12 December 2021
BHP produces resources the world needs to grow and transition to a net zero future, like copper, nickel and our steelmaking commodities, iron ore and metallurgical coal. And while what we produce is essential, never before has how we produce and manage our products through our supply chain been more important. Customers increasingly care about where products come from: their environmental and ethical footprints, as well as the efficiency and transparency of their supply chains. To that end, traceability becomes for us a key enabler to lifting sustainability standards across the value chain.
According to the UN, traceability is the ability to identify and trace the history, distribution, location and application of products, parts and materials. This is to ensure the reliability of sustainability claims, in the areas of human rights, labour, the environment and anti-corruption.
But how do you trace products through a supply chain as complex as BHP’s? How can you reliably collect, access and share data about your products that can prove its environmental and ethical credentials and make your supply chain more transparent? We believe part of the answer could lie in blockchain technology.
What is blockchain?
Blockchain is a technology that links digital records (or ‘blocks’) using cryptography to create an open, distributed, digital record, or ledger. That ledger records transactions between parties efficiently and in a verifiable and permanent way. It allows transactions and data to flow uninterrupted between all the various parties involved in a transaction, making them faster, more streamlined and much easier for everyone involved.
In business-to-business ecosystems, technology platforms can digitally integrate value chains based on a shared single source of truth. However, all parties need to be able to rely on the integrity of that shared information and verify its accuracy – and not just the information itself, but on who controls access and where it is stored. This is particularly true for commercially sensitive or regulated data. Blockchain can help solve these challenges. It assures integrity, verifies the record’s accuracy, gives control back to the data owner and, in some networks, gives control over data residence.
To that end, we think blockchain technology could help answer some of the big questions asked of us as products pass through our supply chain: What’s its environmental footprint? Was it ethically sourced? Am I getting what it’s worth? Here are five examples that helped us earn a spot on the Forbes’ coveted Blockchain 50 2021 list:
Question 1: ‘What’s its carbon footprint?’
Tracing the emissions from nickel used in battery electric vehicles
In a recent pilot, we traced nickel shipments from BHP’s Nickel West operations in Western Australia to Tesla's Gigafactory Shanghai. The program supported the end customer’s supply chain due diligence of product provenance and confirmed if any raw material ‘dilution’ occurred in the supply chain. This, and other similar initiatives, will contribute to greater transparency and help with aligning to regulations and supporting traceability and sustainability across the battery supply chain.
According to a third party analysis, our Nickel West asset has one of the world’s lowest operational carbon emissions intensities for nickel mining operations and plans to further reduce emissions, making BHP a partner of choice to battery electric vehicles manufacturers across the globe that value sustainability and transparency.
Tracing the emissions from copper used in electric cables and wires
Earlier this year, we partnered with leading US copper cable and wire manufacturer, Southwire, on a pilot to trace BHP copper cathodes and associated greenhouse gas emissions from our mines in Chile to Southwire’s processing operations in the United States. Through this collaboration, and using BHP’s carbon offsetting capabilities, we completed our first ever ‘carbon neutral’1 commodity transaction in October 2021.
‘As Southwire explores the potential of low-carbon wire and cable products, we are pleased to work with key leaders in our supply chain to reduce greenhouse gas emissions across our value chain. We look forward to continuing to generate a broader impact on carbon reduction by collaborating with like-minded companies such as BHP.’ - Burt Fealing, Executive Vice President, General Counsel and Chief Sustainability Officer, Southwire
Question 2: ‘Was it ethically sourced?’
Tracing the rubber used in truck tyres
At BHP, not only do we supply resources to customers, but we also procure goods from others. That includes more than 6,000 giant tyres per year, which weigh around 4.5 tonnes each, like those used to keep our haul trucks and heavy equipment moving.
However, tyres are made from natural rubber, known to have a high risk supply chain for modern slavery and illegal deforestation. It’s important to the sustainability and integrity of our business that we operate in a way that respects human rights and with a commitment to strong governance and anti-corruption.
Blockchain has the potential to mitigate these risks by tracing the rubber from its source through the supply chain, authenticating transactions between buyers and sellers along the way to ensure the rubber is deforestation- and modern slavery-free. To test our assumptions, we started internal trials to track tyres using blockchain a couple of years ago, and are now in talks to run trials with suppliers, focused initially on tracking products from manufacturing to fitment before expanding further down the supply chain.
As well as a more ethical supply chain, blockchain could improve tyre supply chain transparency to mitigate against supply issues; and support decarbonisation initiatives by tracking greenhouse gas emissions.
Question 3: ‘Am I getting what it’s worth?’
Tracing iron ore shipments
In 2020 alone, BHP commissioned more than 1,500 sea voyages to ship products and supplies around the world. However, the traditional way we transact with our customers and their banks for each commodity shipment remains paper-heavy and manual. In two separate trials, we’ve used blockchain to exchange data and documents digitally, improving efficiency and transparency and reducing bureaucracy, risk and red tape.
The trials have involved shipments of iron ore from the Pilbara region of Western Australia to our customer, China Baowu. Blockchain helped to enable a paperless exchange, which became incredibly helpful during the pandemic, when social distancing was in place and banks were closed. Blockchain was more efficient and gave the relevant parties real-time visibility of the shipment and traceability of the supply. The second trial with China Baowu, enabled foundations to report carbon emissions through the iron ore value chain, which we look forward to exploring more.
Tracing copper concentrate shipments
In a pilot with China Minmetals Nonferrous Metals Co. Ltd in the second half of 2021, we used Minehub’s blockchain technology to digitally orchestrate a variety of post-trade processes from a shipment of copper concentrates. Those processes included performance of contract terms, payment notifications, digital document exchange, chemical assay exchange and carbon emissions data sharing. The pilot digitised the assay exchange process (used to determine the quality of the concentrate) to improve efficiency and transparency in what is known to be one of the most complex and sensitive processes in international bulk commodity transactions. We’re planning another trial with an expanded scope in early 2022.
Through our trials, in partnership with our customers and suppliers, we’re already seeing the value blockchain can bring in enabling us to track and trace products through our supply chain – which is becoming increasingly important as all parties demand greater levels of environmental sustainability, responsibility and transparency. We’ll continue to engage with our customers and suppliers to bring traceability as an essential component of our offering.
We have also been exploring post-trade platforms that emerge in our customer markets, and are preparing for pilots to further our readiness for scaling, enabled by interoperability between multiple blockchain and non-blockchain solutions, as well as integrations with internal systems. The key to increased adoption is to advance as an ecosystem, with industry-wide consultation, participation and acceptance. To that end, BHP is actively engaging with other stakeholders, regulatory and industry bodies, and multiple technology solutions to realise whole-of-industry and supply-chain outcomes.
The true power of blockchain, over time and at scale, has yet to mature to its full potential. We’re excited about how we can use it to further strengthen BHP as a responsible partner and supplier of choice, bringing the essential materials the world needs to grow and transition to a low carbon economy – now and into the future.
1 ‘Carbon neutral’ is not intended to imply certification under any standard or application of a particular methodology and includes all those greenhouse gas emissions as defined for BHP reporting purposes.