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BHP accepts the Intergovernmental Panel on Climate Change (IPCC) assessment of climate change science, which has found that warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable. Read our full climate change position statement.

Climate change is a global challenge that requires a collaborative market and policy response. Playing our part in responding to climate change is a priority governance and strategic issue for BHP. Our Board is actively engaged in the governance of climate change issues, supported by the Sustainability Committee. Management has primary responsibility for the design and implementation of our climate change strategy.

Our climate change strategy focuses on reducing our operational greenhouse gas (GHG) emissions, investing in low emissions technologies, promoting product stewardship, managing climate-related risk and opportunity, and working with others to enhance the global policy and market response.

Reducing operational emissions

As a major energy consumer, managing energy use, ensuring energy security and reducing GHG emissions at our operations are key components of our climate change strategy. Reducing our operational emissions is a key performance indicator for our business and our performance against our targets is reflected in senior executive and leadership remuneration.

Delivering against our emissions reduction targets

We have been publicly reporting our operational emissions – and undertaking initiatives to reduce them – since the 1990s. In FY2018, we began working towards a new five-year GHG emissions reduction target. Our new target, which took effect from 1 July 2017, is to maintain our total operational emissions in FY2022 at or below FY2017 levels while we continue to grow our business. Our new target builds on our success in achieving our previous five-year target.

Our operational emissions (Scopes 1 and 2 combined) in FY2018 totalled 16.5 million tonnes of carbon dioxide equivalent (CO2-e). This is a 1 per cent increase compared to the FY2017 baseline, and is primarily due to an increase in Scope 2 emissions from our Minerals Americas business as a result of increased production at our Escondida and Pampa Norte copper assets in Chile, as well as the commissioning of the new Escondida desalination plant.

Greenhouse gas emissions (Scope 1 and 2)1

Greenhouse gas emissions (Scope 1 and 2)

Our Scope 1 and 2 emissions inventory is available to download as part of our GHG data Excel file (XLSX 78 kb).

In addition to our five-year target, we have set the longer-term goal of achieving net-zero operational GHG emissions in the latter half of this century, consistent with the Paris Agreement.

Our five-year target and our longer-term emissions reduction goal underpin our strategy and are an important driver of internal performance. We continue to focus on the delivery of our five-year target and defining a pathway to net-zero emissions over the coming decades.

Investing in low emissions technologies

Defining a pathway to net-zero emissions for our long-life assets requires planning for the long term and a deep understanding of the development pathway for low emissions technologies. Our strategy is to develop emerging and deploy existing technologies that make step-change reductions in GHG emissions, both from our own operations and from the downstream processing and use of our products.

We have a suite of initiatives currently underway aimed at achieving reductions across our major operational emissions sources:

  • Zero-carbon electricity supply: emissions from electricity use make up 46 per cent of our operational emissions. This includes both the power we generate ourselves and the power we buy from grids around the world. Our strategy seeks to accelerate the transition to lower carbon sources of electricity while balancing cost, reliability and emissions reductions.
  • Zero-carbon material movement: emissions from fuel and distillate make up 35 per cent of our operational emissions, primarily from the consumption of diesel in the course of material movement (for example haul trucks). Our strategy is to accelerate and de-risk technologies and innovations that can transition operations over time to alternate fuels and greater electrification of mining equipment and mining methods.
  • Fugitive emissions: fugitive methane emissions from our petroleum and coal assets make up 18 per cent of our operational emissions. Our strategy is to pursue innovation in mitigation technologies for these emissions, which are among the most technically and economically challenging to reduce.

In evaluating low emissions technology investment opportunities, we:

  • consider technologies with the potential to deliver results across a range of time horizons;
  • emphasise investments that can deliver material GHG savings;
  • consider the ability of projects and technologies to leverage our global Operating Model (replicability, scale and market breadth);
  • evaluate the potential for building capacity, capability and internal awareness across our business.

For example, our Olympic Dam asset in South Australia currently relies on diesel equipment for development, production, ore handling and mine services. A trial is underway to deploy electric vehicles in Olympic Dam’s underground fleet. Find out more about our electric vehicle trial.

As well as helping us to reduce our own emissions, lessons from our low emissions technologies projects will be shared with others in our sector and more broadly. For example, we are participating in the Lakeland Solar and Storage Project, a three-year knowledge sharing partnership to demonstrate connecting large-scale battery storage to a fringe-of-the-grid solar project in regional Queensland, Australia. Outcomes of an extensive test program at Lakeland will provide insight for BHP and the resource sector with respect to security of energy supply. Find out more about the Lakeland Solar and Storage Project.

We are also working in collaboration with Australia’s national research agency, CSIRO, to scope a project designed to determine the viability of measuring fugitive methane emissions in near real time from open-cut coal mining environments.

Footnotes

1 Scope 1 and 2 emissions have been calculated on an operational control basis in accordance with the GHG Protocol Corporate Accounting and Reporting Standard. Dada includes Onshore US. Comparisons of data over the period FY2014 to FY2016 should note the demerger of South32 during FU2015 (FY2015 data excludes emissions from assets that were emerged with South32 between the date of completion of the demerger (25 May 2015).

2 Scope 1 refers to direct GHG emissions from operated assets.

3 Scope 2 refers to indirect GHG emissions from the generation of purchased electricity and steam that is consumed by operated assets (calculated using the market-based method).

4 FY2017 is the base year for our current five-year GHG emissions reduction target, which took effect from FY2018. The FY2017 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. Note that FY2017 was also the final year of our previous five-year target (which we achieved), which was to keep our absolute emissions below an FY2006 baseline (adjusted for material acquisitions and divestments).

Promoting product stewardship

While reducing our operational emissions is vital, emissions from our value chain (Scope 3 emissions) are significantly higher than those from our own operations. We recognise that we have a stewardship role in working with our customers, suppliers and other value chain participants to seek to influence emissions reductions across the full life cycle of our products.

Managing our value chain emissions

In FY2018, Scope 3 emissions in our value chain were 596 million tonnes of CO2-e. The most significant contributors to this total were emissions from the downstream processing and use of our products, which accounted for around 97 per cent of total Scope 3 emissions. In particular, Scope 3 emissions emanating from the steelmaking process (the processing and use of our iron ore and metallurgical coal) accounted for over 65 per cent of the total. Emissions from the combustion of our energy commodities (energy coal, natural gas and petroleum products) were estimated around 25 per cent of the total.

Greenhouse gas emissions (Scope 3)1

Scope 3 category FY2018 emissions (million tonnes CO2-e)
Processing of sold products2 322.6 

Iron ore to steel

317.4

Copper cathode to copper wire

5.2
Use of sold products 235.8

Metallurgical coal

112.3

Energy coal

71.0

Natural gas & natural gas liquids (NGLs)

40.9

Crude oil & condensates3

29.6
Upstream and downstream transportation and distribution 8.6
Other Scope 34 11.4
Scope 3 total5 596.4

By definition, Scope 3 emissions occur from sources that are not owned or controlled by BHP, but by our customers, suppliers and others in our value chain. For some emissions sources, we have the ability to influence our suppliers or other service providers to reduce emissions from their activities. For example, BHP is one of the largest global shippers of bulk commodities. We are working on initiatives to reduce our freight emissions and seek to drive change more broadly within the shipping industry. Over the last few years we have worked with RightShip, a leading maritime risk management and environmental assessment organisation, to develop data analytics to measure the GHG emissions of the marine fleet we charter, benchmarked the emissions performance of individual vessels, and implemented vetting criteria to exclude vessels with poor emissions performance. Find out more about our approach to sustainable shipping.

For other emissions sources, such as the downstream processing of our products, the fact that these emissions occur ‘outside the gate’ makes them more challenging to address. However, we already work directly with our customers to help them improve the productivity and environmental performance of their processes based on the quality characteristics of our products. There is opportunity to build on these relationships to identify strategic opportunities to partner in implementing projects with the potential to achieve more material emissions reductions. Find out more about how we work with our customers to minimise the environmental impacts of their production.

Our full Scope 3 emissions inventory is available to download as part of our GHG data Excel file (XLSX 78 kb). Details of the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions data can be found in the associated Scope 3 calculation methodology document.

Our approach to addressing Scope 3 emissions is evolving. We are working to develop a more comprehensive approach to understanding, managing and communicating climate-related opportunities and risks across our value chain. This will include activities aimed at improving how we measure and track Scope 3 emissions in our value chain, and identifying additional opportunities to work with others in our value chain to influence emissions reductions. Find out more in our whitepaper on addressing greenhouse gas emissions beyond our operations (PDF 122 kb).

Accelerating the development of carbon capture and storage

We also work in partnership with others to accelerate the development of low emissions technologies with the potential to deliver step-change emissions reductions from the processing and use of our products over a longer time horizon. Carbon capture and storage (CCS) is a key low emissions technology with the potential to play a pivotal role in reducing emissions from industrial processes, such as steel production, as well as emissions from the power sector and from oil and gas production.

While we recognise that progress is required in developing policy frameworks to support the wider deployment of this technology, our CCS investments and partnerships focus on mechanisms to reduce costs and accelerate development timeframes. Our investments include activities aimed at knowledge sharing from commercial-scale projects, development of sectoral deployment roadmaps, and funding for research and development at leading universities and research institutes.

For example, we established the International CCS Knowledge Centre to share lessons from SaskPower's Boundary Dam CCS project in Saskatchewan, Canada. We are working with Peking University and other partners to identify the key policy, technical and economic barriers to CCS deployment in the industrial sector, with a particular focus on the iron and steel industry in China. We have also established a research collaboration between the University of Melbourne, University of Cambridge and Stanford University to support fundamental research into the long-term storage mechanisms of CO2 in sub-surface locations. Find out more about our approach to CCS.

Footnotes

1 Scope 1 and 2 emissions have been calculated on an operational control basis in accordance with the GHG Protocol Corporate Accounting and Reporting Standard. Includes data for Continuing and Discontinued operations for the financial years being reported. Comparisons of data over the period shown should note the demerger of South32 during FY2015 (data from FY2015 onwards excludes emissions from assets that were demerged with South32 from the date of completion of the demerger (25 May 2015)).

2 All iron ore production is assumed to be processed into steel and all copper metal production is assumed to be processed into copper wire for end-use. Processing of nickel, zinc, gold, silver, ethane and uranium oxide is not currently included, as production volumes are much lower than iron ore and copper and a large range of possible end uses apply. Processing/refining of petroleum products is also excluded as these emissions are considered immaterial compared to the end-use product combustion reported in the ‘Use of sold products’ category.

3 All crude oil and condensates are conservatively assumed to be refined and combusted as diesel.

4 Includes upstream emissions from purchased goods and services (including capital goods); fuel and energy related activities; business travel; and employee commuting. Also includes emissions from investments (i.e. the Scope 1 and 2 emissions (on an equity basis) from assets that are owned as a joint venture but not operated by BHP).

5 There is an element of double counting across emissions categories for our iron ore and metallurgical coal products; both are used in the same process (steelmaking) further downstream, which inflates the total Scope 3 emissions figure.

Managing risk and opportunity

We recognise the physical and non-physical impacts of climate change may affect our assets, productivity, the markets in which we sell our products and the communities in which we operate. Risks related to the physical impacts of climate change include acute risks resulting from increased severity of extreme weather events and chronic risks resulting from longer-term changes in climate patterns. Non-physical risks arise from a variety of policy, legal, technological and market responses to the challenges posed by climate change and the transition to a lower carbon economy.

A broader discussion of our climate-related risk factors and risk management approach is provided as part of our climate-related disclosures in our Annual Report 2018, which are aligned with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

Adapting to the physical impacts of climate change

We take a robust, risk-based approach to adapting to the physical impacts of climate change. We work with globally recognised agencies to obtain regional analyses of climate science to inform resilience planning at an asset level and improve our understanding of the potential climate vulnerabilities of our operations and host communities.

Our operations are required to build climate resilience into their activities through compliance with the Our Requirements for Environment and Climate Change standard. We also require new investments to assess and manage risks associated with the forecast physical impacts of climate change. For example, cyclone management is already a critical requirement for our West Australian Iron Ore (WAIO) asset, and maintaining adaptive management practices will allow WAIO to respond to an expected increase in cyclone intensity in the Pilbara region. Another example is provided by our Petroleum business, which has specifically designed severe weather mitigation systems for Floating Production and Storage Offtake vessels (FPSOs). Although the FPSOs are connected to subsea oil and gas infrastructure, they have the capability to disconnect from this infrastructure, and can sail away from impending cyclonic or extreme weather events.

As well as this ongoing business resilience planning, we continue to look at ways we can contribute to community and ecosystem resilience. For example, read about how we are building capacity for climate change adaptation in Trinidad and Tobago (PDF 182 kb).

We recognise the body of scientific knowledge about the potential impacts of climate change is rapidly expanding and continue to review our adaptation approach in light of the latest climate science.

Evaluating the resilience of our portfolio

We consider the impacts of climate change in our strategy process. We recognise the world could respond in a number of different ways to address climate change. We use a broad range of scenarios to consider how divergent policy, technology, market and societal outcomes could impact our portfolio, including low plausibility, extreme shock events. We also continually monitor the macro environment for climate change-related developments that would serve as a call to action for us to reassess the resilience of our portfolio.

Our investment evaluation process includes an assessment of non-quantifiable risks such as those that could impact the people and the environment that underpin our licence to operate. The process has also incorporated market and sector based carbon prices for more than a decade.

Our Climate Change: Portfolio Analysis (2015) and Climate Change: Portfolio Analysis – Views after Paris (2016) reports, describe in more detail how we have used scenario analysis to evaluate the resilience of our portfolio to both an orderly and a more rapid transition to a 2°C world.

We are committed to keeping our stakeholders informed of the potential impact of climate change on our business, and continue to review and consider developing best practices and evolving stakeholder expectations. Following the release of the TCFD recommendations, we also continue to review our approach to the public disclosure of this ongoing work.

Contributing to the global response

Climate change is a global challenge that requires collaboration. We prioritise working with others to enhance the global policy and market response.

Supporting the development of effective climate and energy policy

Industry has a key role to play in supporting policy development. We engage with governments and other stakeholders to contribute to the development of an effective, long-term policy framework that can deliver a measured transition to a lower carbon economy.

While we plan for a range of climate scenarios, we continue to advocate for a less than 2°C outcome. We are signatories to the UNFCCC ‘Paris Pledge’ which brings together cities, regions, companies and investors in support of the Paris Agreement.

We believe an effective policy framework should include a complementary set of measures, including a price on carbon, support for low emissions technology and measures to build resilience. We are a signatory to the World Bank's ‘Putting a Price on Carbon’ statement and a partner in the Carbon Pricing Leadership Coalition, a global initiative that brings together leaders from industry, government, academia and civil society with the goal of putting in place effective carbon pricing policies.

We also advocate for a framework of policy settings that will accelerate the deployment of CCS. We are a member of the Global CCS Institute and, in 2018 joined the UK Government’s newly formed Council on Carbon Capture Usage and Storage (CCUS).

We contribute to policy reviews throughout our global operating regions. For example, we made submissions in response to the Australian Government’s 2017 Review of Climate Change Policies and Independent Review into the Future Security of the National Electricity Market (Finkel review) and its 2018 Consultation on the operation of the Emissions Reduction Fund Safeguard Mechanism. We also engaged with the Australian Energy Security Board in, both directly and through our industry association memberships, on the design of the National Energy Guarantee.

We believe industry associations have the capacity to play a key role in advancing the development of standards, best practices and constructive policy that are of benefit to members, the economy and society. We also recognise there is increasing stakeholder interest in the nature and role of industry associations and the extent to which the positions of industry associations on key issues are aligned with those of member companies.

In 2017, we completed a review of our membership of those industry associations that hold an active position on climate and energy policy. Our Industry Association Review report, published in December 2017, sets out a list of the material differences between the positions we hold on climate and energy policy and the advocacy positions on climate and energy policy taken by industry associations to which we belong. It also describes the outcomes of the review of our membership of those industry associations. In light of the material difference identified by the review and the narrow range of activities of benefit to BHP from membership, we determined to cease membership of the World Coal Association (WCA). Find out more about our approach to industry associations.

Promoting market mechanisms to reduce global emissions

In addition to measures to reduce our own emissions, we support the development of market mechanisms that reduce global GHG emissions through projects that generate carbon credits.

Our climate change strategy includes a focus on reducing emissions from deforestation through support for REDD+, the UN program for reducing emissions from deforestation and forest degradation.

We are also exploring investments in ‘blue’ carbon, the carbon captured in coastal and marine ecosystems.

For example, in partnership with the International Finance Corporation (IFC) and Conservation International (CI) we developed a first-of-its-kind US$152 million Forests Bond, issued by the IFC in 2016. We provide a price-support mechanism for the bond, which supports the Kasigau Corridor REDD project in Kenya. We also support the Alto Mayo REDD+ project in Peru..

In partnership with CI and Baker McKenzie, in 2017 we launched the Finance for Forests (F4F) initiative, which aims to share our experiences to help encourage replication of these investments and the exploration of other innovative private finance tools to conserve forests and further advance REDD+. Find out more about our approach to REDD+.

Disclosure and engagement

Our climate strategy is supported by transparent disclosure and reporting, as well as active engagement with our stakeholders – including investors, policy makers, peer companies and non-governmental organisations.

Climate-related financial disclosures

We were one of the first companies to align our disclosures with the recommendations of the TCFD. We believe the TCFD recommendations represent an important step towards establishing a widely accepted framework for climate-related financial risk disclosure and we have been a firm supporter of this work. Our Vice President of Sustainability and Climate Change is a member of the Task Force. For information on our TCFD-aligned disclosures on climate-related financial risk, refer to our Annual Report 2018.

We have also participated in CDP (formerly the Carbon Disclosure Project) since its inception. Note however that because of the timing of the CDP disclosure cycle relative to our financial year, our most recent publically available submission to the CDP climate change questionnaire relates to our FY2016 financial year.

We are committed to continuing to work with the TCFD and our peers in the resources sector to support the wider adoption of the TCFD recommendations and the development of more effective disclosure practices within the sector.

Stakeholder engagement

We periodically hold one-on-one and group meetings with investors and their advisers. We also seek input and insight from external experts, such as the BHP Forum on Corporate Responsibility (FCR). The FCR, which is composed of civil society leaders and BHP executives, has played a critical role in the development of our position on climate change. Find out more about the FCR.

Informed by this engagement, we continue to regularly review our approach to climate change in response to emerging scientific knowledge, changes in global climate policy and regulation, developments in low emissions technologies and evolving stakeholder expectations.

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