We recognise the importance of supporting efforts to reduce emissions in our value chain. In 2020, BHP set Scope 3 GHG emissions goals for 2030 for processing of our steelmaking products and maritime transportation of our products, supported by an action plan and aligned to a long-term vision to support the economy-wide transition necessary to meet the Paris Agreement goals by working with customers and suppliers to achieve sectoral decarbonisation.
In the BHP Climate Transition Action Plan 2021, we are building on these medium-term goals by announcing our enhanced Scope 3 position. See the ‘Value chain GHG emissions (Scope 3)’ section of BHP’s climate goals and targets for our Scope 3 goals for 2030 and enhanced Scope 3 position.
Action on our value chain (Scope 3) GHG emissions goals in FY2021
Our Scope 3 goal for 2030 is to support industry to develop technologies and pathways capable of 30 per cent emissions intensity reduction in integrated steelmaking, with widespread adoption expected post 2030.
In FY2021, BHP signed memoranda of understanding for partnerships with three of our customers, China Baowu, JFE and HBIS, to invest up to a total of US$65 million in research and development of steel decarbonisation pathways. We also established a research program with the University of Newcastle in Australia to study raw material properties in low-carbon iron and steelmaking. Additionally, BHP Ventures is strategically investing in a range of emerging companies, including some focused on low- or no-carbon steelmaking.
In FY2022, we intend to progress research and development and develop plans for operational testing and trials under the three steelmaking partnerships. We also plan to explore new steelmaking partnerships to jointly study low-carbon steelmaking technologies.
Our Scope 3 goal for 2030 is to support 40 per cent emissions intensity reduction of BHP-chartered shipping of our products.
In FY2021, BHP committed to becoming one of the founding members of the Global Centre for Maritime Decarbonisation. The Centre is to be set up in Singapore and act as a focal point for the global maritime industry’s efforts in decarbonisation and innovation. In April 2021, we participated in the first marine biofuel trial involving an ocean-going vessel bunkering in Singapore in collaboration with Oldendorff Carriers and GoodFuels, and supported by the Maritime and Port Authority of Singapore.
BHP also issued and awarded the world’s first LNG-fuelled Newcastlemax bulk carrier vessel tender in FY2021, with the aim of significantly reducing GHG emissions per voyage. In FY2022, we intend to begin to integrate the use of LNG-fuelled bulk carriers into our maritime operations and assess the suitability of a range of routes for LNG or bio-fuelled bulk carriers. We are also developing a sustainability analytics platform to analyse the operational energy efficiency and emissions of BHP-chartered vessels. This will enable more energy-efficient vessel selection, as well as more targeted emissions reduction insights and actions that can be pursued with our shipping partners.
Scope 3 GHG emissions performance
The most significant contributions to BHPs total reported Scope 3 emissions inventory come from the downstream processing of our products, in particular from the emissions generated by steelmaking through the processing of iron ore and metallurgical coal. Our analysis indicates that in FY2021, GHG emissions associated with the processing of our commodities (primarily iron ore and metallurgical coal to steel; together with copper concentrate and cathode to copper wire) were 306 million tonnes (Mt) of CO2-e. GHG emissions associated with the use of our energy products (energy coal, oil and gas)(1) were 76 MtCO2-e.
While we have worked to eliminate major ‘double-counting’ in our Scope 3 inventory of GHG emissions from iron ore and metallurgical coal used in steelmaking, a degree of overlap in reporting boundaries still occurs due to our involvement at multiple points in the life cycle of the commodities we produce and consume. Refer to footnotes (1) and (7) to the table below for more information.
We continue to consider ways to understand different metrics for measuring Scopes 1, 2 and 3 GHG emissions intensity and tracking their impact on long-term decarbonisation. To this end, in FY2021 we continued to engage with the CA 100+ and the Transition Pathway Initiative on their methodology for the diversified mining sector. We also progressed pilot traceability studies in copper and nickel that measure the value-chain GHG emissions of our products.
(1) In line with our reporting methodology for Scope 3 GHG emissions, we define our energy products as oil, gas and energy coal. We account for metallurgical coal within the processing of our products (within steelmaking GHG emissions).
(1) Scope 3 GHG emissions have been calculated using methodologies consistent with the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard). Scope 3 GHG emissions reporting necessarily requires a degree of overlap in reporting boundaries due to our involvement at multiple points in the life cycle of the commodities we produce and consume. More information on the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions data can be found in the BHP Scope 1, 2 and 3 GHG Emissions Calculation Methodology, available at bhp.com/climate.
(2) In FY2021, we have made improvements in how we calculate Scope 3 GHG emissions associated with the purchased goods and services category by assigning more accurate emission factors to some procurement categories and improving the accuracy of spend data. Previously reported GHG emissions for the ‘Purchased goods and services (including capital goods)’ category are 16.9 MtCO2-e in FY2020 and 17.3 MtCO2-e in FY2019. Previously reported GHG emissions for FY2019 are 0.1 MtCO2-e in the ‘Business travel’ category and <0.1 MtCO2-e for the ‘Employee commuting’ category. Emissions in FY2020 did not materially change as a result of the improved methodology.
(3) In FY2021, we have made improvements in how we calculate Scope 3 GHG emissions associated with the Fuel and Energy related activities by removing the Scope 3 GHG emissions associated with natural gas consumption at our Petroleum operations as the majority of those GHG emissions would be captured in our Scope 1 GHG emissions. Previously reported GHG emissions for the ‘Fuel and Energy related activities’ category are 1.3 MtCO2-e in FY2020 and also in FY2019.
(4) Includes product transport where freight costs are covered by BHP, for example under Cost and Freight (CFR) or similar terms, as well as purchased transport services for process inputs to our operations.
(5) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(6) For BHP, this category covers the Scope 1 and Scope 2 GHG emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP. In FY2021, GHG emissions estimates from non-operated assets were developed from data provided directly by operators. GHG emissions from our non-operated Kelar Power Station asset are reported as Scope 2 GHG emissions at the Minerals Americas operated assets supplied by the facility and therefore excluded from our Scope 3 GHG emissions totals. The previous FY2020 value of 3.9 MtCO2-e has been restated to remove GHG emissions from the Kelar Power Station and include updated Scope 3 GHG emissions estimates for non-operated assets for which data was previously unavailable from operators. FY2021 Scope 1 and Scope 2 emissions (on an equity basis) from Cerrejón are only accounted for H1FY2021 due to the effective economic date of 31 December 2020 for sale of BHP’s interest in Cerrejón. On 28 June 2021, BHP announced its agreement with Glencore to divest its 33.3 per cent interest in Cerrejón. Completion is subject to the satisfaction of customary competition and regulatory requirements and expected to occur in the first half of the 2022 calendar year.
(7) All iron ore production and metallurgical coal is assumed to be processed into steel and all copper metal production is assumed to be processed into copper wire for end use. Processing of nickel, zinc, gold, silver, ethane and uranium oxide is not currently included, as production volumes are much lower than iron ore and copper and a large range of possible end uses apply or downstream emissions are estimated to be immaterial. Processing/refining of petroleum products is also excluded as these emissions are considered immaterial compared to the end-use product combustion reported in the ‘Use of sold products’ category.
(8) In FY2021, we have addressed some key limitations associated with estimating Scope 3 GHG emissions. We have worked to eliminate double counting in our reported inventory in relation to GHG emissions from processing of iron ore and metallurgical coal in steelmaking, by allocating GHG emissions between the two and reporting a single total Scope 3 GHG emissions figure for emissions from steelmaking. Allocation of steelmaking GHG emissions to BHP’s metallurgical coal is based on the global average input mass ration of metallurgical vs iron ore to the blast furnace-basic oxygen furnace (BF-BOF) steelmaking route. This approach to improving accuracy is consistent with the Scope 3 Standard. We have also improved the accuracy of the GHG emission factor used to estimate Scope 3 GHG emissions by reflecting the blast furnace integrated steelmaking route into which the majority of BHP’s steelmaking raw materials portfolio is sold. The improved estimation also considers BHP iron ore product quality and its impact on the amount of ore required to produce steel. As our product evolves in its quality and flow through to other pathways (such as direct reduced iron electric arc furnace (DRI-EAF)), we will adjust the balance of intensity factors to reflect these changes. Previously reported numbers for iron ore processing are 205.6-322.6 MtCO2-e for FY2020 and 197.2-299.6 MtCO2-e for FY2019. Previously reported numbers for metallurgical coal are 33.7-108.2 MtCO2-e for FY2020 and 34.7-111.4 MtCO2-e for FY2019.
(9) All crude oil and condensates are conservatively assumed to be refined and combusted as diesel. Energy coal, natural gas and natural gas liquids are assumed to be combusted. FY2021 Scope 3 GHG emissions associated with energy coal products from Cerrejón are only accounted for H1FY2021 due to the effective economic date of 31 December 2020 for sale of BHP’s interest in Cerrejón. On 28 June 2021, BHP announced its agreement with Glencore to divest its 33.3 per cent interest in Cerrejón. Completion is subject to the satisfaction of customary competition and regulatory requirements and expected to occur in the first half of the 2022 calendar year.
(10) We reported a total Scope 3 figure for the GHG emissions Scope 3 inventory this year as major double counting of GHG emissions from the processing of iron ore and metallurgical coal in steelmaking was removed, however a degree of overlap in reporting boundaries still occurs due to our involvement at multiple points in the life cycle of the commodities we produce and consume.
Championing sustainability in the maritime supply chain
The maritime industry accounts for 2 to 3 per cent of global greenhouse gas (GHG) emissions. Our goal for 2030 is to support a 40 per cent emissions intensity reduction of BHP-chartered shipping of our products.