Climate change is a material governance and strategic issue for us. Our Board is actively engaged in the governance of climate change issues, including our strategic approach and performance against our commitments, supported by the Sustainability Committee and the Risk and Audit Committee.
Below the level of the Board, key management decisions are made by the CEO and management, in accordance with their delegated authority. Management has primary responsibility for the design and implementation of our climate change strategy and execution of that strategy is overseen by the Climate Change Steering Committee.
Board skills and experience
Board members bring experience from a range of sectors, including resources, energy, finance, technology and the public sector. The Board also seeks the input of suitably skilled members of management and independent advisers. This equips them to consider potential implications of climate change on BHP and our operational capacity, as well as to understand the nature of the debate and the international policy response as it develops. In addition, there is an ongoing focus on understanding systemic risk and the potential impacts on our portfolio.
The Board has taken measures designed to ensure its decisions are informed by climate change science and expert advisers. The Board seeks the input from management (including Dr Fiona Wild, our Vice President Sustainability and Climate Change) and a range of independent advisers. In addition, our Forum on Corporate Responsibility (which includes Don Henry, former CEO of the Australian Conservation Foundation and Changhua Wu, former Greater China Director, the Climate Group) advises operational management teams and engages with the Sustainability Committee and the Board, as appropriate.
The Board strengthened the link between executive remuneration and delivery of our climate change strategy in 2020, with performance against operational emissions and value chain measures now representing 10 per cent of the Cash and Deferred Plan (CDP) scorecard.
The 10 per cent climate change component applied to remuneration paid in respect of FY2021 and includes these key measures:
- Reductions in Scope 1 and Scope 2 operational greenhouse gas (GHG) emissions.
- Short and medium-term actions to reduce operational GHG emissions on the pathway to net-zero emissions.
- Short and medium-term actions to address value chain (Scope 3) GHG emissions.
The Board uses a range of formal and informal communication channels to seek to understand and take into account the views of shareholders. Feedback and commentary related to climate change are increasingly a part of all of our routine investor engagements, including results roadshows with the CEO and CFO, and the Chair’s investor engagement meetings. A summary of this feedback is provided to the Board.
In FY2021, the CEO, CFO, senior management and the Investor Relations team held virtual meetings and roundtables with investors worldwide. Topics covered included corporate governance and ESG matters, steel decarbonisation technologies, strategy, finance and operating performance. We also engaged regularly with the Climate Action 100+ (CA 100+) on a range of decarbonisation and emissions related topics, and with the Transparency Pathway Initiative and FTSE Russell about their methodologies relating to the transition and approach to mined commodities.
Below the level of the Board, key management decisions are made by the CEO and Management, in accordance with their delegated authority. Our Executive Leadership Team (ELT) is held to account for a range of measures including climate-related performance, which are then cascaded through the organisation.
BHP has a dedicated Climate Change Team that is responsible for advising the ELT. The team collaborates with BHP’s functions and asset teams, external partners and industry to develop practical climate change solutions, designed to preserve and unlock long-term value for the Group. It regularly prepares information and advice for the ELT, Sustainability Committee, Risk and Audit Committee and the Board on climate-related strategy, risks (both threats and opportunities), and performance against climate-related metrics. It also monitors key risk indicators and signposts against our appetite for climate change-related risks.
Climate-related activity is also undertaken across the Group, including in our Portfolio Strategy and Development, Commercial, Planning and Technical and Environment teams. These activities are overseen by the Climate Change Steering Committee, which is made up of ELT representatives of our Operational and Commercial teams, plus Legal, Governance, Finance, Planning and Investor Relations functions.