paid in shares.
	FY2020	CDP awarded for FY2020 performance. One-third was provided in cash in September 2020, one-third deferred in an equity award that is due to vest in FY2023, and one-third deferred in an equity award that is due to vest in FY2026.	Based on performance during the five-year period to 30 June 2020, 48% of Mike’s 192,360 awards from the 2015 LTIP (granted to him when he was President Coal before he was appointed CEO and Executive Director) vested, and the remaining awards lapsed. The value of the vested awards is inclusive of a DEP, which is paid in shares.
Andrew Mackenzie	FY2020	Prorated CDP awarded for FY2020 performance. Two-thirds of the award was paid in cash in September 2020 covering the cash and two-year deferred equity portion. Nothing has been or will be granted or paid in respect of the remaining one-third of the award i.e. the five-year deferred equity portion.	Details of Andrew’s vested 2015 LTIP award (which vested after Andrew retired from BHP) are set out in section 3.3.24 of the 2020 Annual Report.

FY2021 CDP performance outcomes

The Board and Remuneration Committee assessed the CEO’s CDP outcome in light of the Group’s performance in FY2021, taking into account the CEO’s performance against the KPIs in his CDP scorecard. Having recorded strong safety, operational and financial performance in FY2021 (after fully eliminating the very positive impacts of commodity prices during the year, particularly for iron ore), when assessing performance against the targets set at the commencement of the year the Board and Committee determined the CDP outcome for the CEO for FY2021 at 115 per cent against the target of 100 per cent (which represents an outcome of 77 per cent against maximum). The Board and Committee believe this outcome is appropriately aligned with the shareholder experience and the interests of the Group’s other stakeholders.

The CEO’s CDP scorecard outcomes for FY2021 are summarised in the following tables, including a narrative description of each performance measure and the CEO’s level of achievement, as determined by the Remuneration Committee and approved by the Board. The level of performance for each measure is determined based on a range of threshold (the minimum necessary to qualify for any reward outcome), target (where the performance requirements are met), and maximum (where the performance requirements are significantly exceeded).

160

Summary of outcomes for the CEO

HSEC

The HSEC targets for the CEO are aligned to the Group’s suite of HSEC five-year public targets as set out in section 1.13. As it has done for several years, the Remuneration Committee seeks guidance each year from the Sustainability Committee when assessing HSEC performance against scorecard targets. The Remuneration Committee has taken a holistic view of Group performance in critical areas, including any matters outside the scorecard targets that the Sustainability Committee considers relevant.

The performance commentary below is provided against the HSEC scorecard targets, which were updated in FY2021 as a consequence of our commitment to clarify and strengthen the links between climate change and executive remuneration. This resulted in a weighting for climate change of 10 per cent under the CDP, which compares to around 4 per cent allocated to climate change in the prior STIP. The targets were set on the basis of operated assets only.


HSEC measures	Scorecard targets	Performance against scorecard targets	Measure outcome
Significant events	No significant (actual level 4) health, safety (including fatalities), environment or community events during the year.	• There were no fatalities or other significant HSEC events during FY2021 at operated assets. • In addition, for a maximum outcome to be awarded, strong progress was required on the development and implementation of BHP’s Fatality Elimination Program in all regions, and this was largely achieved for FY2021.	Close to maximum.

Climate change	Steps in place to achieve reported GHG emissions in FY2022 at FY2017 level. Decarbonisation plans developed in line with pathways to net zero and incorporated into the capital allocation plan process. Two partnerships formalised with strategic customers in the steel sector.	• For FY2021, we improved on our operational GHG emissions target of 17.0Mt, with an actual result of 16.2Mt. • All operated assets completed the development of decarbonisation plans which were incorporated in the capital allocation process. The new renewable power purchase agreements at Escondida and Spence, both in Chile, remain on track for first power supply in the first half of FY2022. In addition, in FY2021 we also entered into renewable power purchase agreements for Queensland Coal and Kwinana nickel refinery in Australia. • During the year, memorandums of understanding were signed with China Baowu (China), JFE Steel Corporation (Japan) and HBIS Limited (China) to partner on emissions intensity reduction in integrated steelmaking. We have significantly progressed developing a Phase 1 research and development agreement with China Baowu (which we anticipate will be signed in FY2022) and significant work is also being undertaken in collaboration with our partners to convert the remaining two memorandums of understanding into executed definitive contracts.	Slightly above target.

Management of priority Tailings Storage Facilities (TSFs)	All priority TSFs are assessed based on key risk indicator data, and are either within appetite or continued operation outside appetite is approved with remediation progressing to plan.	• All priority TSFs are now either within appetite based on key risk indicator data or continued operation outside appetite is approved with remediation progressing to plan. • We have continued improving our key risk indicator performance with 84% of all key risk indicators for priority TSFs rated either on target or less risk being taken than target, against a target of 80%.	Slightly above target.

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The initial outcome against the HSEC KPI for FY2021 was 33 per cent out of the target of 25 per cent.

However, having assessed performance against the FY2021 HSEC KPI, the Sustainability Committee also considered sexual assault and sexual harassment and noted:

•

Good progress has been made in relation to preventing, managing and responding to risks of sexual assault and sexual harassment through significant efforts since 2018, including enhancing controls to prevent incidents, improved reporting processes and in the creation and commencement of a dedicated support service to assist impacted persons.

•

Management acknowledges there were areas where coordination of work streams and integrated planning in relation to work regarding sexual assault and sexual harassment could have been improved, and this may have allowed certain actions to have been taken sooner, including the introduction of increased alcohol restrictions in camps.

•

Aligned targets for implementation of controls have been incorporated into the FY2022 CDP HSEC scorecard with support from a dedicated project management office.

In recognition of the opportunity to have enhanced coordination of work streams and integrated planning in relation to sexual assault and sexual harassment, and with the Remuneration Committee being mindful that this is a critical health and safety matter, the Committee, upon the recommendation of the Sustainability Committee, determined a 10 per cent reduction in the overall FY2021 CDP HSEC KPI outcome from 33 per cent to a final outcome of 30 per cent out of the target of 25 per cent.

Financial

ROCE is underlying profit after taxation (excluding after-taxation finance costs and exceptional items) divided by average capital employed. ROCE is the key financial KPI against which CDP outcomes for our senior executives are measured and is, in our view, a relevant measure to assess the financial performance of the Group for this purpose. While ROCE excludes exceptional items, the Remuneration Committee reviews each exceptional item to assess if it should be included in the result for the purposes of deriving the ROCE CDP outcome.

When we are assessing management’s performance, we make adjustments to the ROCE result to allow for changes in commodity prices, foreign exchange movements and other material items to ensure the assessment appropriately measures outcomes that are within the control and influence of the Group and its executives. Of these, changes in commodity prices have historically been the most material due to volatility in prices and the impact on Group revenue and ROCE.

162

The outcome against the ROCE KPI for FY2021 was 60 per cent out of the target of 50 per cent.

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Individual measures for the CEO

Individual measures for the CEO are determined at the commencement of the financial year. The application of personal measures remains an important element of effective performance management. These measures seek to provide a balance between the financial and

non-financial

performance requirements that maintain our position as a leader in our industry. The CEO’s individual measures for FY2021 included contribution to BHP’s overall performance and the management team, and also the delivery of projects and initiatives within the scope of the CEO role as specified by the Board, as set out in the table below.


Individual measures	Individual scorecard targets	Performance against scorecard targets	Measure outcome
Performance	• BHP Operating System deployment on track. • Enterprise-wide improvement initiatives established and progressed to plan.	• The deployment of the BHP Operating System is tracking better than target on the schedule and costs of implementation, and the improvement value identified and delivered to date is in excess of target. • The accelerated delivery of cost savings targeted by the end of FY2021 has been achieved, and in-flight initiatives are progressing to plan.	Between target and maximum.

Social value	• Social value plans established for each asset. • Reframing the social value narrative plan agreed and underway. • Restructure of the leadership of Samarco/Fundação Renova oversight. • Progress on Samarco claims.	• All assets have established social value plans, and also delivered the FY2021 actions set out in those plans. • ‘Reframing the Narrative’, marketing segmentation strategy, audience testing and creative concepts were presented to the Board throughout FY2021, approved as necessary, and implemented, with strong results received so far. • Samarco/Fundação Renova leadership was successfully restructured to have Samarco/Fundação Renova overseen by a dedicated person reporting directly to the regional President Minerals Americas, and a dedicated external affairs team was also established. • Good progress on Fundação Renova compensation programs, and we have continued to amplify our communications and stakeholder engagement in Brazil, with positive feedback received.	Target.

People	• Increase in female participation by three percentage points. • Operations Services (OS) increased to 5,000 employees. • New Engagement and Perception Survey (EPS) system embedment. • ELT members’ development and succession plans.	• By 30 June 2021 gender diversity had increased 2.7 percentage points to 29.2%, up from 26.5% at 30 June 2020, for a cumulative increase of 11.6 percentage points from 17.6% at 30 June 2016. • By 30 June 2021 there were 3,864 OS employees. • The new EPS was successfully implemented during FY2021 with high levels of participation and a strong improvement focus. • The ELT transitions were completed in FY2021 (i.e. promotions, recruitment and departures), and updated individual development plans were established for all ELT members.	Between threshold and target.

Portfolio	• Portfolio strategy delivery. • Exploration and development performance. • Business development process improvement.	• Strong progress on delivery of key strategy elements as have been publicly announced, including preparing for the investment in Jansen Stage 1, pursuing a merger of our Petroleum business with Woodside, unifying our corporate structure and the Cerrejon divestment. The process for BHP Mitsui Coal and New South Wales Energy Coal is progressing, in line with the two-year timeframe set last year. • The metals exploration strategy was refreshed, as presented to the Board in June 2021, and is now in execution. Greenfield exploration activity has increased, with wider geographic coverage and greater focus on using technology to increase identification of ore under cover. • Business Development and Exploration teams are working effectively together, with the co-location of senior personnel, which will improve the interactions of the teams, as well as access to new opportunities. In addition, the Business Development team has significantly increased capability during FY2021.	Target.

Overall, it was considered the performance of the CEO against the individual measures KPI for FY2021 warranted an outcome at the target of 25 per cent.

164

LTIP performance outcomes

LTIP vesting based on performance to June 2021

The five-year performance period for the 2016 LTIP award ended on 30 June 2021. The CEO’s 2016 LTIP award comprised 192,360 awards (granted as President Operations, Minerals Australia prior to his appointment as CEO). Vesting is subject to achievement of the relative TSR performance conditions and any discretion applied by the Remuneration Committee (see ‘Overarching discretion and vesting underpin’ in this section 2.2.3).

Testing the performance condition

For the award to vest in full, TSR must exceed the Peer Group TSR (for 67 per cent of the award) and the Index TSR (for 33 per cent of the award) by an average of 5.5 per cent per year for five years, being 30.7 per cent in total compounded over the performance period from 1 July 2016 to 30 June 2021. TSR includes returns to BHP shareholders in the form of share price movements along with dividends paid and reinvested in BHP (including cash and

in-specie

dividends).

BHP’s TSR performance was positive 266.5 per cent over the five-year period from 1 July 2016 to 30 June 2021. This is above the weighted median Peer Group TSR of positive 213.9 per cent and above the Index TSR of positive 99.8 per cent over the same period. This level of performance results in 100 per cent vesting for the 2016 LTIP award. The value of the CEO’s vested 2016 LTIP award has been reported in ‘Single total figure of remuneration’ in this section 2.2.3.

The graph below shows BHP’s performance relative to comparator groups.

The Committee is conscious the granting of the 2016 LTIP awards and the early part of the five-year performance period coincided with a period of share price reductions, driven in part by the Samarco dam failure having occurred on 5 November 2015.

The number of LTIP awards to be granted in December 2016 was to be determined using the share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2016. Using a

12-month

average share price of A$20.3326 and a

12-month

average US$/A$ exchange rate of 0.728415 (each up to and including 30 June 2016), the number of LTIP awards derived for Mike Henry was 259,982. However, to ensure Mike (and other Executive KMP) did not receive a larger number of awards as a result of the lower BHP share price since the Samarco dam failure in Brazil on 5 November 2015, as the Committee was conscious of shareholder expectations in this respect, the Committee instead granted 192,360 LTIP awards to Mike in December 2016, a reduction of 26 per cent. This was the same number that was granted to Mike in the prior year in December 2015, which in itself had been reduced from the formulaically derived amount to ensure the Samarco dam failure did not inflate the 2015 LTIP award grant size. The Committee has reviewed this approach and concluded it was appropriate.

The value of the vested 2016 LTIP award is higher than the value of the award at the time it was granted. With the share price having risen appreciably during the five-year period and strong dividends, 36 per cent of the value realised is the value at grant time and 64 per cent of the value realised is due to share price appreciation and dividends. This value increment due to share price appreciation and dividends is consistent with the experience of shareholders over the period.

165

The following chart shows the cumulative outcomes of the decisions above, with the original notional grant size as if it had vested in full, the grant size reduction due to the Samarco dam failure, and the final vested value of US$7.939 million, split between the original grant value and share price appreciation and dividends.

LTIP allocated during FY2021

Following shareholder approval at the 2020 AGMs, LTIP awards (in the form of performance rights) were granted to Mike Henry on 20 October 2020.

The face value and fair value of the awards granted on 20 October 2020 are shown in the table below. The face value of Mike’s award was 200 per cent of his base salary of US$1.700 million at the time of grant.

The fair value of the awards is ordinarily calculated by multiplying the face value of the award by the fair value factor of 41 per cent (for the current plan design, as determined by the independent adviser to the Committee).

The number of LTIP awards for Mike as detailed below was determined based on the US$ face value of the LTIP awards and calculated using the average share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2020.


	Number of LTIP awards	Face value US$(‘000)	Face value % of salary	Fair value US$(‘000)	Fair value % of salary	% of max (1)
Mike Henry	140,239	3,400	200	1,394	82	100

(1)	The allocation is 100 per cent of the maximum award that was permitted under the remuneration policy approved by shareholders at the 2019 AGMs.

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Terms of the LTIP award

In addition to those LTIP terms set in the remuneration policy for the CEO approved by shareholders in 2019, the Remuneration Committee has determined:


Performance period		• 1 July 2020 to 30 June 2025

Performance conditions		• An averaging period of six months will be used in the TSR calculations. • BHP’s TSR relative to the weighted median TSR of sector peer companies selected by the Committee (Peer Group TSR) and the MSCI World Index (Index TSR) will determine the vesting of 67% and 33% of the award, respectively. • Each company in the peer group is weighted by market capitalisation. The maximum weighting for any one company is 25% and the minimum is set at 0.4% to reduce sensitivity to any single peer company. • For the whole of either portion of the award to vest, BHP’s TSR must be at or exceed the weighted 80th percentile of the Peer Group TSR or the Index TSR (as applicable). Threshold vesting (25% of each portion of the award) occurs where BHP’s TSR equals the weighted 50th percentile (i.e. the median) of the Peer Group TSR or the Index TSR (as applicable). Vesting occurs on a sliding scale between the weighted 50 th and 80 th percentiles.

Sector peer group companies (1)(2)(3)		• Resources (85%): Anglo American, Fortescue Metals, Freeport-McMoRan, Glencore, Rio Tinto, Southern Copper, Teck Resources, Vale. • Oil and gas (15%): Apache, BP, Canadian Natural Res., Chevron, ConocoPhillips, Devon Energy, EOG Resources, ExxonMobil, Occidental Petroleum, Royal Dutch Shell, Woodside Petroleum.

(1)

Sector peer group companies are selected by the Committee on the basis of the commodities they produce and their market capitalisations, such that the sector peer group as a whole, to the extent practical, reflects the weighting of the value of commodities produced by BHP. The targeted outcome is that, to the extent practical, the vesting outcome is driven by BHP’s performance excluding movements in commodity prices over the five-year performance period.

(2)	From December 2016, BG Group and Peabody Energy were removed from the comparator group. BG Group was acquired by Royal Dutch Shell and Peabody Energy had become a significantly less comparable peer.

(3)	From November 2018, CONSOL Energy was removed from the comparator group, as due to its internal restructuring it had become a less comparable peer.

Overarching discretion and vesting underpin

The rules of the CDP, STIP and LTIP and the terms and conditions of the awards give the Committee an overarching discretion to reduce the number of awards that will vest, notwithstanding the fact that the performance condition for partial or full vesting, as tested following the end of the performance period, or the relevant service conditions, have been met.

This holistic, qualitative judgement, which is applied as an underpin test before final vesting is confirmed, is an important risk management tool to ensure vesting is not simply driven by a formula or the passage of time that may give unexpected or unintended remuneration outcomes.

The Committee considers its discretion carefully each year ahead of the scheduled vesting of equity awards in August. It considers performance holistically over the five-year period, including a five-year ‘look back’ on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. For the five years from FY2017 to FY2021, the Committee noted BHP’s continued improvement in HSEC outcomes, strong operational performance with improving production and cost performance, and significant returns to shareholders, together with no governance or conduct issues of note.

Accordingly, in respect of the STIP

two-year

deferred shares (granted in November 2019 in respect of performance in FY2019), the Committee chose not to exercise its discretion and allowed the STIP awards to vest in full. In addition, in respect of the LTIP five-year performance shares (granted in December 2016), the formulaic outcome of the 2016 LTIP was a 100 per cent vesting. Having undertaken the ‘look back’ review described above and the assessment of the estimated impact on TSR performance of the Samarco dam failure, the Committee concluded the vesting outcome was appropriate given Group and individual performance, and chose not to exercise its discretion and allowed 100 per cent of the LTIP awards to vest. There is no upwards discretion available to the Remuneration Committee in respect of the LTIP, as the overarching discretion may only reduce the number of awards that may vest.

167

CEO remuneration and returns to shareholders

10-year

CEO remuneration

The table below shows the single total figure of remuneration for Mike Henry, Andrew Mackenzie and Marius Kloppers over the last 10 years along with the proportion of maximum opportunity earned for each type of incentive.


Executive Director	Financial year			Single total figure of remuneration, US$(‘000)		CDP/STIP (% of maximum)		LTIP (% of maximum)
Mike Henry		FY2021			14,521		77		100
		FY2020	(1)		6,069		64		48
Andrew Mackenzie		FY2020	(1)		2,424		64		48
		FY2019			3,531		32		0
		FY2018			4,657		60		0
		FY2017			4,554		57		0
		FY2016			2,241		0		0
		FY2015			4,582		57		0
		FY2014			7,988		77		58
		FY2013	(2)		9,740		47		65
Marius Kloppers		FY2013	(2)		5,624		47		65
		FY2012			16,092		0		100

(1)

As Mike Henry assumed the role of CEO and Executive Director in January 2020, the FY2020 single total figure of remuneration shown includes remuneration relevant to that role for the period 1 January 2020 to 30 June 2020. The FY2020 single total figure of remuneration for Andrew Mackenzie includes remuneration relevant to his role as CEO and Executive Director for the period 1 July 2019 to 31 December 2019. The value of Mike’s vested 2015 LTIP award is included in full, while Andrew’s vested 2015 LTIP award (with a value of US$5.317 million and which vested after Andrew stepped down from his role as CEO and Executive Director) was reported in section 3.3.24 of the 2020 Annual Report.

(2)

As Andrew Mackenzie assumed the role of CEO and Executive Director in May 2013, the FY2013 single total figure of remuneration shown includes remuneration relevant to that role for the period 10 May 2013 to 30 June 2013. The FY2013 single total figure of remuneration for Marius Kloppers includes remuneration relevant to his role as CEO and Executive Director for the period 1 July 2012 to 10 May 2013. The value of Andrew’s vested 2008 LTIP award of US$8.480 million (inclusive of vested

sign-on

awards provided when Andrew joined BHP) is included in full, while Marius’ vested 2008 LTIP award (with a value of US$12.051 million and which vested after Marius stepped down from his role as CEO and Executive Director) was reported in section 4.4.28 of the 2014 Annual Report.

10-year

TSR

The graph below shows BHP’s TSR against the performance of relevant indices over the same

10-year

period. The indices shown in the graph were chosen as being broad market indices, which include companies of a comparable size and complexity to BHP.

168

Changes in Directors’ remuneration from FY2019 to FY2021

The table below sets out the percentage change in remuneration from FY2019 to FY2021 for the CEOs (for the time they were CEO) and

Non-executive

Directors, compared to the average change in each remuneration element for employees in Australia (being approximately 24,000 employees) over the same period. This has been chosen by the Committee as the most appropriate comparison, as Australia has the largest employee base, and the Committee considers remuneration levels in Australia when setting salaries and fees for Executive and

Non-executive

Directors and the CEO is located in Australia. The CEOs’ and

Non-executive

Directors’ remuneration described in the table align to what is disclosed in ‘Single total figure of remuneration’ (Executive Directors and

Non-executive

Directors) in this section

2.2.3.


		FY2019 to FY2020								FY2020 to FY2021
		Base salary/fees % change			Benefits % change			CDP/STI % change		Base salary/fees % change			Benefits % change (4)			CDP/STI % change
CEO (1)	Mike Henry		0			0			0		0			67			20
	Andrew Mackenzie		0			10			100		–			–			–
Non-executive Directors	Terry Bowen		2			33			–		17			(90	)		–
	Malcolm Broomhead		(5	)		(53	)		–		(3	)		(84	)		–
	Xiaoqun Clever (2)		0			0			–		0			0			–
	Ian Cockerill (2)		0			0			–		0			(100	)		–
	Anita Frew		0			(2	)		–		0			(96	)		–
	Gary Goldberg (2)		0			0			–		14			(87	)		–
	Carolyn Hewson (3)		0			0			–		–			–			–
	Susan Kilsby (2)		0			0			–		7			(99	)		–
	Ken MacKenzie		0			25			–		0			(90	)		–
	Lindsay Maxsted (3)		(2	)		(44	)		–		0			0			–
	John Mogford		6			13			–		8			(97	)		–
	Christine O’Reilly (2)		0			0			–		0			0			–
	Shriti Vadera (3)		0			0			–		0			0			–
	Dion Weisler (2)		0			0			–		0			0			–
Australian employees			2			(7	)		43		3			(36	)		3

(1)

The per cent changes for Mike Henry from FY2019 to FY2020 are zero due to his appointment as CEO on 1 January 2020. The per cent changes for Mike Henry from FY2020 to FY2021 are based on annualised FY2020 figures. The per cent changes for Andrew Mackenzie from FY2019 to FY2020 are based on annualised FY2020 figures.

(2)

The per cent changes in remuneration from FY2019 to FY2020 are zero as there were no changes made to the remuneration of

Non-executive

Directors who joined the Board during FY2019 (Ian Cockerill and Susan Kilsby both joined on 1 April 2019). The per cent changes in remuneration from FY2020 to FY2021 are zero as there were no changes made to the remuneration of

Non-executive

Directors who joined the Board in FY2021 (Xiaoqun Clever and Christine O’Reilly joined on 1 October 2020 and 12 October 2020 respectively). The per cent changes for Gary Goldberg and Dion Weisler from FY2020 to FY2021 are based on annualised FY2020 figures as they joined the Board on 1 February 2020 and 1 June 2020 respectively.

(3)

The per cent changes in remuneration from FY2019 to FY2020 for Carolyn Hewson are zero as there were no changes made to her remuneration up to the date of her retirement from the Board on 7 November 2019. The per cent changes for Lindsay Maxsted and Shriti Vadera from FY2020 to FY2021 are zero as there were no changes made to their remuneration up to the date of their retirement from the Board on 4 September 2020 and 15 October 2020 respectively.

(4)	The majority of the amounts disclosed for benefits for Non-executive Directors are usually travel allowances (amounts of between US$ nil and US$90,000 for FY2020), however, the COVID-19 pandemic restricted Non-executive Director travel during FY2021.

CEO pay ratio disclosure

As BHP is a global company and our UK employees represent less than 1 per cent of all of our employees worldwide, these disclosures are voluntary, and we have chosen to amend the comparison to all employees, an approach that is still compliant with UK requirements.

The table below shows the CEO pay ratios, calculated using the reported single total figure of remuneration, and compared to employees at the 25

percentile, Median and 75

percentile using Option A methodology as set out under UK requirements.

Year

percentile

Median

percentile

FY2021

189:1

129:1

106:1

FY2020

116:1

81:1

67:1

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Option A uses the full-time equivalent base salary and benefits paid during the year as it is the most accurate reflection of employee pay as a direct comparison to the single total figure of remuneration for the CEO. The FY2021 CEO remuneration used in the calculation is the reported single total figure of remuneration data for Mike Henry. The remuneration calculation for all employees is based on actual earnings for the 12 months to 31 March 2021, including annual incentive payments for employees calculated using the Group performance outcome, and vested equity received if applicable. Pension contributions are calculated as the total cost of contributions made by the Group over the

12-month

period. Employees on international assignments have been excluded from the analysis as their remuneration structures are generally not consistent with the single total figure of remuneration for the CEO. The FY2020 CEO remuneration used in the calculation is a combination of reported single total figure of remuneration data for Mike Henry and Andrew Mackenzie, recognising the transition in CEO leadership during FY2020.

The FY2021 ratio of 129:1 at the median compared to the FY2020 ratio of 81:1 reflects the proportion of the CEO’s pay being more heavily weighted to variable pay, including share-based long-term incentives, than for other employees. Specifically, the change from FY2020 to FY2021 is driven by a higher FY2021 CDP outcome of 115 per cent against a target of 100 per cent compared to the CDP outcome of 96 per cent in FY2020, together with the 100 per cent LTIP vesting for FY2021 at a BHP Group Limited share price of A$47.70 per share, whereas there was 48 per cent LTIP vesting for FY2020 at a BHP Group Limited share price of A$39.06 per share.

The Group believes the median pay ratio reflects the diversity of our global business footprint and employee population. BHP’s remuneration policies and practices are based on a high degree of alignment and consistency, with total remuneration at all levels providing a competitive package that enables the attraction and retention of talent while also providing

at-risk

remuneration based on performance.

Remuneration for the CEO in FY2022

The remuneration for the CEO in FY2022 will be in accordance with the remuneration policy approved by shareholders at the AGMs in 2019.

Base salary review

Base salary is reviewed annually and increases are applicable from 1 September. The CEO commenced in the role on 1 January 2020 and did not receive a base salary increase in September 2021 and it will remain unchanged at US$1.700 million per annum for FY2022. The CEO’s base salary will be kept under review in future years to ensure it remains competitive, especially in light of recent movement in exchange rates against the US dollar.

FY2022 CDP performance measures

For FY2022, the Remuneration Committee has set the following CDP scorecard performance measures:


Performance categories	Weighting			Target measures
HSEC		25	%	The following HSEC performance measures are designed to incentivise achievement of the Group’s public five-year HSEC targets. Significant events (10%): No significant (actual level 4) health, safety (including fatalities), environment or community events during the year, implementation of sexual assault and sexual harassment controls, and design of cultural heritage controls. Climate change (10%): Reported GHG emissions in FY2022 are below the FY2017 level. A majority of planned decarbonisation projects are presented for tollgates and all asset adaptation plans are updated. Work undertaken as planned under partnerships with strategic customers in the steel sector established in FY2021, one more partnership formalised, and a review of Scope 3 goals and estimation methodologies completed. Management of priority tailings storage facilities (5%): All priority tailings storage facilities are assessed based on key risk indicator data, and are either within appetite or continued operation outside appetite is approved with remediation progressing to plan.
Financial		50	%	ROCE is underlying profit after taxation (excluding after-taxation finance costs and exceptional items) divided by average capital employed. When we are assessing management’s performance, we make adjustments to the ROCE result to allow for changes in commodity prices, foreign exchange movements and other material items to ensure the assessment appropriately measures outcomes that are within the control and influence of the Group and its executives. For reasons of commercial sensitivity, the target for ROCE will not be disclosed in advance; however, we plan to disclose targets and outcomes retrospectively in our next Remuneration Report, following the end of each performance year. In the rare instances where this may not be prudent on grounds of commercial sensitivity, we will explain why and give an indication of when they will be disclosed.
Individual		25	%	The CEO’s individual measures for FY2022 comprise contribution to BHP’s overall performance and the management team and the delivery of projects and initiatives within the scope of the CEO role as set out by the Board. These include projects and initiatives in respect of social value (long term growth in value and returns for all stakeholders), people (right people, right skills, coming together in the right way to support exceptional performance), performance (material improvement in the system that supports exceptional performance) and portfolio (material progress on our strategic objectives to create a winning portfolio and set BHP up for the next 20 years). These performance measures are aligned with medium and long-term strategy aspirations that are intended to drive long-term value for shareholders and other stakeholders.

170

FY2022 LTIP award

The maximum face value of the CEO’s LTIP award under the remuneration policy approved by shareholders at the 2019 AGMs is US$3.400 million, being 200 per cent of the CEO’s base salary. The number of LTIP awards in FY2022 has been determined using the share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2021. Based on this, a FY2022 grant of 107,183 LTIP awards is proposed and approval for this LTIP grant will be sought from shareholders at the 2021 AGMs. If approved, the award will be granted following the AGMs (i.e. in or around November/December 2021 subject to securities dealing considerations). The FY2022 LTIP award will use the same performance and service conditions and comparator groups as the FY2021 LTIP award.

Remuneration for other Executive KMP (excluding the CEO)

The information in this section contains details of the remuneration policy that guided the Remuneration Committee’s decisions and resulted in the remuneration outcomes for other Executive KMP (excluding the CEO). The remuneration policy and structures for other Executive KMP are essentially the same as those already described for the CEO in previous sections of the Remuneration Report, including the treatment of remuneration on loss of office as detailed in ‘Service contracts and policy on loss of office’ in section 2.2.2.

Components of remuneration

The components of remuneration for other Executive KMP are the same as for the CEO, with any differences described below.

CDP

The CDP performance measures for other Executive KMP for FY2021 are similar to those of the CEO, which are outlined in ‘FY2021 CDP performance outcomes’ in this section 2.2.3; however, the weighting of each performance measure will vary to reflect the focus required from each Executive KMP role.

Individual performance measures are determined at the start of the financial year. These include the other Executive KMP’s contribution to the delivery of projects and initiatives within the scope of their role and the overall performance of the Group. Individual performance of other Executive KMP was reviewed against these measures by the Committee and on average, was considered slightly above target.

171

The diagram below represents the FY2021 CDP weightings and outcomes against the original scorecard.

LTIP

LTIP awards granted to other Executive KMP for FY2022 will be calculated in accordance with the remuneration policy approved by shareholders in 2019. Awards for other Executive KMP will have a maximum face value of 175 per cent of base salary, which is a fair value of 72 per cent of base salary under the current plan design (with a fair value of 41 per cent, taking into account the performance condition: 175 per cent x 41 per cent = 72 per cent).

Other Executive KMP who were promoted from executive roles within BHP may hold MAP awards that were granted to them in respect of their service in

non-KMP

roles.

Shareplus

Other Executive KMP are eligible to participate in Shareplus. For administrative simplicity, Executive KMP, including the CEO, do not currently participate in Shareplus. No Executive KMP, including the CEO, had any holdings under the Shareplus program during FY2021.

Remuneration mix

A significant portion of other Executive KMP remuneration is

at-risk,

in order to provide strong alignment between remuneration outcomes and the interests of BHP shareholders.

The diagram below sets out the relative mix of each remuneration component for the other Executive KMP for FY2021. Each component is determined as a percentage of base salary (at the minimum, target and maximum levels of performance-based remuneration).

(1)	Base salary earned by each Executive KMP is set out in ‘Executive KMP remuneration table’ in this section 2.2.3.

(2)

Retirement benefits are 10 per cent of base salary for other Executive KMP, with the exception of Geraldine Slattery.

From FY2021, contribution rates for Geraldine reduced to 20 per cent of base salary in accordance with the remuneration policy approved by shareholders at the 2019 AGMs (progressive reduction to 10 per cent of base salary as follows: 15 per cent of base salary from 1 July 2021; and 10 per cent of base salary from 1 July 2022 onwards). For any new Executive KMP appointments, the pension contribution rate will be 10 per cent of base salary immediately.

(3)	Other benefits are based on a notional 10 per cent of base salary.

(4)

As for the CEO, the minimum CDP award is zero, with a cash award of 80 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for target performance on all measures, and a maximum cash award of 120 per cent base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively.

(5)	Other Executive KMP have a maximum LTIP award with a face value of 175 per cent of base salary.

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Employment contracts

The terms of employment for other Executive KMP are formalised in employment contracts, which have no fixed term. They typically outline the components of remuneration paid to the individual, but do not prescribe how remuneration levels are to be modified from year to year. Other Executive KMP’s employment contracts may be terminated by BHP on up to 12 months’ notice or can be terminated immediately by BHP making a payment of up to 12 months’ base salary plus pension contributions for the relevant period. Other Executive KMP must give up to 12 months’ notice for voluntary resignation.

Arrangements for KMP leaving and joining the Group

KMP leaving the Group

The arrangements for Executive KMP leaving the Group are within the approval provided by shareholders at the 2020 AGMs in regard to Australian termination benefits legislation, including the provision of performance-based remuneration in accordance with the rules of the relevant incentive plans.

Peter Beaven stepped down from his role as Chief Financial Officer on 30 November 2020 and exited BHP on 28 February 2021. Daniel Malchuk stepped down from his role as President Minerals Americas on 31 October 2020 and exited BHP on 31 December 2020. Peter and Daniel received base salary, pension contributions, prorated CDP, statutory leave entitlements and applicable benefits up to the dates of their exit from BHP.

Peter and Daniel received a part payment in lieu of notice upon exit and have been paid or will receive in the future the value of pension funds that they have accumulated during their service with the Group. When determining the Executive KMP CDP awards for FY2021, the Remuneration Committee resolved that Peter and Daniel would each receive a prorated FY2021 CDP award in the form of cash based on their performance (covering the cash and

two-year

deferred share components, but not the five-year deferred share component). No deferral period will apply in respect of these CDP awards.

All unvested FY2019 STIP and FY2020 CDP

two-year

deferred share awards allocated to Peter and Daniel remained on foot on termination. FY2019 STIP deferred share awards vested in August 2021 and FY2020 CDP

two-year

deferred share awards will not vest until August 2022. Peter’s and Daniel’s unvested LTIP awards and CDP five-year deferred shares were prorated to reflect the percentage of the performance period to 28 February 2021 for Peter and 31 December 2020 for Daniel. The vesting of the retained prorated LTIP awards will be determined by the Committee at the relevant time in future years and will only vest to the extent the performance conditions are met at the end of each five-year performance period. The vesting of LTIP awards and CDP five-year deferred share awards are subject to the Committee’s ability to reduce vesting through its discretion under the plan rules.

KMP joining the Group

David Lamont joined BHP as Chief Financial Officer on 1 December 2020. David left his former employer, CSL Limited, a major Australian company listed on the Australian Stock Exchange, on 30 October 2020. As a consequence of his resignation certain CSL incentive awards, which were expected to have been paid or vested in 2021 and beyond, were foregone.

Replacement BHP awards have been provided in accordance with BHP’s remuneration policy (approved by shareholders in 2019 with almost 94 per cent support) under which a new senior executive appointed from outside BHP can be provided cash and/or BHP equity awards to replace any remuneration forfeited or not received from the former employer. In accordance with that policy, remuneration that David forfeited or did not receive as a consequence of leaving CSL to join BHP has been partly replaced as set out in the table below.

The value of the BHP awards is less than the fair value of the awards foregone (as confirmed by the Committee’s independent adviser), and the duration of the BHP awards is longer, on average, than those they replace. The Committee has determined appropriate service and performance conditions within BHP’s framework, considering the vesting status of the conditions attached to the foregone awards. As always, the Committee has been mindful of limiting such payments and not providing any more compensation than is necessary and, under BHP’s incentive plans, retains the right to adjust vesting outcomes where an inappropriate benefit would be received.

173

The BHP awards provided are set out in the table below.


Award	Amount/number	Payable/vesting	Release	Conditions	Replaces
Cash	US$300,000	September 2021 (1)	September 2022 (1)	Nil	Replaces a cash bonus payment foregone that would have been payable in September 2021
Performance shares	77,000	August 2022 (2)	August 2023 (2)	Service and performance conditions, being subject to a holistic assessment of underlying financial performance of BHP and personal performance of David during the vesting period	Partly replaces equity awards foregone that would have been paid and vested to David in 2021 and beyond

(1)	Should David voluntarily resign or retire during the holding lock period, or be terminated for cause, the cash payment would become repayable on a pro-rata basis.

(2)

Upon performance shares vesting in August 2022, a holding lock will apply to the vested shares until August 2023, at which time they will be released to David. Should David voluntarily resign or retire during the holding lock period, or be terminated for cause, the shares subject to the holding lock will be forfeited.

Remuneration for

Non-executive

Directors

The remuneration outcomes described below have been provided in accordance with the remuneration policy approved by shareholders at the 2019 AGMs. The maximum aggregate fees payable to

Non-executive

Directors (including the Chair) were approved by shareholders at the 2008 AGMs at US$3.800 million per annum. This sum includes base fees, Committee fees and pension contributions. Travel allowances and

non-monetary

benefits are not included in this limit.

Single total figure of remuneration

This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration. Fees include the annual base fee, plus additional fees as applicable for the Senior Independent Director, Committee Chair and Committee memberships.

Non-executive

Directors do not have any performance-based

at-risk

remuneration or receive any equity awards as part of their remuneration, therefore the totals shown below are total remuneration and total fixed fees. This table also meets the requirements of the Australian Corporations Act 2001 and relevant accounting standards.


US$(‘000)	Financial year	Fees		Benefits (1)		Pensions (2)		Total
Terry Bowen	FY2021		219		4		12		235
	FY2020		187		40		10		237
Malcolm Broomhead	FY2021		195		3		10		208
	FY2020		201		19		11		231
Ian Cockerill	FY2021		220		–		–		220
	FY2020		220		90		–		310
Xiaoqun Clever (3)	FY2021		144		–		–		144
Anita Frew	FY2021		220		2		–		222
	FY2020		220		47		–		267
Gary Goldberg (3)	FY2021		246		2		–		248
	FY2020		90		15		–		105
Carolyn Hewson (4)	FY2020		75		18		4		97
Susan Kilsby	FY2021		220		1		–		221
	FY2020		205		83		–		288
Ken MacKenzie	FY2021		864		4		16		884
	FY2020		866		40		14		920
Lindsay Maxsted (4)	FY2021		33		3		2		38
	FY2020		205		18		11		234
John Mogford	FY2021		215		2		–		217
	FY2020		199		69		–		268
Christine O’Reilly (3)	FY2021		162		–		9		171
Shriti Vadera (4)	FY2021		74		1		–		75
	FY2020		253		48		–		301
Dion Weisler (3)	FY2021		178		1		9		188
	FY2020		15		–		1		16

174

(1)

The majority of the amounts disclosed for benefits for

Non-executive

Directors are usually travel allowances (amounts of between US$ nil and US$90,000 for FY2020) however, the

COVID-19

pandemic restricted

Non-executive

Director travel during FY2021. For FY2021, amounts of between US$ nil and US$3,500 are included in respect of tax return preparation; and amounts of between US$ nil and US$2,500 are included in respect of the reimbursement of the tax cost associated with the provision of taxable benefits.

(2)	BHP Group Limited made minimum superannuation contributions of up to 9.5 per cent of fees for FY2021 in accordance with Australian superannuation legislation. No other pension contributions were paid.

(3)

The FY2020 remuneration for Gary Goldberg and Dion Weisler relates to part of the year only, as they joined the Board on 1 February 2020 and 1 June 2020 respectively. The FY2021 remuneration for Xiaoqun Clever and Christine O’Reilly relates to part of the year only, as they joined the Board on 1 October 2020 and 12 October 2020 respectively.

(4)

The FY2020 remuneration for Carolyn Hewson relates to part of the year only, as she retired from the Board on 7 November 2019. The FY2021 remuneration for Lindsay Maxsted and Shriti Vadera relates to part of the year only, as they retired from the Board on 4 September 2020 and 15 October 2020 respectively.

Non-executive

Directors’ remuneration in FY2022

In FY2022, the remuneration for the

Non-executive

Directors will be paid in accordance with the remuneration policy approved by shareholders at the 2019 AGMs (which is unchanged from the remuneration policy for

Non-executive

Directors approved by shareholders at the 2017 AGMs). Fee levels for the

Non-executive

Directors and the Chair are reviewed annually. The review includes benchmarking against peer companies, with the assistance of external advisers.

From 1 July 2017, the Chair’s annual fee was reduced by approximately 8 per cent from US$0.960 million to US$0.880 million and will remain at that level for FY2022. This fee reduction was in addition to the reduction of approximately 13 per cent from US$1.100 million to US$0.960 million effective 1 July 2015. Base fee levels for

Non-executive

Directors will remain at the reduced levels that took effect from 1 July 2015, at which time they were reduced by approximately 6 per cent from US$0.170 million to US$0.160 million per annum.

The below table sets out the annualised fee levels for FY2022.


Levels of fees and travel allowances for Non-executive Directors (in US$)	From 1 July 2021
Base annual fee		160,000

Plus additional fees for:
Senior Independent Director of BHP Group Plc		48,000

Committee Chair:
Risk and Audit		60,000
Remuneration		45,000
Sustainability		45,000
Nomination and Governance		No additional fee

Committee membership:
Risk and Audit		32,500
Remuneration		27,500
Sustainability		27,500
Nomination and Governance		18,000

Travel allowance: (1)
Greater than 3 but less than 10 hours		7,000
10 hours or more		15,000

Chair’s fee		880,000

(1)	In relation to travel for Board business, the time thresholds relate to the flight time to travel to the meeting location (i.e. one way flight time). Only one travel allowance is paid per round trip.

175

Remuneration governance

Board oversight and the Remuneration Committee

Board

The Board is responsible for ensuring the Group’s remuneration arrangements are equitable and aligned with the long-term interests of BHP and its shareholders. In performing this function, it is critical the Board is independent of management when making decisions affecting remuneration of the CEO, other Executive KMP and the Group’s employees.

The Board has therefore established a Remuneration Committee to assist it in making such decisions. The Committee is comprised solely of

Non-executive

Directors, all of whom are independent. To ensure it is fully informed, the Committee regularly invites members of management to attend meetings to provide reports and updates; however, members of management are not present when decisions are considered or taken concerning their own remuneration. The Committee can draw on services from a range of external sources, including remuneration advisers.

Remuneration Committee

The activities of the Remuneration Committee are governed by Terms of Reference (updated version approved by the Board in April 2021), which are available at bhp.com. The current members of the Remuneration Committee are: Christine O’Reilly (Remuneration Committee Chair), Anita Frew, Gary Goldberg, Susan Kilsby, and Dion Weisler. The role and focus of the Committee and details of meeting attendances can be found in section 2.1. Other Directors and employees who regularly attended meetings were: Ken MacKenzie (Chair), Mike Henry (CEO), Athalie Williams (Chief People Officer), Andrew Fitzgerald (Vice President Reward), Caroline Cox (Group Company Secretary to 31 October 2020), Stefanie Wilkinson (Group Company Secretary from 1 March 2021), Geof Stapledon (Vice President Governance to 31 March 2021), and Prakash Kakkad (Head of Group Governance from 1 June 2021). These individuals were not present when decisions regarding their own remuneration were considered or taken.

When determining executive director remuneration practices, the Remuneration Committee considers any decisions in the context of the principles of the 2018 UK Corporate Governance Code, including:


Principle		How the Remuneration Committee has applied the principle
Clarity		BHP engages proactively with shareholders on remuneration matters. Feedback from shareholders is used by the Remuneration Committee in its decision-making in respect of the remuneration policy and its application. The Group also conducts regular employee engagement surveys which give employees an opportunity to provide feedback on a wide range of employee matters. Many employees are also ordinary shareholders through Shareplus and therefore have the opportunity to share their views as shareholders.
Simplicity		The purpose, structure and strategic alignment of each element of remuneration is clearly set out in section 2.2.2.
Risk		A significant portion of variable remuneration is at-risk in order to provide strong alignment between remuneration outcomes and the interests of BHP shareholders. The delivery of two-thirds of CDP awards in deferred shares and the LTIP five-year performance period help to align the long-term interests of the CEO and shareholders.
Predictability		The remuneration opportunities under different performance scenarios (minimum, target and maximum) are set out in section 2.2.2.
Proportionality		The CEO is incentivised to achieve stretching performance through the targets set under the CDP and LTIP. In addition, the Remuneration Committee has discretion to adjust formulaic outcomes downwards to ensure that poor performance is not rewarded.
Alignment with culture		The FY2021 CDP performance measures for the CEO include a number of measures linked to culture including the delivery of social value plans for assets, improving gender diversity and embedding a new Engagement and Perception Survey system. We continue to focus on fostering a culture of respect and ensuring the workplace is safe at all times.

176

Engagement of independent remuneration advisers

The Committee seeks and considers advice from independent remuneration advisers where appropriate. Remuneration consultants are engaged by and report directly to the Committee. Potential conflicts of interest are taken into account when remuneration consultants are selected and their terms of engagement regulate their level of access to, and require their independence from BHP’s management.

PricewaterhouseCoopers was appointed by the Committee in March 2016 to act as an independent remuneration adviser.

The PricewaterhouseCoopers team that advises the Remuneration Committee does not provide any other services to the Group. Other PricewaterhouseCoopers teams provide services to the Group in the areas of forensic and general technology, internal audit and international assignment solutions. Processes and arrangements are in place to protect independence (for example, ring-fencing of teams) and to manage any conflicts of interest that may arise.

PricewaterhouseCoopers is currently the only remuneration adviser appointed by the Committee. In that capacity, they may provide remuneration recommendations in relation to KMP; however, they did not do so in FY2021.

Total fees paid to the PricewaterhouseCoopers team advising the Committee on remuneration-related matters for FY2021 were £177,300. These fees are based on an agreed fee for regular items with additional work charged at agreed rates. Total fees paid to PricewaterhouseCoopers for other services rendered to the Group for FY2021 were approximately US$31 million.

Statement of voting at the 2020 AGMs

BHP’s remuneration resolutions have attracted a high level of support by shareholders. Voting in regard to those resolutions put to shareholders at the 2020 AGMs is shown below.


AGM resolution	Requirement		% vote ‘for’		% vote ‘against’		Votes withheld (1)
Remuneration Report (excluding remuneration policy (2) )		UK		95.8		4.2		4,630,094
Remuneration Report (whole Report)		Australia		95.7		4.3		4,961,722
Approval of grants to Executive Director		Australia		98.5		1.5		4,624,916
Approval of leaving entitlements		Australia		99.3		0.7		5,029,752

(1)	The sum of votes marked ‘Vote withheld’ at BHP Group Plc’s 2020 AGM and votes marked ‘Abstain’ at BHP Group Limited’s 2020 AGM.

(2)	The UK requirement for approval of the remuneration policy was met at the 2019 AGMs, where the following outcomes were recorded: a 93.5 per cent vote ‘for’, a 6.5 per cent vote ‘against’ with 23,166,578 votes withheld. This resolution was not required in 2020.

Other statutory disclosures

This section provides details of any additional statutory disclosures required by Australian or UK regulations that have not been included in the previous sections of the Remuneration Report.

177

Executive KMP remuneration table

The table below has been prepared in accordance with relevant accounting standards and remuneration data for Executive KMP are for the periods of FY2020 and FY2021 that they were KMP. More information on the policy and operation of each element of remuneration is provided in previous sections of this Report.

Share-based payments

The figures included in the shaded columns of the statutory table below for share-based payments were not actually provided to the KMP during FY2021 or FY2020. These amounts are calculated in accordance with accounting standards and are the amortised IFRS fair values of equity and equity-related instruments that have been granted to the executives. For information on awards that were allocated and vested during FY2021 and FY2020, refer to ‘Equity awards’ in this section 2.2.3.


					Short-term benefits						Post- employment benefits		Share-based payments				Total
US$(‘000)	Financial year		Base salary (1)		Annual cash incentive (2)		Non-monetary benefits (3)		Other benefits (4)		Retirement benefits (5)		Value of CDP/STIP awards (2)(6)		Value of LTIP awards (6)		Total
Executive Director
Mike Henry		FY2021		1,700		1,564		120		–		170		1,487		2,315		7,356
		FY2020		1,400		1,075		129		–		223		907		2,299		6,033
Andrew Mackenzie (7)		FY2020		850		653		124		–		213		1,202		2,038		5,080
Other Executive KMP
Edgar Basto		FY2021		950		866		60		–		95		432		839		3,242
Peter Beaven (7)		FY2021		417		400		39		–		83		876		787		2,602
		FY2020		1,000		848		41		–		250		810		2,090		5,039
David Lamont		FY2021		554		510		42		–		55		167		935		2,263
Daniel Malchuk (7)		FY2021		333		307		23		–		67		765		620		2,115
		FY2020		1,000		816		38		–		250		797		2,090		4,991
Geraldine Slattery		FY2021		800		800		25		–		160		777		930		3,492
		FY2020		750		618		–		–		188		378		903		2,837
Ragnar Udd		FY2021		567		521		49		420		57		190		483		2,287

(1)

Base salaries shown in this table reflect the amounts paid over the

12-month

period from 1 July 2020 to 30 June 2021 for each Executive KMP. There were no changes to Executive KMP base salaries during the year except for Edgar Basto who was appointed as President Minerals Australia on 1 July 2020 on an annual base salary of US$0.950 million, Ragnar Udd who was appointed as President Minerals Americas on 1 November 2020 on an annual base salary of US$0.850 million, David Lamont who was appointed as Chief Financial Officer on 1 December 2020 on an annual base salary of US$0.950 million, and Geraldine Slattery whose salary changed to US$0.850 million on 1 January 2021. Geraldine’s base salary was set by the Remuneration Committee in March 2019 upon her appointment as President Petroleum at US$0.750 million per annum, which was 25 per cent below that of Geraldine’s predecessor. In December 2020, the Committee assessed Geraldine’s performance as President Petroleum and it was confirmed that Geraldine was performing and developing strongly in role. The Committee also considered market factors, job relativities and contribution in the role in reaching its decision that Geraldine’s base salary would be increased to US$0.850 million per annum on 1 January 2021. The base salaries for Executive KMP will be kept under review in future years to ensure they remain competitive, especially in light of recent movement in exchange rates against the US dollar.

(2)

Annual cash incentive in this table is the cash portion of CDP awards earned in respect of performance during each financial year for each executive. CDP is provided

one-third

in cash and

two-thirds

in deferred equity (which are included in the Share-based payments columns of the table). The cash portion of CDP awards is paid to Executive KMP in September of the year following the relevant financial year. The minimum possible value awarded to each individual is nil and the maximum is 360 per cent of base salary (120 per cent in cash and 240 per cent in deferred equity). For FY2021, Executive KMP earned the following CDP awards as a percentage of the maximum (the remaining portion has been forfeited): Mike Henry 77 per cent, Edgar Basto 76 per cent, Peter Beaven 80 per cent (for the time served as Chief Financial Officer), David Lamont 77 per cent (for the time served as Chief Financial Officer), Daniel Malchuk 77 per cent (for the time served as President Minerals Americas), Geraldine Slattery 83 per cent and Ragnar Udd 77 per cent (for the time served as President Minerals Americas). Andrew’s FY2020 CDP and Peter’s and Daniel’s FY2021 CDP was paid in cash and prorated to reflect the period served until they ceased to be KMP on 31 December 2019, 30 November 2020 and 31 October 2020 respectively, as noted for Andrew in ‘Single total figure of remuneration’ in this section 2.2.3, with 50 per cent of the total CDP award included in the Annual cash incentive column, and 50 per cent in the Value of CDP/STIP awards column.

(3)	Non-monetary benefits are non-pensionable and include items such as net leave accruals, health and other insurances, fees for tax return preparation (if required in multiple jurisdictions), car parking and travel costs.

(4)	Other benefits are non-pensionable and include a one-off relocation allowance (with no trailing entitlements) provided to Ragnar Udd in FY2021 relating to his international relocation from Australia to Chile.

(5)

In FY2021, retirement benefits were 20 per cent of base salary for each Executive KMP except for Mike Henry, who was appointed CEO on 1 January 2020, Edgar Basto, who was appointed as President Minerals Australia on 1 July 2020, David Lamont, who was appointed as Chief Financial Officer on 1 December 2020, and Ragnar Udd, who was appointed as President Minerals Americas on 1 November 2020, each with a pension contribution rate of 10 per cent of base salary as per the remuneration policy approved at the 2019 AGMs.

(6)	The IFRS fair value of CDP, STIP and LTIP awards is estimated at grant date. Refer to note 25 ‘Employee share ownership plans’ in section 3 for more information on IFRS.

(7)	The remuneration reported for Andrew Mackenzie, Peter Beaven and Daniel Malchuk reflects service as Executive KMP up to 31 December 2019, 30 November 2020 and 31 October 2020, respectively.

178

Equity awards

The interests held by Executive KMP under the Group’s employee equity plans are set out below. Each equity award is a right to acquire one ordinary share in BHP Group Limited or in BHP Group Plc upon satisfaction of the vesting conditions. BHP Group Limited share awards are shown in Australian dollars. BHP Group Plc awards are shown in Pounds Sterling. Our mandatory minimum performance requirements for securities dealing governs and restricts dealing arrangements and the provision of shares on vesting or exercise of awards. No interests under the Group’s employee equity plans are held by related parties of Executive KMP.

Dividend Equivalent Payments

DEP applies to awards provided to Executive KMP under the CDP, STIP and LTIP as detailed in ‘Components of remuneration’ in section 2.2.2. No DEP is payable on MAP awards previously provided to Executive KMP.

Equity awards provided for Executive KMP service

Awards under the CDP, STIP, and LTIP

Executive KMP received or will receive awards under the CDP, STIP and LTIP. The terms and conditions of CDP, STIP and LTIP awards, including the performance conditions, are described in ‘Components of remuneration’ in section 2.2.2. The LTIP rules are available at bhp.com.

Equity awards provided prior to Executive KMP service

Awards under the MAP

BHP senior management who are not KMP receive awards under the MAP. While no MAP awards were granted to Executive KMP after becoming KMP, Edgar Basto, Geraldine Slattery and Ragnar Udd still hold MAP awards that were allocated to them prior to commencing their Executive KMP service.

179

Award type

Date of grant

At 1 July
2020

Granted

Vested

Lapsed

At 30 June
2021

Award vesting
date

(1)

Market price on date of:

Gain on
awards
(‘000)

(4)

DEP on
awards
(‘000)

Grant

(2)

Vesting

(3)

Mike Henry

CDP

20-Oct-20

–

44,348

–

44,348

Aug 25

A$35.90

–

CDP

20-Oct-20

–

44,348

–

44,348

Aug 22

A$35.90

–

STIP

20-Nov-19

17,420

–

17,420

Aug 21

A$37.24

–

STIP

18-Dec-18

30,692

–

30,692

–

19 Aug 20

A$33.50

A$39.06

A$1,199

A$152

LTIP

20-Oct-20

–

140,239

–

140,239

Aug 25

A$35.90

–

LTIP

20-Nov-19

153,631

–

153,631

Aug 24

A$37.24

–

LTIP

18-Dec-18

172,413

–

172,413

Aug 23

A$33.50

–

LTIP

24-Nov-17

218,020

–

218,020

Aug 22

A$27.97

–

LTIP

9-Dec-16

192,360

–

192,360

Aug 21

A$25.98

–

LTIP

4-Dec-15

192,360

–

92,333

100,027

–

19 Aug 20

A$17.93

A$39.06

A$3,607

A$748

Edgar Basto

(5)

LTIP

20-Oct-20

–

68,572

–

68,572

Aug 25

A$35.90

–

MAP

19-May-20

28,245

–

28,245

Aug 24

A$35.05

–

MAP

19-May-20

28,245

–

28,245

Aug 23

A$35.05

–

MAP

25-Sep-19

28,245

–

28,245

Aug 22

A$36.53

–

MAP

24-Sep-18

27,651

–

27,651

Aug 21

A$33.83

–

MAP

25-Sep-17

33,828

–

33,828

–

19 Aug 20

A$25.98

A$39.06

A$1,321

–

Peter Beaven

(6)

CDP

20-Oct-20

–

34,977

–

34,977

Aug 25

A$35.90

–

CDP

20-Oct-20

–

34,977

–

34,977

Aug 22

A$35.90

–

STIP

20-Nov-19

19,003

–

19,003

Aug 21

A$37.24

–

STIP

18-Dec-18

30,964

–

30,964

–

19 Aug 20

A$33.50

A$39.06

A$1,209

A$154

LTIP

20-Oct-20

–

72,182

–

72,182

Aug 25

A$35.90

–

LTIP

20-Nov-19

139,664

–

139,664

Aug 24

A$37.24

–

LTIP

18-Dec-18

156,739

–

156,739

Aug 23

A$33.50

–

LTIP

24-Nov-17

198,200

–

198,200

Aug 22

A$27.97

–

LTIP

9-Dec-16

174,873

–

174,873

Aug 21

A$25.98

–

LTIP

4-Dec-15

174,873

–

83,940

90,933

–

19 Aug 20

A$17.93

A$39.06

A$3,279

A$680

David Lamont

(5)

Performance shares

1-Dec-20

–

77,000

–

77,000

Aug 22

A$38.56

–

LTIP

1-Dec-20

–

68,572

–

68,572

Aug 25

A$38.56

–

Daniel Malchuk

(6)

CDP

20-Oct-20

–

33,657

–

33,657

Aug 25

A$35.90

–

CDP

20-Oct-20

–

33,657

–

33,657

Aug 22

A$35.90

–

STIP

20-Nov-19

16,786

–

16,786

Aug 21

A$37.24

–

STIP

18-Dec-18

33,686

–

33,686

–

19 Aug 20

A$33.50

A$39.06

A$1,316

A$167

LTIP

20-Oct-20

–

72,182

–

72,182

Aug 25

A$35.90

–

LTIP

20-Nov-19

139,664

–

139,664

Aug 24

A$37.24

–

LTIP

18-Dec-18

156,739

–

156,739

Aug 23

A$33.50

–

LTIP

24-Nov-17

198,200

–

198,200

Aug 22

A$27.97

–

LTIP

9-Dec-16

174,873

–

174,873

Aug 21

A$25.98

–

LTIP

4-Dec-15

174,873

–

83,940

90,933

–

19 Aug 20

A$17.93

A$39.06

A$3,279

A$680

Geraldine Slattery

CDP

20-Oct-20

–

25,490

–

25,490

Aug 25

A$35.90

–

CDP

20-Oct-20

–

25,490

–

25,490

Aug 22

A$35.90

–

STIP

20-Nov-19

6,628

–

6,628

Aug 21

A$37.24

–

LTIP

20-Oct-20

–

54,136

–

54,136

Aug 25

A$35.90

–

LTIP

20-Nov-19

104,748

–

104,748

Aug 24

A$37.24

–

MAP

21-Feb-19

28,527

–

28,527

Aug 23

A$34.83

–

MAP

21-Feb-19

28,527

–

28,527

Aug 22

A$34.83

–

MAP

24-Sep-18

28,527

–

28,527

Aug 21

A$33.83

–

MAP

25-Sep-17

34,349

–

34,349

–

19 Aug 20

A$25.98

A$39.06

A$1,342

–

Ragnar Udd

(5)

LTIP

2-Nov-20

–

61,354

–

61,354

Aug 25

A$33.81

–

MAP

21-Aug-20

21,231

–

21,231

Aug 24

A$38.36

–

MAP

21-Aug-20

21,231

–

21,231

Aug 23

A$38.36

–

MAP

25-Sep-19

21,231

–

21,231

Aug 22

A$36.53

–

MAP

24-Sep-18

25,565

–

25,565

Aug 21

A$33.83

–

(1)

Where the vesting date is not yet known, the estimated vesting month is shown. Where awards lapse, the lapse date is shown. If the vesting conditions are met, awards will vest on or as soon as practicable after the first

non-prohibited

period date occurring after 30 June of the preceding year of vest. The year of vesting is the second (STIP and CDP

two-year

awards), third (MAP), fourth (MAP) or fifth (MAP, CDP five-year awards and LTIP) financial year after grant. All awards are conditional awards and have no exercise period, exercise price or expiry date; instead ordinary fully paid shares are automatically delivered upon the vesting conditions being met. Where vesting conditions are not met, the conditional awards will immediately lapse.

(2)

The market price shown is the closing price of BHP shares on the relevant date of grant. No price is payable by the individual to receive a grant of awards. The IFRS fair value of the CDP and LTIP awards granted in FY2021 at the grant date of 20 October 2020 are as follows: CDP – A$35.90 and LTIP – A$20.98. The IFRS fair value of the LTIP awards granted in FY2021 at the grant date of 2 November 2020 and 1 December 2020 are A$18.61 and A$20.85 respectively. The IFRS fair value of David Lamont’s performance shares at the grant date of 1 December 2020 is A$38.56.

(3)	The market price shown is the closing price of BHP shares on the relevant date of vest.

(4)

The gain on awards is calculated using the market price on date of vesting or exercise (as applicable) less any exercise price payable. The amounts that vested and were lapsed for the awards during FY2021 are as follows: STIP – 100 per cent vested; LTIP – 48 per cent vested and 52 per cent lapsed; MAP – 100 per cent vested.

(5)	The opening balances of awards for Edgar Basto, David Lamont and Ragnar Udd reflect their holdings on the date that each became KMP, being 1 July 2020, 1 December 2020 and 1 November 2020 respectively.

(6)

Awards shown as held by Peter Beaven and Daniel Malchuk at 30 June 2021 are their balances at the date they ceased being KMP (30 November 2020 and 31 October 2020, respectively). The subsequent treatment of their awards is set out in ‘Arrangements for KMP leaving and joining the Group’ in this section 2.2.3.

180

Estimated value range of equity awards

The current face value (and estimate of the maximum possible total value) of equity awards allocated during FY2021 and yet to vest are the awards as set out in the previous table multiplied by the current share price of BHP Group Limited or BHP Group Plc as applicable. The minimum possible total value of the awards is nil.

The actual value that may be received by participants in the future cannot be determined as it is dependent on and therefore fluctuates with the share prices of BHP Group Limited and BHP Group Plc at the date that any particular award vests or is exercised. The table below provides five-year share price history for BHP Group Limited and BHP Group Plc, history of dividends paid and the Group’s earnings.

Five-year share price, dividend and earnings history


		FY2021		FY2020		FY2019			FY2018		FY2017
BHP Group Limited	Share price at beginning of year		A$35.82		A$41.68		A$33.60			A$23.23		A$19.09
	Share price at end of year		A$48.57		A$35.82		A$41.16			A$33.91		A$23.28
	Dividends paid		A$2.07		A$2.13		A$3.08	(1)		A$1.24		A$0.72
BHP Group Plc	Share price at beginning of year		£16.28		£20.33		£16.53			£12.15		£9.40
	Share price at end of year		£21.30		£16.54		£20.15			£17.06		£11.76
	Dividends paid		£1.15		£1.13		£1.70	(1)		£0.72		£0.44
BHP	Attributable profit (US$ million, as reported)		11,304		7,956		8,306			3,705		5,890

(1)	The FY2019 dividends paid includes A$1.41 or £0.80 in respect of the special dividend associated with the divestment of Onshore US.

The highest share prices during FY2021 were A$51.65

for BHP Group Limited shares and £23.76 for BHP Group Plc shares. The lowest share prices during FY2021 were A$33.78

and £14.90 respectively.

181

Ordinary share holdings and transactions

The number of ordinary shares in BHP Group Limited or in BHP Group Plc held directly, indirectly or beneficially, by each individual (including shares held in the name of all close members of the Director’s or Executive KMP’s family and entities over which either the Director or Executive KMP or the family member has, directly or indirectly, control, joint control or significant influence) are shown below. No shares are held nominally by any KMP or their related parties. There have been no changes in the interests of any Directors in the period to 1 September 2021 (being not less than one month prior to the date of the notice of the 2021 AGMs), except as noted below. These are ordinary shares held without performance conditions or restrictions and are included in MSR calculations for each individual.

The interests of Directors and Executive KMP in the ordinary shares of each of BHP Group Limited and BHP Group Plc as at 30 June 2021 did not exceed on an individual basis or in the aggregate 1 per cent of BHP Group Limited’s or BHP Group Plc’s issued ordinary shares.

BHP Group Limited shares

BHP Group Plc shares

Held at
1 July 2020

Purchased

Received as
remuneration

(1)

Sold

Held at
30 June 2021

Held at
1 July 2020

Purchased

Received as
remuneration

(1)

Sold

Held at
30 June 2021

Executive Director

Mike Henry

120,069

–

146,072

67,162

198,979

196,262

–

196,262

Other Executive KMP

Edgar Basto

(2)

117,279

33,828

16,260

134,889

–

Peter Beaven

(3)

261,287

–

136,244

65,424

332,107

–

David Lamont

(2)

6,345

–

6,345

–

Daniel Malchuk

(3)

194,608

–

139,312

56,934

276,986

–

Geraldine Slattery

(4)

71,520

–

34,349

8,544

97,325

–

Ragnar Udd

(2)

105,418

–

105,418

–

Non-executive

Directors

Terry Bowen

11,000

–

11,000

–

Malcolm Broomhead

19,000

–

19,000

–

Xiaoqun Clever

(5)

5,000

2,000

–

7,000

–

Ian Cockerill

8,759

–

8,759

3,500

–

3,500

Anita Frew

–

15,000

–

15,000

Gary Goldberg

(4)

10,000

–

10,000

–

Susan Kilsby

–

6,900

–

6,900

Ken MacKenzie

52,351

–

52,351

–

Lindsay Maxsted

(6)

18,000

–

18,000

–

John Mogford

–

12,000

1,938

–

13,938

Christine O’Reilly

(5)

7,000

–

7,000

–

Shriti Vadera

(6)

–

25,000

–

25,000

Dion Weisler

1,544

–

1,544

–

(1)	Includes DEP in the form of shares on equity awards vesting as disclosed in ‘Equity awards’ in this section 2.2.3.

(2)	The opening balances for Edgar Basto, David Lamont and Ragnar Udd reflect their shareholdings on the date that each became KMP being 1 July 2020, 1 December 2020 and 1 November 2020 respectively.

(3)	Shares shown as held by Peter Beaven and Daniel Malchuk at 30 June 2021 are their balances at the date they ceased being KMP being 30 November 2020 and 31 October 2020 respectively.

(4)	The following BHP Group Limited shares were held in the form of American Depositary Shares: Geraldine Slattery (868 BHP Group Limited) and Gary Goldberg (5,000 BHP Group Limited).

(5)	The opening balances for Xiaoqun Clever and Christine O’Reilly reflect their shareholdings on the date that each became Non-executive Directors being 1 October 2020 and 12 October 2020 respectively.

(6)	Shares shown as held by Lindsay Maxsted and Shriti Vadera at 30 June 2021 are their balances at the date of their retirement from the Board on 4 September 2020 and 15 October 2020 respectively.

182

Prohibition on hedging of BHP Group shares and equity instruments

The CEO and other Executive KMP may not use unvested BHP equity awards as collateral or protect the value of any unvested BHP equity awards or the value of shares and securities held as part of meeting the MSR.

Any securities that have vested and are no longer subject to restrictions may be subject to hedging arrangements or used as collateral, provided that prior consent is obtained.

Share ownership guidelines and the MSR

The share ownership guidelines and the MSR help to ensure the interests of Directors, executives and shareholders remain aligned.

The CEO and other Executive KMP are expected to grow their holdings to the MSR from the scheduled vesting of their employee awards over time. The MSR is tested at the time that shares are to be sold. Shares may be sold to satisfy tax obligations arising from the granting, holding, vesting, exercise or sale of the employee awards or the underlying shares whether the MSR is satisfied at that time or not.

For FY2021:

•

The MSR for the CEO was five times annual

pre-tax

base salary. At the end of FY2021, the CEO met the MSR.

•

The MSR for other Executive KMP was three times annual

pre-tax

base salary. At the end of FY2021, the other Executive KMP met the MSR, except for David Lamont, as he was appointed as Executive KMP on 1 December 2020.

•

No other Executive KMP sold or purchased shares during FY2021, other than sales to satisfy taxation obligations and a net immaterial purchase for Edgar Basto.

Effective 1 July 2020, a

two-year

post-retirement shareholding requirement for the CEO applies from the date of retirement, which will be the lower of the CEO’s MSR or the CEO’s actual shareholding at the date of retirement.

Subject to securities dealing constraints,

Non-executive

Directors have agreed to apply at least 25 per cent of their remuneration (base fees plus Committee fees) to the purchase of BHP shares until they achieve an MSR equivalent in value to one year of remuneration (base fees plus Committee fees). Thereafter, they must maintain at least that level of shareholding throughout their tenure. At the end of FY2021, each

Non-executive

Director met the MSR with the exception of Susan Kilsby, Dion Weisler and Christine O’Reilly as they only recently joined the Board on 1 April 2019, 1 June 2020 and 12 October 2020, respectively. As at the date of this Report, Susan, Dion and Christine each met the MSR.

Payments to past Directors and for loss of office

UK regulations require the inclusion in the Remuneration Report of certain payments to past Directors and payments made for loss of office.

The following payments were made to Andrew Mackenzie for FY2021 that relate to the period when he was no longer an Executive Director and CEO and which have not been reported elsewhere in this section 2.2.3:

•

100 per cent of the 254,815 retained LTIP awards granted in 2016, reduced from 339,753 awards originally granted and prorated for time served at the time of departure, vested on 18 August 2021. The value of these awards for Andrew was US$10.517 million, including a related DEP of US$1.710 million which was paid in shares.

•

During FY2021, Andrew was provided tax return preparation services of US$0.073 million in respect of his tax obligations in multiple jurisdictions for BHP employment income in accordance with contractual and termination arrangements.

The Remuneration Committee has adopted a de minimis threshold of US$7,500 for disclosure of payments to past Directors under UK requirements.

There were no payments made for loss of office in FY2021.

183

Relative importance of spend on pay

The table below sets out the total spend for Continuing operations on employee remuneration during FY2021 (and the prior year) compared with other significant expenditure items, and includes items as prescribed in the UK requirements. BHP has included tax payments and purchases of property, plant and equipment being the most significant other outgoings in monetary terms.


US$ million	FY2021		FY2020
Aggregate employee benefits expense		4,842		4,120
Dividends paid to BHP shareholders (1)		7,901		6,876
Income tax paid and royalty-related taxation paid (net of refunds)		7,610		5,944
Purchases of property, plant and equipment		6,606		6,900

(1)	There were no share buybacks in FY2021 or FY2020.

Transactions with KMP

During the financial year, there were no transactions between the Group and its subsidiaries and KMP (including their related parties) (2020: US$ nil; 2019: US$ nil). There were no amounts payable by or loans with KMP (including their related parties) at 30 June 2021 (2020: US$ nil).

A number of KMP hold or have held positions in other companies (i.e. personally related entities) where it is considered they control or significantly influence the financial or operating policies of those entities. There have been no transactions with those entities and no amounts were owed by the Group to personally related entities or any other related parties (2020: US$ nil; 2019: US$ nil).

This Remuneration Report was approved by the Board on 2 September 2021 and signed on its behalf by:

Christine O’Reilly

Chair, Remuneration Committee

2 September 2021

2.3 Directors’ Report

The information presented by the Directors in this Directors’ Report relates to BHP Group Limited, BHP Group Plc and their respective subsidiaries. Section 1 ‘Strategic Report’ (which includes the Chair’s review in section 1.2 and the Chief Executive Officer’s review in section 1.3, and incorporates the operating and financial review), section 2.1 ‘Corporate Governance Statement’, section 2.2 ‘Remuneration Report’, section 3.5 ‘Lead Auditor’s Independence Declaration’ and section 4 ‘Additional information’ are each incorporated by reference into, and form part of, this Directors’ Report. In addition, for the purposes of UK law, the Strategic Report in section 1 and the Remuneration Report in section 2.2 form separate reports and have been separately approved by the Board for that purpose.

For the purpose of the Financial Conduct Authority’s (FCA) Listing Rule 9.8.4C R, the applicable information required to be disclosed in accordance with FCA Listing Rule 9.8.4 R is set out in the sections below.


Applicable information required by FCA Listing Rule 9.8.4 R		Section in this Annual Report
(1) Interest capitalised by the Group		Section 3, note 22 ‘Net finance costs’

Paragraphs (2), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14) of Listing Rule 9.8.4 R are not applicable.

The Directors confirm, on the advice of the Risk and Audit Committee (RAC), that they consider the Annual Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess BHP’s position, performance, business model and strategy.

184

2.3.1 Review of operations, principal activities and state of affairs

A review of the operations of BHP during FY2021, the results of those operations during FY2021 and the expected results of those operations in future financial years are set out in section 1, in particular in 1.2 to 1.15, 1.17 and 1.18 and in other material in this Annual Report. Information on the development of BHP and likely developments in future years also appears in those sections.

Our principal activities during FY2021 are disclosed in section 1. We are among the world’s top producers of major commodities, including iron ore, metallurgical coal and copper. We also have substantial interests in oil, gas and energy coal. No significant changes in the nature of BHP’s principal activities occurred during FY2021 other than as disclosed in section 1.

There were no significant changes in BHP’s state of affairs that occurred during FY2021 and no significant post balance date events other than as disclosed in section 1 and note 35 ‘Subsequent events’ in section 3.

No other matter or circumstance has arisen since the end of FY2021 that has significantly affected or is expected to significantly affect the operations, the results of operations or state of affairs of BHP in future years.

2.3.2 Share capital and

buy-back

programs

At the Annual General Meetings held in 2019 and 2020, shareholders authorised BHP Group Plc to make

on-market

purchases of up to 211,207,180 of its ordinary shares, representing 10 per cent of BHP Group Plc’s issued share capital at that time. During FY2021, we did not make any

on-market

off-market

purchases of BHP Group Limited or BHP Group Plc shares under any share

buy-back

program. As at the date of this Directors’ Report, there were no current

on-market

buy-backs.

Shareholders will be asked at the 2021 Annual General Meetings to renew this authority. As at the date of this Directors’ Report, there is no intention to exercise this authority.

Some of our executives receive rights over BHP shares as part of their remuneration arrangements. Entitlements may be satisfied by the transfer of existing shares, which are acquired

on-market

by the Employee Share Ownership Plan (ESOP) Trusts or, in respect of some entitlements, by the issue of shares.

The number of shares referred to in column A below were purchased to satisfy awards made under the various BHP Group Limited and BHP Group Plc employee share schemes during FY2021.

Period

Total number of
shares
purchased and
transferred to
employees to
satisfy employee
awards

Average
price paid
per share

(1)

US$

Total
number of shares
purchased as

part of publicly

announced plans

or programs

Maximum number of shares that

may yet be purchased under the

plans or programs

BHP Group
Limited

(2)

BHP Group

Plc

1 Jul 2020 to 31 Jul 2020

–

211,207,180

(3)

1 Aug 2020 to 31 Aug 2020

6,158,718

28.32

–

211,207,180

(3)

1 Sep 2020 to 30 Sep 2020

–

211,207,180

(3)

1 Oct 2020 to 31 Oct 2020

–

211,207,180

(3)

1 Nov 2020 to 30 Nov 2020

–

211,207,180

(3)

1 Dec 2020 to 31 Dec 2020

–

211,207,180

(3)

1 Jan 2021 to 31 Jan 2021

–

211,207,180

(3)

1 Feb 2021 to 28 Feb 2021

–

211,207,180

(3)

1 Mar 2021 to 31 Mar 2021

882,454

36.57

–

211,207,180

(3)

1 Apr 2021 to 30 Apr 2021

–

211,207,180

(3)

1 May 2021 to 31 May 2021

–

211,207,180

(3)

1 Jun 2021 to 30 Jun 2021

731,235

38.00

–

211,207,180

(3)

Total

7,772,407

30.16

–

211,207,180

(3)

(1)	The shares were purchased in the currency of the stock exchange on which the purchase took place and the sale price has been converted into US dollars at the exchange rate on the day of purchase.

(2)

BHP Group Limited is able to

buy-back

and cancel BHP Group Limited shares within the ‘10/12 limit’ without shareholder approval in accordance with section 257B of the Australian Corporations Act 2001. Any future

on-market

buy-back

program would be conducted in accordance with the Australian Corporations Act 2001 and with the ASX Listing Rules.

(3)	At the Annual General Meetings held during 2019 and 2020, shareholders authorised BHP Group Plc to make on-market purchases of up to 211,207,180 of its ordinary shares, representing 10 per cent of BHP Group Plc’s issued capital at the time.

185

2.3.3 Results, financial instruments and going concern

Information about the Group’s financial position and financial results is included in the Financial Statements in this Annual Report. The Consolidated Income Statement shows profit attributable to BHP members of US$11.3 billion in FY2021, compared with a profit of US$8.0 billion in FY2020.

BHP’s business activities, together with the factors likely to affect its future development, performance and position, are discussed in section 1. In addition, sections 1.3 to 1.9 and 2.1.13, and note 23 ‘Financial risk management’ in section 3 outline BHP’s capital management objectives, its approach to financial risk management and exposure to financial risks, liquidity and borrowing facilities.

The Directors, having made appropriate enquiries, have a reasonable expectation that BHP has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of accounting in preparing the annual Financial Statements.

2.3.4 Directors

The Directors who served at any time during FY2021 or up until the date of this Directors’ Report were Ken MacKenzie, Mike Henry, Terry Bowen, Malcolm Broomhead, Xiaoqun Clever, Ian Cockerill, Anita Frew, Gary Goldberg, Susan Kilsby, Lindsay Maxsted, John Mogford, Christine O’Reilly, Shriti Vadera and Dion Weisler. For information on the current Directors of BHP Group Limited and BHP Group Plc, refer to section 2.1.2. These details include the period for which each Director held office up to the date of this Directors’ Report, their qualifications, experience and particular responsibilities, the directorships held in other listed companies since 1 July 2018 and the period for which each directorship has been held.

Shriti Vadera served as a

Non-executive

Director of BHP Group Limited and BHP Group Plc from January 2011 until her retirement on 15 October 2020. Lindsay Maxsted served as a

Non-executive

Director of BHP Group Limited and BHP Group Plc from March 2011 until his retirement on 4 September 2020.

Xiaoqun Clever and Christine O’Reilly were appointed as

Non-executive

Directors of BHP Group Limited and BHP Group Plc with effect from 1 October 2020 and 12 October 2020 respectively and were elected at the 2020 Annual General Meetings.

The number of meetings of the Board and its Committees held during the year and each Director’s attendance at those meetings are set out in section 2.1.4.

186

2.3.5 Remuneration and share interests

Remuneration

The policy for determining the nature and amount of emoluments of the Executive Key Management Personnel (KMP) (including the Executive Director) and the

Non-executive

Directors, and information about the relationship between that policy and BHP’s performance are set out in sections 2.2.2 and 2.2.3.

The remuneration tables contained in section 2.2.3 set out the remuneration of members of the Executive KMP (including the Executive Director) and the

Non-executive

Directors.

Directors

‘Ordinary share holdings and transactions’ in section 2.2.3 sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc of the Directors who held office during FY2021, at the beginning and end of FY2021. No rights or options over shares in BHP Group Limited and BHP Group Plc are held by any of the

Non-executive

Directors. Interests held by the Executive Director under employee equity plans as at 30 June 2021 are set out in the tables showing interests in incentive plans contained in ‘Equity awards’ in section 2.2.3. Except for Mike Henry, as at the date of this Directors’ Report, the information pertaining to shares in BHP Group Limited and BHP Group Plc held directly, indirectly or beneficially by Directors is the same as set out in the table in ‘Ordinary share holdings and transactions’ in section 2.2.3. Where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities.

Non-executive

Directors have agreed to apply at least 25 per cent of their remuneration (base fees plus committee fees) to the purchase of shares in BHP Group Limited and BHP Group Plc until they achieve a shareholding equivalent in value to one year’s remuneration (base fees plus committee fees). Thereafter,

Non-executive

Directors must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to mandatory minimum performance requirements for securities dealing and are reported to the Board and to the stock exchanges. Information on our policy governing the use of hedging arrangements over shares in BHP by Directors and other members of the KMP is set out in ‘Prohibition on hedging of BHP Group shares and equity instruments’ in section 2.2.3.

As at the date of this Directors’ Report, Mike Henry held:

•

(either directly, indirectly or beneficially) 196,262 shares in BHP Group Plc and 325,330 shares in BHP Group Limited

•

rights and options over nil shares in BHP Group Plc and 772,999 shares in BHP Group Limited

We have not made available to any Directors any interest in a registered scheme.

Key Management Personnel

‘Ordinary share holdings and transactions’ in section 2.2.3 sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc held directly, indirectly or beneficially at the beginning and end of FY2021 by those senior executives who were Executive KMP (other than the Executive Director) during FY2021. Where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities. Interests held by members of the Executive KMP under employee equity plans as at 30 June 2021 are set out in the tables contained in ‘Equity awards’ in section 2.2.3.

The table below sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc held directly, indirectly or beneficially, as at the date of this Directors’ Report by those senior executives who were Executive KMP (other than the Executive Director) on that date. Where applicable, the information also includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities.


Executive KMP member	BHP Group entity	As at date of Directors’ Report
Edgar Basto	BHP Group Limited BHP Group Plc		130,038 –
David Lamont	BHP Group Limited BHP Group Plc		6,345 –
Geraldine Slattery	BHP Group Limited BHP Group Plc		123,640 –
Ragnar Udd	BHP Group Limited BHP Group Plc		118,557 –

187

2.3.6 Secretaries

Stefanie Wilkinson is the Group Company Secretary. For details of her qualifications and experience, refer to section 2.1.2. The following people also acted during FY2021 as Company Secretaries of BHP Group Limited and BHP Group Plc: Caroline Cox BA (Hons), MA, LLB, BCL until 1 March 2021, Rachel Agnew, BComm (Economics), LLB (Hons), GAICD, until 1 September 2020 and Geof Stapledon, BEc, LLB (Hons), DPhil, FCIS.

Geof Stapledon resigned as Company Secretary of BHP Group Limited and BHP Group Plc with effect from 7 July 2021. Prakash Kakkad, LLB, LPC was appointed as a Company Secretary of BHP Group Limited and BHP Group Plc and John-Paul Santamaria, BEng (Civil) (Hons), LLB was appointed as a Company Secretary of BHP Group Limited, in each case with effect from 7 July 2021.

Each individual has experience in a company secretariat role or other relevant fields arising from time spent in roles within BHP, other large listed companies or other relevant entities.

2.3.7 Indemnities and insurance

Rule 146 of the BHP Group Limited Constitution and Article 146 of the BHP Group Plc Articles of Association require each company to indemnify, to the extent permitted by law, each Officer of BHP Group Limited and BHP Group Plc, respectively, against liability incurred in, or arising out of, the conduct of the business of BHP or the discharge of the duties of the Officer. The Directors named in section 2.1.2, the Company Secretaries and other Officers of BHP Group Limited and BHP Group Plc have the benefit of this requirement, as do individuals who formerly held one of those positions.

In accordance with this requirement, BHP Group Limited and BHP Group Plc have entered into Deeds of Indemnity, Access and Insurance (Deeds of Indemnity) with each of their respective Directors. The Deeds of Indemnity are qualifying third party indemnity provisions for the purposes of the UK Companies Act 2006 and each of these qualifying third party indemnities was in force as at the date of this Directors’ Report.

We have a policy that BHP will, as a general rule, support and hold harmless an employee, including an employee appointed as a Director of a subsidiary who, while acting in good faith, incurs personal liability to others as a result of working for BHP.

In addition, as part of the arrangements to effect the demerger of South32, we agreed to indemnify certain former Officers of BHP who transitioned to South32 from certain claims and liabilities incurred in their capacity as Directors or Officers of South32.

From time to time, we engage our External Auditor, Ernst & Young (EY), to conduct

non-statutory

audit work and provide other services in accordance with our policy on the provision of other services by the External Auditor. The terms of engagement in the United Kingdom include that we must compensate and reimburse EY LLP for, and protect EY LLP against, any loss, damage, expense, or liability incurred by EY LLP in respect of third party claims arising from a breach by BHP of any obligation under the engagement terms. In Australia, the terms of engagement for certain services include that we must compensate and reimburse EY for, and protect EY against, any loss, damage, expense, or liability incurred by EY in respect of third party claims arising from a breach by BHP of any obligation under the engagement terms.

We have insured against amounts that we may be liable to pay to Directors, Company Secretaries or certain employees (including former Officers) pursuant to Rule 146 of the Constitution of BHP Group Limited and Article 146 of the Articles of Association of BHP Group Plc or that we otherwise agree to pay by way of indemnity. The insurance policy also insures Directors, Company Secretaries and some employees (including former Officers) against certain liabilities (including legal costs) they may incur in carrying out their duties. For this Directors’ and Officers’ insurance, we paid premiums of US$24,114,600 excluding taxes during FY2021.

During FY2021, BHP paid legal defence costs for certain current and former employees of BHP or BHP Brasil in relation to the criminal charges filed by the Federal Prosecutors’ Office in Brazil. In addition, BHP paid legal defence costs for Roger Gilbertson, a former BHP Bolivia country manager, in connection with the Bolivian authorities’ decision to criminally prosecute two former presidents of Bolivia and a number of former international oil company executives in relation to exploration and production contracts entered into between 1994 and 1997.

Other than as set out above, no indemnity in favour of a current or former officer of BHP Group Limited or BHP Group Plc, or in favour of the External Auditor, was called on during FY2021.

2.3.8 Employee policies

Our people are fundamental to our success. We are committed to shaping a culture where our employees are provided with opportunities to develop, are valued and encouraged to contribute towards making work safer, simpler and more productive. We strongly believe that having employees who are engaged and connected to BHP reinforces our shared purpose aligned to

Our Charter

and will result in a more productive workplace.

For more information on employee engagement and employee policies, including communications and regarding disabilities, refer to section 1.14, 1.12 and in ‘Workforce engagement’ in section 2.1.6.

188

2.3.9 Corporate governance

The FCA’s Disclosure Guidance and Transparency Rules (DTR 7.2) require that certain information be included in a corporate governance statement. BHP has an existing practice of issuing a corporate governance statement as part of our Annual Report that is incorporated into the Directors’ Report by reference. The information required by the Disclosure Guidance and Transparency Rules and the FCA’s Listing Rules (LR 9.8.6) is located in section 2, with the exception of the information referred to in LR 9.8.6 (1), (3) and (4) and DTR 7.2.6, which is located in sections 2.3.2, 2.3.3, ‘Directors’ in section 2.3.5 and 2.3.18.

2.3.10 Dividends

A final dividend of 200 US cents per share will be paid on 21 September 2021, resulting in total dividends determined in respect of FY2021 of 301 US cents per share. For information on the dividends paid, refer to notes 16 ‘Share capital’ and 18 ‘Dividends’ in section 3. For information on the Group’s dividend policy, refer to section 4.10.7.

2.3.11 Auditors

No current officer of BHP has held the role of director or partner of the Group’s current external auditor. During FY2021, Lindsay Maxsted was the only officer of BHP who, prior to his appointment as an officer of BHP, previously held the role of director or partner of the Group’s former external auditor, at a time when the Group’s former external auditor conducted an audit of BHP. KPMG resigned as BHP’s external auditor on 7 November 2019 following the conclusion of the 2019 AGMs, in order to comply with UK and EU requirements on auditor tenure. Lindsay Maxsted was not part of the KPMG audit practice after 1980 and, while at KPMG, was not in any way involved in, or able to influence, any audit activity associated with BHP. Lindsay Maxsted retired as a

Non-executive

Director of BHP Group Limited and BHP Group Plc on 4 September 2020.

Each person who held the office of Director at the date the Board approved this Directors’ Report made the following statements:

•

so far as the Director is aware, there is no relevant audit information of which BHP’s External Auditor is unaware

•

the Director has taken all steps that he or she ought to have taken as a Director to make him or herself aware of any relevant audit information and to establish that BHP’s External Auditor is aware of that information

This confirmation is given pursuant to section 418 of the UK Companies Act 2006 and should be interpreted in accordance with, and subject to, those provisions.

Consistent with the then applicable UK and EU requirements in regard to audit firm tender and rotation, BHP conducted an audit tender during FY2017.

After a comprehensive tender process, at a meeting held on 16 August 2017, the Board selected EY as its independent registered public accounting firm from the financial year beginning 1 July 2019, and our shareholders approved EY’s appointment at the Annual General Meetings in 2019.

2.3.12 Non-audit

services

Information on the

non-audit

services undertaken by BHP’s External Auditor, including the amounts paid for

non-audit

services, refer to note 36 ‘Auditor’s remuneration’ in section 3. All

non-audit

services were approved in accordance with the process set out in the Policy on Provision of Audit and Other Services by the External Auditor. No

non-audit

services were carried out that were specifically excluded by the Policy on Provision of Audit and Other Services by the External Auditor. Based on advice provided by the RAC, the Directors have formed the view that the provision of

non-audit

services is compatible with the general standard of independence for auditors, and that the nature of

non-audit

services means that auditor independence was not compromised. For a statement of the reasons for this view and for more information about our policy in relation to the provision of

non-audit

services by the auditor, refer to section 2.1.10.

2.3.13 Political donations

We maintain a position of impartiality with respect to party politics and do not make political contributions or expenditure/donations for political purposes to any political party, politician, elected official or candidate for public office. We do, however, contribute to the public debate of policy issues that may affect BHP in the countries in which we operate.

No political contributions/donations for political purposes were made by BHP to any political party, politician, elected official or candidate for public office during FY2021.

(1)

Note that Australian Electoral Commission (AEC) disclosure requirements are broad, such that amounts that are not political donations can be reportable for AEC purposes. For example, where a political party or organisation owns shares in BHP, the AEC filing requires the political party or organisation to disclose the dividend payments received in respect of their shareholding.

189

2.3.14 Exploration, research and development

Companies within the Group carry out exploration and research and development necessary to support their activities. Details are provided in sections 1.10 to 1.17 and 4.6.

2.3.15 ASIC Instrument 2016/191

BHP Group Limited is an entity to which Australian Securities and Investments Commission (ASIC) Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016 applies. Amounts in this Directors’ Report and the Financial Statements, except estimates of future expenditure or where otherwise indicated, have been rounded to the nearest million dollars in accordance with ASIC Instrument 2016/191.

2.3.16 Proceedings on behalf of BHP Group Limited

No proceedings have been brought on behalf of BHP Group Limited, nor has any application been made, under section 237 of the Australian Corporations Act 2001.

2.3.17 Performance in relation to environmental regulation

BHP seeks to be compliant with all applicable environmental laws and regulations relevant to its operations. We monitor compliance on a regular basis, including through external and internal means, to minimise the risk of

non-compliance.

For more information on BHP’s performance in relation to health, safety and the environment, refer to section 1.13.

Fines and prosecutions

For the purposes of section 299 (1)(f) of the Australian Corporations Act 2001, in FY2021 BHP was levied four fines in relation to environmental laws and regulations at our operated assets, the total amount payable being US$35,526. Three fines were received in Australia: the first fine was received at the Caval Ridge Mine for mine affected water release (US$10,187), the second fine was received at the Poitrel Mine for unverified environmental monitoring data (US$10,329) and the third fine was received at Ripstone Dam for water monitoring telemetry system failure (US$10,417). One fine was received in South America, at the Spence Mine for incorrect waste storage (US$4,593).

Greenhouse gas emissions and energy consumption

Regulations made under the UK Companies Act 2006 require BHP, to the extent practicable, to obtain relevant information on the Group’s annual quantity of greenhouse gas emissions, which is reported in tonnes of carbon dioxide equivalent, and the Group’s energy consumption. In accordance with those UK requirements, information on BHP’s total FY2021 greenhouse gas emissions and intensity and energy consumption has been included in sections 1.13.7 and 4.8.

For more information on environmental performance, including environmental regulation, refer to section 1.13

190

2.3.18 Share capital, restrictions on transfer of shares and other additional information

Information relating to BHP Group Plc’s share capital structure, restrictions on the holding or transfer of its securities or on the exercise of voting rights attaching to such securities, certain agreements triggered on a change of control and the existence of branches of BHP outside of the United Kingdom, is set out in the following sections:

•

section 1.10.1 (Locations)

•

section 2.3.2 (Share capital and

buy-back

programs)

•

section 4.10.3 (Organisational structure)

•

section 4.10.4 (Material contracts)

•

section 4.10.5 (Constitution)

•

section 4.10.6 (Share ownership)

•

section 4.10.9 (Government regulations)

•

note 16 ‘Share capital’ and note 25 ‘Employee share ownership plans’ in section 3

As at the date of this Directors’ Report, there were 13,607,440 unvested equity awards outstanding in relation to BHP Group Limited ordinary shares held by 18,942 holders and 324,504 unvested equity awards outstanding in relation to BHP Group Plc ordinary shares held by 1,015 holders. The expiry dates of these unvested equity awards range between February 2022 and August 2025 and there is no exercise price. 4,155 options over unissued shares or unissued interests in BHP have been granted during or since the end of FY2021 and 4,096,660 shares or interests were issued as a result of the exercise of an option over unissued shares or interests during or since the end of FY2021. For more information, refer to note 25 ‘Employee share ownership plans’ in section 3. For information on movements in share capital during and since the end of FY2021, refer to note 16 ‘Share capital’ in section 3.

The Directors’ Report is approved in accordance with a resolution of the Board.


Ken MacKenzie		Mike Henry
Chair		Chief Executive Officer
Dated: 2 September 2021

191

Section 3

Financial Statements

Refer to the pages beginning on page

F-1

in this Annual Report.

192

Section 4

Additional information

In this section:


4.1 Financial information summary			194

4.2 Alternative Performance Measures			195

4.3 Information on mining operations			207

4.4 Financial Information by commodity			222

4.5 Production			228

4.6 Reserves			231

4.7 Major projects			247

4.8 Sustainability – performance data			249

4.9 Legal proceedings			264

4.10 Shareholder information			269

4.10.1 History and development			269

4.10.2 Markets			270

4.10.3 Organisational structure			271

4.10.4 Material contracts			274

4.10.5 Constitution			275

4.10.6 Share ownership			281

4.10.7 Dividends			284

4.10.8 American Depositary Receipts fees and charges			285

4.10.9 Government regulations			286

4.10.10 Taxation			290

4.10.11 Ancillary information for our shareholders			298

4.11 Glossary			299

193

4 Additional Information

4.1 Financial information summary

Information in this section has been presented on a Continuing operations basis to exclude the contribution from Onshore US assets, unless otherwise noted. Details of the contribution of the Onshore US assets to the Group’s results are disclosed in note 29 ‘Discontinued operations’ in section 3.


Year ended 30 June US$M	2021		2020		2019			2018			2017
Consolidated Income Statement (section 3.1.1)
Revenue		60,817		42,931		44,288			43,129			35,740
Profit from operations		25,906		14,421		16,113			15,996			12,554
Profit after taxation from Continuing operations		13,451		8,736		9,520			7,744			6,694
Loss after taxation from Discontinued operations		–		–		(335	)		(2,921	)		(472	)
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders (Attributable profit) (1)		11,304		7,956		8,306			3,705			5,890
Dividends per ordinary share – paid during the period (US cents)		156.0		143.0		220.0			98.0			54.0
Dividends per ordinary share – determined in respect of the period (US cents)		301.0		120.0		235.0			118.0			83.0
Basic earnings per ordinary share (US cents) (1)(2)		223.5		157.3		160.3			69.6			110.7
Diluted earnings per ordinary share (US cents) (1)(2)		223.0		157.0		159.9			69.4			110.4
Basic earnings from Continuing operations per ordinary share (US cents) (2)		223.5		157.3		166.9			125.0			119.8
Diluted earnings from Continuing operations per ordinary share (US cents) (2)		223.0		157.0		166.5			124.6			119.5
Number of ordinary shares (million)
– At period end		5,058		5,058		5,058			5,324			5,324
– Weighted average		5,057		5,057		5,180			5,323			5,323
– Diluted		5,068		5,069		5,193			5,337			5,336
Consolidated Balance Sheet (section 3.1.3) (3)
Total assets (4)		108,927		105,733		101,811			112,943			117,956
Net assets (4)		55,605		52,175		51,753			60,599			62,655
Share capital (including share premium)		2,686		2,686		2,686			2,761			2,761
Total equity attributable to BHP shareholders (4)		51,264		47,865		47,169			55,521			57,187
Consolidated Cash Flow Statement (section 3.1.4)
Net operating cash flows (5)		27,234		15,706		17,871			18,461			16,804
Capital and exploration expenditure (6)		7,120		7,640		7,566			6,753			5,220
Other financial information (section 4.2)
Net debt (7)		4,121		12,044		9,446			11,605			17,201
Underlying attributable profit (7)		17,077		9,060		9,124			8,933			6,732
Underlying EBITDA (7)		37,379		22,071		23,158			23,183			19,350
Underlying EBIT (7)		30,291		15,874		17,065			16,562			13,190
Underlying basic earnings per share (US cents) (7)		337.7		179.2		176.1			167.8			126.5
Underlying Return on Capital Employed (per cent) (4)(7)		32.5		16.9		16.0			14.2			9.8

(1 )	Includes Loss after taxation from Discontinued operations attributable to BHP shareholders.

(2)	For more information on earnings per share, refer to note 7 ‘Earnings per share’ in section 3.

(3)

The Consolidated Balance Sheet includes the associated assets and liabilities held for sale in relation to Cerrejón for FY2021 and Onshore US for FY2018 as IFRS 5/AASB 5

‘Non-current

Assets Held for Sale and Discontinued Operations’ does not require the Consolidated Balance Sheet to be restated for comparative periods.

(4)

(5)	Net operating cash flows are after dividends received, net interest paid, proceeds and settlements of cash management related instruments, net taxation paid and includes Net operating cash flows from Discontinued operations.

194

(6)

Capital and exploration expenditure is presented on a cash basis and represents purchases of property, plant and equipment plus exploration expenditure from the Consolidated Cash Flow Statement in section 3 and includes purchases of property, plant and equipment plus exploration expenditure from Discontinued operations. For more information, refer to note 29 ‘Discontinued operations’ in section 3. Purchase of property, plant and equipment includes capitalised deferred stripping of US$810 million for FY2021 (FY2020: US$698 million) and excludes capitalised interest. Exploration expenditure is capitalised in accordance with our accounting policies, as set out in note 11 ‘Property, plant and equipment’ in section 3.

(7)

We use Alternative Performance Measures (APMs) to reflect the underlying performance of the Group. Underlying attributable profit, Underlying basic earnings per share and Underlying return on capital employed includes Continuing and Discontinued operations. Refer to section 4.2 for a reconciliation of APMs to their respective IFRS measure. Refer to section 4.2.1 for the definition and method of calculation of APMs. Refer to note 20 ‘Net debt’ in section 3 for the composition of Net debt.

4.2 Alternative Performance Measures

We use various Alternative Performance Measures (APMs) to reflect our underlying financial performance.

These APMs are not defined or specified under the requirements of IFRS, but are derived from the Group’s Consolidated Financial Statements prepared in accordance with IFRS. The APMs are consistent with how management review the financial performance of the Group with the Board and the investment community.

Sections 4.2.1 and 4.2.2 outline why we believe the APMs are useful and the calculation methodology. We believe these APMs provide useful information, but they should not be considered as an indication of or as a substitute for statutory measures as an indicator of actual operating performance (such as profit or net operating cash flow) or any other measure of financial performance or position presented in accordance with IFRS, or as a measure of a company’s profitability, liquidity or financial position.

The following tables provide reconciliations between the APMs and their nearest respective IFRS measure.

The measures and reconciliations below included in this section for the year ended 30 June 2021 and comparative periods are unaudited and have been derived from the Group’s Consolidated Financial Statements.

Exceptional items

To improve the comparability of underlying financial performance between reporting periods, some of our APMs adjust the relevant IFRS measures for exceptional items. For more information on exceptional items, refer to note 3 ‘Exceptional items’ in section 3.1.

Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and impact is considered material to the Group’s Consolidated Financial Statements. The exceptional items included within the Group’s profit from Continuing and Discontinued operations for the financial years are detailed below.


Year ended 30 June	2021 US$M			2020 US$M			2019 US$M
Continuing operations
Revenue		–			–			–
Other income		34			489			50
Expenses excluding net finance costs, depreciation, amortisation and impairments		(592	)		(1,025	)		(57	)
Depreciation and amortisation		–			–			–
Net impairments		(2,371	)		(409	)		–
Loss from equity accounted investments, related impairments and expenses		(1,456	)		(508	)		(945	)

Profit/(loss) from operations		(4,385	)		(1,453	)		(952	)

Financial expenses		(85	)		(93	)		(108	)
Financial income		–			–			–

Net finance costs		(85	)		(93	)		(108	)

Profit/(loss) before taxation		(4,470	)		(1,546	)		(1,060	)

Income tax (expense)/benefit		(1,327	)		241			242
Royalty-related taxation (net of income tax benefit)		–			–			–

Total taxation (expense)/benefit		(1,327	)		241			242

Profit/(loss) after taxation from Continuing operations		(5,797	)		(1,305	)		(818	)

Discontinued operations
Profit/(loss) after taxation from Discontinued operations		–			–			–

Profit/(loss) after taxation from Continuing and Discontinued operations		(5,797	)		(1,305	)		(818	)

Total exceptional items attributable to non-controlling interests		(24	)		(201	)		–
Total exceptional items attributable to BHP shareholders		(5,773	)		(1,104	)		(818	)

Exceptional items attributable to BHP shareholders per share (US cents)		(114.2	)		(21.9	)		(15.8	)

Weighted basic average number of shares (Million)		5,057			5,057			5,180

195

APMs derived from Consolidated Income Statement

Underlying attributable profit


Year ended 30 June	2021 US$M		2020 US$M		2019 US$M
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders		11,304		7,956		8,306
Total exceptional items attributable to BHP shareholders (1)		5,773		1,104		818

Underlying attributable profit		17,077		9,060		9,124

(1)	For more information, refer to note 3 ‘Exceptional items’ in section 3.1.

Underlying attributable profit – Continuing operations


Year ended 30 June	2021 US$M		2020 US$M		2019 US$M
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders		11,304		7,956		8,306
Loss attributable to members of BHP for Discontinued operations		–		–		342
Total exceptional items attributable to BHP shareholders (1)		5,773		1,104		818

Underlying attributable profit – Continuing operations		17,077		9,060		9,466

(1)	For more information, refer to note 3 ‘Exceptional items’ in section 3.1.

Underlying basic earnings per share


Year ended 30 June	2021 US cents		2020 US cents		2019 US cents
Basic earnings per ordinary share		223.5		157.3		160.3
Exceptional items attributable to BHP shareholders per share (1)		114.2		21.9		15.8

Underlying basic earnings per ordinary share		337.7		179.2		176.1

(1)	For more information, refer to note 3 ‘Exceptional items’ in section 3.1.

Underlying EBITDA


Year ended 30 June	2021 US$M			2020 US$M			2019 US$M
Profit from operations		25,906			14,421			16,113
Exceptional items included in profit from operations (1)		4,385			1,453			952

Underlying EBIT		30,291			15,874			17,065

Depreciation and amortisation expense		6,824			6,112			5,829
Net impairments		2,635			494			264
Exceptional item included in Depreciation, amortisation and impairments (1)		(2,371	)		(409	)		–

Underlying EBITDA		37,379			22,071			23,158

(1)	For more information, refer to note 3 ‘Exceptional items’ in section 3.1.

196

Underlying EBITDA – Segment


Year ended 30 June 2021 US$M	Petroleum		Copper		Iron Ore		Coal			Group and unallocated items/ eliminations (2)			Total Group
Profit from operations		386		6,665		22,975		(2,144	)		(1,976	)		25,906
Exceptional items included in profit from operations (1)		47		144		1,319		1,567			1,308			4,385
Depreciation and amortisation expense		1,739		1,608		1,971		845			661			6,824
Net impairments		128		72		13		1,077			1,345			2,635
Exceptional item included in Depreciation, amortisation and impairments (1)		–		–		–		(1,057	)		(1,314	)		(2,371	)

Underlying EBITDA		2,300		8,489		26,278		288			24			37,379


Year ended 30 June 2020 US$M	Petroleum		Copper			Iron Ore		Coal		Group and unallocated items/ eliminations (2)			Total Group
Profit from operations		744		1,362			12,310		793		(788	)		14,421
Exceptional items included in profit from operations (1)		6		1,228			614		18		(413	)		1,453
Depreciation and amortisation expense		1,445		1,740			1,608		807		512			6,112
Net impairments		12		426			22		14		20			494
Exceptional item included in Depreciation, amortisation and impairments (1)		–		(409	)		–		–		–			(409	)

Underlying EBITDA		2,207		4,347			14,554		1,632		(669	)		22,071


Year ended 30 June 2019 US$M	Petroleum		Copper			Iron Ore		Coal		Group and unallocated items/ eliminations (2)			Total Group
Profit from operations		2,480		2,587			8,426		3,400		(780	)		16,113
Exceptional items included in profit from operations (1)		–		–			971		–		(19	)		952
Depreciation and amortisation expense		1,560		1,835			1,653		632		149			5,829
Net impairments		21		128			79		35		1			264

Underlying EBITDA		4,061		4,550			11,129		4,067		(649	)		23,158

(1)	For more information, refer to note 3 ‘Exceptional items’ in section 3.1.

(2)	Group and unallocated items includes functions, other unallocated operations, including Potash, Nickel West, legacy assets, and consolidation adjustments.

197


Year ended 30 June 2021 US$M	Profit from operations			Exceptional items included in profit from operations (1)			Depreciation and amortisation		Net impairments		Exceptional item included in Depreciation, amortisation and impairments (1)			Underlying EBITDA
Potash		(1,489	)		1,320			2		1,314		(1,314	)		(167	)
Nickel West		146			3			79		31		–			259
Corporate, legacy assets and eliminations		(633	)		(15	)		580		–		–			(68	)

Total		(1,976	)		1,308			661		1,345		(1,314	)		24


Year ended 30 June 2020 US$M	Profit from operations			Exceptional items included in profit from operations (1)			Depreciation and amortisation		Net impairments		Exceptional item included in Depreciation, amortisation and impairments (1)			Underlying EBITDA
Potash		(130	)		–			3		–		–			(127	)
Nickel West		(113	)		5			68		3		–			(37	)
Corporate, legacy assets and eliminations		(545	)		(418	)		441		17		–			(505	)

Total		(788	)		(413	)		512		20		–			(669	)


Year ended 30 June 2019 US$M	Profit from operations			Exceptional items included in profit from operations (1)			Depreciation and amortisation		Net impairments		Exceptional item included in Depreciation, amortisation and impairments (1)			Underlying EBITDA
Potash		(131	)		–			4		–		–			(127	)
Nickel West		91			–			11		–		–			102
Corporate, legacy assets and eliminations		(740	)		(19	)		134		1		–			(624	)