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At BHP, we recognise the importance of taking action to support efforts to reduce emissions across our full value chain, as the emissions from our customers’ use of our products are significantly higher than those from our operated assets. By definition, Scope 3 emissions occur outside of our operated assets and are emissions over which we do not have operational control. We therefore seek opportunities to partner with others across our value chain to enable the reduction of these emissions. The most significant contributions to Scope 3 emissions come from the processing and use of our products, in particular from the use of our iron ore and metallurgical coal in steelmaking.

We have set Scope 3 GHG emissions goals for 2030 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
  • support 40 per cent emissions intensity reduction of BHP-chartered shipping of our products.

In support of the medium-term goal for the steel industry, we will continue our engagement and technical collaboration with customers in the steel sector to drive the most efficient utilisation of BHP’s products, while working with our operated assets to deliver the right product qualities to our customers. We will also partner with leading steel mills and other stakeholders to accelerate the development and commercialisation of technologies that support greater efficiency and emissions reductions in the integrated steelmaking route. We will also work to improve our understanding of alternative steelmaking technologies and how BHP’s current and future products can support the adoption of such technologies.

In the maritime sector, BHP is one of the world’s largest dry bulk charterers. We therefore have the opportunity to influence action in a global industry where emissions are difficult to abate. We expect to achieve our Scope 3 goal through chartering choices, alternative fuel requirements, and technology to optimise voyages. As an initial action, in July 2019 we issued a world-first tender for lower-emissions, LNG-fuelled bulk carrier vessels for iron ore transportation. This is expected to lead to lower emissions of up to 34 per cent on a per voyage basis when compared to conventional vessels.

Value chain emissions – performance summary

The most significant contributions to Scope 3 emissions come from the processing and use of our products, in particular from the use of our iron ore and metallurgical coal in steelmaking. Our analysis indicates that in FY2020, emissions associated with the processing of our non-fossil fuel commodities (iron ore to steel; copper concentrate and cathode to copper wire) were 210.8-327.8 Mt of CO2e. Emissions associated with the use of our fossil fuel commodities (metallurgical and energy coal, oil and gas) were 130.5-205.0 Mt of CO2e. Refer to Value chain emissions – methodology below in this section for an explanation of why there is 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. A significant example of a boundary overlap is between iron ore and metallurgical coal that results in a portion of metallurgical coal emissions being double counted across these two categories in the higher end estimate number. This means that the emissions reported under each category should not be added up, as to do so would give an inflated total figure. For this reason we do not report a total Scope 3 emissions figure.

This year we have also included a lower-end estimate of the Scope 3 emissions from the combustion of metallurgical coal that avoids the double counting of the emissions arising from iron and steel production. We have included the lower-end number in the estimate of our Scope 3 emissions, in part to reflect the different ways of calculating Scope 3 emissions, particularly when there is an overlap. The inclusion of two numbers also reflects the different uses for reported Scope 3 emissions. The first, larger number is suitable as a proxy for an assessment of carbon risk to the portfolio. The lower number, calculated to avoid double counting, provides a more useful input into an assessment of the total Scope 3 emissions associated with our value chains.

Scope 3 emissions graph

Value chain emissions – methodology

We calculate Scope 3 emissions using methodologies consistent with the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard). This identifies five generally accepted principles: relevance, completeness, consistency, transparency, and accuracy.

In practice, calculating Scope 3 emissions sometimes requires trade-offs between principles. Our current calculation approach focuses primarily on achieving completeness. This has required the use of less accurate data for some emissions categories. For example, where primary data is unavailable, we use ‘industry average’ emission factors, or ‘proxy’ input data or assumptions. This means that the data is not necessarily representative of the specific activities taking place within our value chain, nor reflective of the quality of our products.

The current approach also means there is a degree of overlap in reporting boundaries for Scope 3 emissions, particularly in relation to emissions from the processing of our iron ore to steel, reported under the ‘Processing of sold products’ emissions category. Steel production also consumes metallurgical coal as an input, a portion of which is produced by us. For reporting purposes, we account separately for Scope 3 emissions from the use of our metallurgical coal with all other fossil fuels under the ‘Use of sold products’ category. This means that a portion of metallurgical coal emissions is double counted across two categories in the higher end estimate number.

This is an expected outcome of emissions reporting between the different scopes defined under standard GHG accounting practices, and is not considered to detract from the overall value of our Scope 3 emissions disclosure. This double counting means that the emissions reported under each category should not be added up. To do so would give an inflated total figure. For this reason we do not report a total Scope 3 emissions figure.

We are currently developing an enhanced approach to calculating, communicating and tracking Scope 3 emissions in our value chain that addresses the limitations described above, and better serves our decision-making needs and those of our stakeholders. Particularly in iron and steel, we will work to incorporate more detailed emissions factors for our largest customers in that sector, defined by process routes and geography.

In order to track our impact on long-term decarbonisation, we intend to measure the total emissions intensity (Scope 1, 2 and 3) for use of BHP’s products. As there is no standard metric for total emissions intensity, in FY2021 we will work with leading groups to develop an appropriate methodology.

Further details of the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions data can be found in the associated BHP Scope 1, 2 and 3 Emissions Calculation Methodology.

(1) Scope 3 emissions have been calculated using methodologies consistent with the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Scope 3 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. A significant example of this is that Scope 3 emissions reported under the ‘Processing of sold products’ category include the processing of our iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by us. For reporting purposes, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil fuels under the ‘Use of sold products’ category, such that a portion of metallurgical coal emissions is accounted for under two categories. This is an expected outcome of emissions reporting between the different scopes defined under standard GHG accounting practices and is not considered to detract from the overall value of our Scope 3 emissions disclosure. This double counting means that the emissions reported under each category should not be added up, as to do so would give an inflated total figure. For this reason we do not report a total Scope 3 emissions figure. Further details of the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions data can be found in the associated BHP Scope 1, 2 and 3 Emissions Calculation Methodology.

(2) 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.
(3) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(4) Includes Business Travel, Employee commuting, Fuel and energy related activities and Investments categories. Investment category for BHP, covers the Scope 1 and Scope 2 emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP.
(5) All iron ore production 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. 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.
(6) Scope 3 emissions reported under the ‘Processing of sold products’ category include the processing of our iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by us. For the higher-end estimate, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil fuels under the ‘Use of sold products’ category, such that a portion of metallurgical coal emissions is accounted for under two categories. The low-end estimate apportions the emission factor for steel between iron ore and metallurgical coal inputs. The low-end estimate for iron ore only accounts for BHP's Scope 3 emissions from iron ore and does not account for BHP's or third party coal used in the steelmaking process. Scope 3 emissions from BHP's coal are captured in the 'Use of sold products' category under metallurgical coal.
(7) 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.


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