Industry associations - BHP’s approach

Industry associations play a number of roles in civil society. They provide a platform for the sharing of global best practice in the interests of the industry and those with whom the industry works. They develop technical standards and public policy positions. They provide a forum for debate between members of a particular sector in developing those policy positions. They do not, however, and nor should they, represent the views of any single member.

Some associations in which BHP participates are sector specific, such as the Minerals Council of Australia (MCA), which engages in advocacy activities related to the resources sector while also providing a forum to advance industry standards. Some are issue specific, such as the Center for Climate and Energy Solutions (C2ES), a US-based organisation that focuses on reducing greenhouse gas emissions and promoting clean energy. We also participate in global associations that seek to advance industry environmental, social and workplace standards, such as the International Council on Mining and Metals (ICMM).

Industry associations perform a number of functions that can lead to better outcomes on policy, practice and standards for the sector. By bringing together the combined technical expertise and experience of members in areas such as safety, health and environment, the ICMM, for example, adopts a leadership position on sustainable development in the resources sector. Similarly, the MCA makes an important contribution to Australian industry practice in areas including health and safety, water accounting, land use and workforce diversity.

We have long held the view that active participation in industry associations provides a leadership opportunity. We believe that by working within associations, we can, with other like-minded members, seek to exert a positive influence on the industry as a whole. This does not mean, however, that we will always agree with every position or approach that every industry association to which we belong adopts on every issue. This is particularly the case where the association’s membership is large and the mandate is broad, covering a wide range of issues.

The role of each member of an association is to articulate its view in a clear and constructive way, and to seek to influence the association through free and open debate. This is certainly how we see BHP’s role within the industry associations to which we belong - both in Australia and globally. It is not the role of any association to represent BHP and there are times when our views are not aligned. We keep under review our alignment with, and membership of, industry associations. We also communicate our own views directly, through submissions, media commentary, speeches, reports and other engagements.

Finding effective solutions to complex challenges requires a transparent exchange of diverse views. At BHP, we believe that transparency is pivotal to making more informed decisions. We remain committed to sharing our views.

BHP is a member of industry associations around the world. We believe associations perform a number of functions that can lead to better outcomes on policy, practice and standards.

The role played by industry associations in public policy debates, particularly in the context of global efforts to combat climate change, has been an area of active stakeholder interest in recent years.

BHP recognises the critical importance of responsible and constructive advocacy and has taken a number of steps to address this interest. We published our first industry association review in 2017, which sought to identify any ‘material differences’ between BHP and our association memberships on climate policy. We repeated this exercise in 2018 and 2019. For the latter, we broadened our methodology to capture additional organisations and to provide an assessment of the extent of overall alignment between BHP and our association memberships on climate policy .

We recognise that stakeholder expectations on the role and nature of industry associations have continued to evolve, particularly in terms of ensuring associations engage proactively and constructively in climate policy debates. Accordingly, following publication of our 2019 industry association review, we commenced a process to understand how we could:

Further enhance our overall approach to industry associations to ensure we maximise the value of our memberships; and
Take further steps to address investor expectations around climate-related advocacy by industry associations.

To help inform our thinking in this regard, we engaged on a number of occasions with a broad range of stakeholders from across the world, including investors and investor ESG organisations, civil society groups, other multi-national companies and industry associations. We used these consultations as a source of insight, and to test and shape key concepts.

Industry association reforms

Drawing on what we heard from stakeholders and our own review of corporate approaches towards industry associations, we have decided to take the following four new steps.

We are publishing our Global Climate Policy Standards. These are intended to provide greater clarity on how our policy positions on climate change should be reflected in our own advocacy and that of associations to which we belong, globally.
We will work with the minerals sector associations of which we are a member in Australia to ask them to develop and agree on a Protocol for the allocation of advocacy accountabilities at the national and state levels. The purpose of this would be to define the policy areas on which the associations advocate, having regard to their jurisdictional responsibilities. We believe the protocol should help improve resource allocation across the associations and within member companies, and ensure the sector has a consistent, transparent voice on important national issues such as climate change.
We will work with the key associations of which we are a member in Australia to ask them to each develop and publish an Annual Advocacy Plan. The associations would use the Plans to outline their policy priorities for the coming year and how they intend to advocate for these priorities, and then review progress against the Plans at the end of the year. We believe this disclosure will give stakeholders greater confidence on how the associations advocate, and help demonstrate how the associations deliver value for their members.
We are making a number of enhancements to our own disclosures on industry associations. Specifically, we will:
- Publish annually a list of our material association memberships that hold an active position on climate policy. For each of these associations, we will disclose our membership fees, whether we have a governance role (e.g. if we sit on the Board) and the nature of this role, and our rationale for being a member. Our disclosure for 2019 will soon be available on the BHP website.
- Disclose in ‘real time’ if we determine that one of our material association memberships has materially departed from our Global Climate Policy Standards.

Implementation

We will assist the key associations of which we are a member in Australia to implement the Protocol and Advocacy Plan models before the end of calendar 2020. The Global Climate Policy Standards will be effective immediately, and we will implement our ‘real time’ disclosure arrangements before the end of calendar 2020.

An internal team will monitor association advocacy in the context of the Global Climate Policy Standards. If it is determined that one of our material association memberships has materially departed from the Global Climate Policy Standards, we will disclose this on the BHP website. Our Principles for Participating in Industry Associations provide for a range of actions that BHP could take if we identify a material departure, up to and including exiting from an association. This range of actions is consistent with that set out in ‘European Investor Expectations on Corporate Lobbying on Climate Change’.

Given the greater transparency the above enhancements will provide, we intend to conduct our formal industry association review process on a three-year cycle.

Conclusion

We have long maintained that climate change is a global challenge that requires a collaborative market and policy response. We believe our reforms strengthen our ability to play our part in responding to climate change, while helping to maximise the benefits we receive from our membership of industry associations.

We thank all stakeholders that shared their perspectives during our recent consultation process.

BHP has committed to disclosing key information relating to its material industry association memberships. The disclosure of this information for 2019 can be found here.

BHP keeps under regular review its alignment with the climate and energy policy positions taken by industry associations on matters of significance to BHP. The sections below provide further information on our review processes.

2017 industry association review

In September 2017, BHP committed to publish (by 31 December 2017):

a list of the material differences between the positions BHP holds on climate and energy policy, and the advocacy positions on climate and energy policy taken by industry associations to which BHP belongs; and
the outcomes of BHP’s current review of its membership of those industry associations.

The report setting out how we met these commitments can be accessed via the link below:

BHP Industry Association Review (PDF 177 kb)

2017 industry association review: update

As part of the Industry association review, BHP committed to make determinations in relation to our membership of the US Chamber of Commerce and the World Coal Association by 31 March 2018. Information on these determinations can be found here.

2018 industry association review

Our 2017 review identified four material differences between BHP and the Chamber on climate and energy policy. These differences relate to the policy areas of: emissions reduction targets; the Paris Agreement; the goal of restricting global warming to 2°C; and putting a price on carbon.

In March 2018, we determined that, due to the broader benefits BHP receives from membership, we would remain a member of the Chamber, subject to a number of actions. One of these actions included keeping our membership of the Chamber under review. We also accepted the invitation of the Chamber to join its Energy and Environment Committee.

Our 2018 review concluded that the US Chamber has largely refrained from policy activity or advocacy in relation to the differences identified, consistent with Principle 3 of our Industry Association Principles. Our review also found that BHP continues to receive benefit from the broader activities of the Chamber.

On April 8, 2019, the Chamber published a new climate change statement. We believe the statement represents an enhancement to the Chamber’s approach to climate change and has the potential to make a constructive contribution to policy discussion.

Based on the findings of our 2018 review and the Chamber’s new climate change statement, we have decided to remain a member of the Chamber at this time, subject to a number of actions. These actions will include: monitoring the Chamber’s ongoing advocacy approach for alignment with its new statement; continuing to expect that the Chamber will refrain from policy activity or advocacy on issues where no broad industry consensus exists; and keeping our membership of the Chamber under review.

2019 industry association review

The report outlining the findings and outcomes of BHP’s 2019 industry association review can be accessed via the link below:

BHP 2019 Industry Association Review (PDF 241 kb)

An earlier update that BHP published on its 2019 industry association review processes can be found here.

An update on BHP's membership of the New South Wales Minerals Council can be found here.

An update on BHP's membership of the Mining Association of Canada, the United States Chamber of Commerce and the American Petroleum Institute can be found here.

A statement on the Queensland Resources Council can be found here.

(UK Corporate Governance Code, provision 4, six-month status report)

At the BHP Annual General Meetings (AGMs) held in London and Sydney on 17 October 2019 and 7 November 2019, respectively, resolution 22 (a shareholder-requisitioned resolution to suspend memberships of industry associations that are involved in lobbying inconsistent with the goals of the Paris Agreement) received the support of 27 per cent of votes cast.

Following the AGMs, BHP has undertaken a range of consultations with shareholders in relation to the subject matter of resolution 22. This included:

In December 2019 the then CEO, Andrew Mackenzie, met with a range of investors, all but one of which had voted in favour of resolution 22. Mr Mackenzie discussed BHP’s approach to industry associations and received direct feedback on the reasons why these investors had supported the resolution.
In January 2020, BHP provided investors in Sydney, Melbourne, London, Edinburgh and Amsterdam with detailed briefings on the findings and outcomes of the 2019 industry association review (which was released on 12 December 2019).
In March 2020, BHP commenced a global engagement and dialogue process with stakeholders (including investors in Australia and the United Kingdom) to explore how the Company could further enhance its overall approach to industry associations.

The key messages received from shareholders include:

Investors acknowledged, in a general sense, that industry associations can play an important role in building the capacity of member companies and advocating in public policy debates.
Investors re-emphasised the importance of alignment between companies and the industry associations of which they are members on key climate and energy policy positions. Some investors noted that if an association cannot reach consensus on an aspect of climate and energy policy it should remain silent. Other investors maintained that associations should be required to advocate proactively in favour of policies that would achieve the goals of the Paris Agreement.
Investors were supportive of efforts to provide greater transparency of industry association advocacy. BHP’s industry association review process was seen as useful in this regard.

BHP is continuing to engage with stakeholders on how the Company can enhance its overall approach to industry associations. An update on this consultation process will be provided in due course.

At the BHP Annual General Meetings (AGMs) held in Australia and the UK on 14 October 2020 and 15 October 2020, respectively, 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.

BHP engaged with investors in advance of the AGMs, and subsequently. The key messages received from shareholders include:

An emphasis that BHP constructively influence its trade associations to further enhance the global energy transition.
Ensuring that the health 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.
That an increased level of transparency around misalignment is not considered a sufficient basis alone for continued membership in an association that seeks policy changes inconsistent with the goals of the Paris Agreement – tangible action must be taken to drive consistency

BHP is confident that its existing processes, combined with the reforms outlined below, provide strengthened oversight over industry association advocacy, and will help ensure the Company’s commitment to responsible and constructive advocacy is shared by the associations of which it is 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 (e.g. we published 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), plus 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. A copy of the protocol can be found here.
Working with the key associations of which BHP is a member in Australia (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 either are now available on the websites of the respective associations (for example, see: APPEA, BCA, and MCA) 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; working with other members to update the APPEA’s climate change policy principles (which now call for Australia to achieve net zero emissions by 2050); and working with other members to enable the BCA to provide in-principle support for the Climate Change Bill 2020 currently before the Australian Parliament.