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Danny Malchuk, President Operations, Minerals Americas
Sustainable Copper: collaborating for a greener future
Speech given at IWCC, Santiago - 2019
It is a special moment for me to be here in Chile to present on two topics that I am so passionate about – copper and sustainability.
But where I’d like to start is with coffee, mangoes and iPhones.
Last year, I read an article about fair trade coffee. In a world first, a small coffee shop in Denver in the United States had given consumers complete oversight of where its coffee beans had originated from. From the farm, to the port, to roasting, to the shop front, coffee drinkers could be sure what they were drinking was organic, or ethically sourced1.
Walmart, one of the world’s most recognised brands, is also working to increase transparency. In response to heightened consumer demands they have reduced the traceability of the mangoes that originate here in Latin America and end up on shelves in the United States, from several days to 2.2 seconds2. Put a different way, it now takes consumers 2.2 seconds to see where their mango was grown and by whom, how it got to the States, and how long it sat in a cold storage facility before it was delivered to their local store3. As ‘eco-labelling’ becomes more prominent, I imagine one day soon we will all be able to see the carbon footprint of any piece of fruit or meat we choose to eat.
And back home, closer to our industry, is another example. Facing similar scrutiny, Apple has become the first company to map their supply chain from manufacturing to the smelter for tin, tantalum, tungsten, cobalt and gold4. Their efforts consider conflict, human rights and other risks and they go above and beyond what’s required by law.
These are three examples of three very different products. But one common thread binds them together: higher demand for sustainably sourced goods, demonstrated through increased transparency of those supply chains.
In response, different parts of these industries have collaborated to turn the challenge for more information about their products, in to opportunities.
Today I would like to talk about how these themes will impact the copper industry, and the opportunity to collectively enhance our ‘green copper’ credentials.
There are a number of different factors driving change within our industry. Together, we must get ahead of them.
Let’s take a look at them now.
The first is the increasing importance of copper in a low carbon economy. The world needs more high-quality copper, but it is getting harder to find and produce.
At the same time, the end consumers of copper-intensive products, such as those people buying electric vehicles, are more ethically minded, and care more about how their vehicles are made and exactly what they are made with.
Making sure we are mining in the right way is fundamental.
At BHP, sustainability is high on our agenda. But there is more that we can do.
I truly believe we need to think bigger as a company, and work together as an industry, to minimise our effect on the environment.
There is much we can learn from coffee, mangoes and iPhones and hold ourselves to higher operating standards.
Let’s look in detail at the current industry landscape.
The way we provide the resources required for the future will be increasingly scrutinised in light of recent global accords such as the United Nations Sustainable Development Goals and the Paris Climate Agreement.
You will see from the chart on the left that in order to achieve the targets of the Paris Agreement, substantial emissions reductions are required across all sectors of the economy, particularly in power generation and transport.
The case is clear: society demands a rapid transition to low emissions technologies to combat climate change.
Electric vehicles are already gaining momentum. As you can see on the right, our analysis shows their presence will rise substantially.
These facts are critical when it comes to the demand for copper. A battery powered electric vehicle contains four times as much copper as a conventional medium sized car. So, our ‘national metal’ is expected to be a big winner from the electrification of the light duty vehicle fleet.
But EV’s are just one part of the de-carbonising megatrend!
Cleaner renewable power is rapidly closing the unsubsidised cost competitiveness gap with traditional power generation across the world.
It is also copper intensive.
So we are confronted by a fast growing and copper hungry world.
It all sounds positive, but this future will also bring additional challenges.
High-quality copper is becoming harder to find and extract. As grades decrease, strip ratios rise and deposits get deeper, more water and energy is required for the same amount of output.
If the current trend continues, the OECD suggests that by 2060, copper will have a substantially worse environmental footprint, both compared to today and to many other metals, on a per tonne basis.
A low carbon future is materially intensive in minerals like lithium, cobalt and copper. If these supply chains are not properly managed, it could seriously undermine the efforts of producing countries to meet their climate and related Sustainable Development Goals.
It also carries potentially significant impacts for local ecosystems, water systems and communities.
In order to fully seize the opportunity to be part of a sustainable future we need to minimise our material and environmental footprints.
Coffee, mangoes and iPhones might not be the most obvious proxy for the copper industry. But I believe in this case we must take notice of the trends affecting these products.
Collectively, we have to deliver our products more sustainably with the ethical end-consumer in mind.
At BHP, sustainability is ingrained in every action we take across our business. We have made strong progress on improving our sustainability performance in the areas of water consumption and greenhouse gas emissions and we continue to set strict public targets for the future in these areas.
Another area which we are particularly proud of is our decision to shift the fuel mix in the Chilean Grid (particularly in the North) through our investment in the Kelar gas-fired power plant which has become one of the key enablers for the significant increase in the production of renewable power in the country.
But sustainability does not end at the mine gate, if you look at the right hand chart you’ll see that if freight were a country it would be the sixth most polluting country in the world. That is why we started to use data analytics to reduce carbon emissions from the 1,500 freight voyages we charter each year.
We also boosted our support for the communities where we operate through local buying programs, and targeted social investments.
We will always look to improve. And if we are to follow other industries in to a more sustainable future, we must work together. This will become even more important as we are confronted by new challenges shaping the sector.
Increasing demand from consumers for ethically sourced products is one such area that presents both a major challenge and an opportunity for BHP, and the broader industry.
The general population is becoming more and more concerned about what goes in to every day goods and services, and the footprint they leave on this earth.
In mining, the focus has traditionally been on conflict minerals, reducing corruption and improving safety. Quite rightly these remain clear priorities.
But I believe we must also add to that list much greater scrutiny and transparency around the ‘green’ credentials and operating performance of our commodities – not least because that is what our customers and end users demand.
Already we are seeing this with copper, where the automotive and electronics sectors actively enquire about the sustainability of copper supply chains.
Consumers care and they speak with their wallets. Investors do the same and the rising influence of ESG investors ensures that our sectors’ performance and transparency must keep up with their demands. And although sustainability should not be driven by profits, higher price premiums for sustainable commodities could be the wake-up call we need as an industry and provide an incentive to invest more on sustainable solutions.
Sooner or later, the owner of an electric vehicle, will want to know exactly what is in their car, and be guaranteed that it meets certain environmental standards.
This is what the concept of ‘green copper’ is all about.
So the case for change is clear, but what does the response look like?
Before I outline my vision I want to acknowledge the work already being done.
Both the International Copper Association (ICA) and the LME have led initiatives to drive greater transparency and lift sustainable credentials across the copper value chain.
I applaud the lead they’ve taken, and we have already learnt a lot from these efforts.
A thorough solution will involve us all, but what I am calling for today is a new set of principles to guide the copper industry of the future.
Firstly, we need an increased level of transparency across our value chains.
Part of this is about being open in regard to what we measure and how we manage, but also making that information available to a more discerning public.
The benefits of higher transparency will be clear as consumers can easily identify sustainable copper, just as they do with a 5-star energy rating on a kitchen appliance.
But improved reporting alone will not be enough. New standards require independent oversight.
Several groups driving different agendas may create confusion and slow things down. We need one, independent body to develop a common framework for sustainable supply chain performance.
We can see from Apple’s experience that this works. Since they began pushing smelters to adhere to independent audits, the number of verified conflict-free smelters has more than doubled!
The final and most important principle is collaboration.
We have a great opportunity to further improve the sustainability credentials of our industry. Sustainability, which needs to be embedded across the entire value chain, end to end. The best way to do this is to learn from and trust each other.
Apple has been outstanding in sharing their standards with cobalt smelters. And Walmart has brought previously fragmented parts of the food industry together to be more transparent in food safety standards.
Our own moment is before us, and whether you are an explorer, a miner, or a fabricator, we will be better if we confront it collaboratively.
So today I invite all of you to come together and help drive us towards a future we can be proud of; a future where we have done our absolute best to reduce our environmental and material footprint. And a future where consumers will go out of their way to buy products built using sustainable copper.
So let me leave you with this.
The sustainability challenge is by far the biggest challenge of our generation. We must respond to this by lifting our game collectively.
Already we can see:
• Who picked our coffee beans;
• How long our mango sat in an energy-hungry refrigerator; and
• That our iPhones are 100% free from slave labour.
The copper industry already has ‘green’ credentials. But together, we can do more to put these under the spotlight and show a more discerning consumer that our products are both ethical and valuable.
And I believe if we act together, we will prosper together.
I look forward to working with you to seize the opportunity ahead of us.
 The Journal of The British Blockchain Association, Food Tracability on Blockchain: Walmart’s Pork and Mango Pilots with IBM, Reshma Kamath, Northwestern University (USA), 12 June 2018.
 Apple Supplier Responsibility 2018 progress report, p.21.