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Responsible sourcing, diversity and inclusion and climate change

Sundeep Singh, Group Procurement Officer - IMARC 2019 - Tuesday, 29 October

It’s great to be a part of one of Australia’s most important events for the Mining and Resources industry and at the heart of world mining here in Melbourne.

I would like to start by acknowledging the traditional owners and the custodians of the land on which we meet today, the Wurundjeri people of the Kulin Nation I pay my respects to their Elders past and present.

As I look around the room today, it gives me great pleasure to see familiar faces

A tremendous representation of the Australian and international mining and resources community.

Now with so many of our suppliers and partners in the room, it would be remiss of me to not start by thanking you thanking you for the critical work and the value you add to our business every single day.

Whether it is an emergency call out, a service that has not been contracted or innovating with us for a better future - we couldn’t deliver for our shareholders, our local communities, and employees; without the partnership of our suppliers.

I’ll be the first to acknowledge that in the past we haven’t always got it right with our suppliers and their experience has been varied.

But today we are in a good place.

Today, we are focussed much more on seeking to establish a supplier relationship model based on sustainable mutual commercial value built on long lasting partnerships that unlock value for all of our businesses. 

So this leads me to our topic of conversation today – how the resources industry – and BHP, in collaboration with our partners, can work to make better business decisions.

Business decisions that have the potential to positively impact those around us - decisions about inclusion and diversity,  decisions about responsible sourcing and  decisions sustainability.

BHP has a focus on these areas because they are good for business, good for BHP.

But here’s the thing. Done well, responsible sourcing, inclusion and diversity, and sustainability measures – also offer incredible value for others.

Shared value.  Social value.

Like two sides of the one coin.

The biggest opportunity in better decision making is the design and performance of your supply chain.  The supply chain, as the name suggests, is only as strong as its weakest link

As BHP’s group procurement officer, our supply chain spans 60 countries, 10,000 partners with an annual spend of US $20 billion across our capex and opex portfolio in FY19. We source 215,000 different types of material and equipment for our Australian operations alone. That’s a lot of decisions, a lot of investments  and a lot of scope to positively influence.

Working together to partner toward more productive and sustainable relationships we  create a competitive advantage and opportunities that will be hard to replicate.

So where are these opportunities in responsible sourcing, inclusion and diversity, and sustainability?

Let’s start with inclusion and diversity.

In 2016 BHP set ourselves an aspirational goal to be a gender balanced organisation by 2025.

At the time, the mining industry had 16% female representation.  BHP was slightly better at 17.6%.

A bold move that some understood, others didn’t.

Why did we do this?

It was good for business.  Our data shows that more inclusive and diverse teams outperform other teams on safety, productivity and culture.

  • Better on safety - with up to 67% lower injury rate.
  • Better on productivity – with up 11% better adherence to schedule; and 
  • Better on culture – with 28% lower unplanned absence and up to 21% more pride in their work.

Three years on since announcing our aspirational goal, women now represent 24.5% of our workforce.

So just under one in four employees are female – an improvement of 7% since announcing our goal.

But it’s not just our own BHP workforce that’s transforming to embrace inclusion and diversity.

We’ve partnered with the markets top labour hire providers such as WorkPac, Hays, Chandler Macleod and to share our commitment to a diversified workforce and amplify these efforts beyond the gates of BHP.

It is in our contracts to have and incentivise, greater diversity and this has resulted in a 15% increase in female candidate conversion rate over the past 12 months (16-31% of all personnel onboarded are female).We partner with organisations like MEGT, an Australian non-profit organisation that supports local employers, apprentices and trainees, who now make sure women represent 40% of suitable applicants.  Again it’s a commitment from both organisations and it’s been written into our contracts.

We’re working with other suppliers like ESS Compass, Blackwoods and Komatsu to make sure the machines we use, the clothes we wear, the food we eat and the camps we live in are more inclusive.

Another example is the work that we have done with Kal Tire, a tire management and fitment organisation that supplies to our Spence operation in Chile. This job requires physical strength, which has been historically restricted to larger men.

We worked with Kal Tire to implement a program that trained women to complete the task and also implemented a zero weight arm 

it saves people lifting a torqueing tool that can weigh around 20kgs by simply holding the tool in position when torqueing each bolt.

As you can see from the photo – trying to hold the tool above your head while torqueing each bolt onto these huge tyres can be strenuous for anyone –   myself included. The program eliminated the need for physical strength as a pre-requisite for the role, making it not only safer, faster but also more inclusive.  

So in summary - yes we still have a way to go to truly realise the increased performance benefits of gender balanced and inclusive teams. But we’re on the right track.

Turning to responsible sourcing, I think the ‘why’ on this topic is pretty well understood.

No-one wants to work with unethical suppliers. Having high risk partners is ultimately expensive for everyone and represents significant exposures. Human Rights violations are the furthest anyone could possibly be from shared value. 

Ethical sourcing means three things at BHP – it means policy, governance and collaboration.

To achieve this we have set up a Human Rights Centre of Excellence that work with us to apply BHP’s own UN Human Rights framework and our human rights policy statement to every transaction we make.

This is then backed by our Global Contract Management System (GCMS) – a system that ensures transparency and visibility of any risk. This system allows us to continually review, and deepen our assessment of our suppliers. Through the system, we know that 96% of our direct suppliers are concentrated in 10 countries.

According to Verisk Maplecroft’s Modern Slavery Index 2019, of these top ten supplier countries of origin, only two per cent are based in high risk countries.

We then work with a third party auditor to conduct reviews across a range of labour conditions, including wage and working hours, workplace health and safety issues, environmental conditions and the frameworks in place to manage these risks.

This level of transparency is making human rights a critical business consideration for anyone that wants to do business with us.

Greater collaboration is another.   

Let me give you an example of how this plays out.

Last month we partnered with Dyno Nobel to invest in a blast technology research program that will improve the safety, productivity and sustainability of our Australian operations.

As well as researching ways to lift safety through reduced nitrous oxide fumes that result from blasting and driving productivity from improved fragmentation via differential energy blasts, this partnership represents a joint commitment to eradicate the use of palm oil in the explosive manufacturing process.

And as you may know a recent and rapid increase in palm oil production, has resulted in an increase in deforestation - destroying habitats, displacing local communities and contributing to climate change. 

As a part of our agreement, Dyno Nobel will only use certified sustainable raw materials and products. If they use forestry-based products, including palm oil, they will give us information on the country and company of origin, and evidence that they are certified sustainable.

If palm oil is included, Dyno Nobel will include a timeline and plan for its replacement with an alternative product.

Sustainability is one of our core Charter Values and climate change is one of the most material business and social issues that we face today. Addressing it is not new for us – we have been measuring, reporting and setting targets to reduce greenhouse gas emissions since the 1990s.

We accept the science and recognise the importance of both limiting climate change and providing continued access to energy and materials.

We have a target to keep our operational emissions below FY17 levels to 2022. This is supported by a long term goal to achieve net zero operational emissions by 2050.

But as I mentioned before, we want to partner with people beyond the mine gate. The emissions our customers produce from using our products are significantly higher than those from our operations. So we are working with our suppliers and customers to reduce emissions from the transportation, processing and use of our products. Ambitious emissions targets will only be achieved by a supply chain that allows us to collaborate with partners like Adelaide-based Voltra who last year helped to develop the world’s first electric UTE, ahead of Tesla.

Whilst the world’s first electric UTE may not receive a warm welcome on the hill at Bathurst, it is a welcome addition to a growing fleet of LEV’s that will significantly reduce our category 1 emissions.

But it won’t be enough.

Let me share with you a number that is uncomfortable.

If shipping were a country it would be the sixth largest emitter of CO2 in the world, with more emissions than Germany or Canada.

Ocean freight is one area at the very end of our industry’s supply chain that hasn’t traditionally been a focus from a sustainability perspective is vital to our success as a reliable global supplier. 

BHP is one of the largest dry bulk charterers in the world. The Commercial Maritime team procure freight for a quarter of a billion tonnes of iron ore, coal and copper   and over 1,500 voyages each year. The combined distance these ships travel is the equivalent of 29 trips to the moon!

Our Maritime team are taking a lead role in driving changes in industry to increase the focus on safety, environmental sustainability, innovation and efficiency.

In 2017, BHP along with others collaborated with RightShip, the world’s leading maritime risk management organisation to introduce a C02 ratings system that moves charters towards ships with lower emissions.

In response we have seen ship owners improve engine performance and reduce drag

This resulted in a 12% decline in the C02 of the vessels we charter.

In July this year, we released the world’s first bulk carrier tender for LNG-fuelled transport for up to 27 million tonnes of iron ore.

Introducing LNG-fuelled ships into BHP’s maritime supply chain will eliminate NOx (nitrogen oxide) and SOx (sulphur oxide) emissions and significantly reduce CO2 emissions along the busiest bulk transport route globally.

A partnership approach. Shared responsibility equals shared value.

There is no better approach to success than the famous Henry Ford saying ‘If everyone is moving forward together, then success takes care of itself’.

I love the work we are doing with our suppliers. Work that demonstrates what’s possible when we partner, when we challenge and transform together. When we go after shared value.

The opportunities presented to us by a supply chain that connects us with a more inclusive, responsible and sustainable version of ourselves. Because it’s good for business, good for shareholders.

More partners not willing to exclude.

More partners not willing to ignore.

More partners not willing to accept

More partners committed to building a more ethical supply chain

An industry that is committed to value and partnerships that are good for business.

And that is what I am asking of you now.

To act. Join us. To partner with us.