Our supply chains have become increasingly globalised, complex and competitive. BHP makes payments to thousands of suppliers annually, including those in our local communities, and is one of the world’s largest bulk vessel charterers. At the same time, consumer demand for ‘green’ and ethical products, environmental regulations on business activities and investors’ sustainability expectations are growing.
Promoting sustainability in our value chain
As a leading global resources company, we strive to work with our customers, suppliers and other value chain participants to promote sustainable practices across the full life cycle of our products.
BHP takes a systems approach to value chain sustainability, which is designed to assess and work with others to improve the sustainability impacts of our upstream supply chains, inbound and outbound logistics, and our products as they move through the value chain from extraction, processing and use. We can broadly categorise value chain sustainability as follows:
- Responsible sourcing – integration of sustainability considerations into procurement and logistics in our inbound and outbound supply chains (including shipping)
- Process stewardship – meeting the responsible sourcing expectations of the market across our operated assets
- Product stewardship – influencing the sustainability performance of our downstream value chain where we do not have operational control
BHP seeks to identify and improve performance across a wide range of relevant issues, including people, environment and communities. In determining where to focus, we consider financial impact as well as environmental and social materiality. Priority areas (see below) have been identified and are aligned with BHP’s social value priorities.
We encourage the suppliers we work with to put sustainability at the heart of their business. The supply chain for our global operations includes skilled labour, miscellaneous services and supply of raw, direct and indirect materials. For procured goods and services, we engage our suppliers through a commercial framework that is aligned with Our Charter values and our ethical practices.
We are focused on how we can support suppliers and service providers to adopt sustainable business standards in health, safety, human rights, anti-corruption and environmental protection that are in line with our own. Contractors working at our operated assets are required to comply with our health, safety and environment (HSE) standards. We also look for opportunities to minimise adverse safety, health, human rights, environmental and climate impacts throughout our value chain.
We take a risk-based approach to identify potential suppliers for more in-depth assessment of their compliance against our requirements. The approach is based on a combination of questionnaires, due diligence and third-party data. We manage our relationships through relevant contractual arrangements, applicable regulatory frameworks, Our Charter, Our Code of Conduct and the Our Requirements standards. The Our Requirements for Supply standard provides the framework that our suppliers of non-traded goods and services must comply with to satisfy our HSE and business conduct minimum requirements. Non-traded goods and services are all goods and services that are not part of BHP’s finished product portfolio, such as raw materials and associated supporting services, such as export shipment.
We assess supply categories according to commercial dependency and supplier risk. If required, we engage with suppliers to develop a plan designed to ensure the supplier meets applicable Our Requirements standards throughout the relationship. We also support suppliers from communities where we operate to help them meet our standards, build their capabilities and generate local employment.
In FY2019, we developed the foundations of our Ethical Supply Chain and Transparency program and tested it through a pilot, with the full program launched to all applicable suppliers of non-traded goods and services to BHP in May 2020, applying the risk-based approach to assessing suppliers described above. This program is critical to the sustainable operation of our business, but also to our responsibility to work with our suppliers and contractors to manage risks associated with potential human rights abuses through our value chain. We are committed to working with our suppliers to enhance their understanding of our Ethical Supply Chain and Transparency processes, which includes taking steps to encourage them to improve management of human rights risks (including modern slavery) among subcontractors and across their own supply chain.
We continue to strengthen our processes and better understand the risks of modern slavery and human trafficking in our operations and supply chains, including assessing our direct suppliers against our Minimum requirements for suppliers, and using third-party audits for high-risk vendors where appropriate. We report our progress annually through our Modern Slavery Act Statement, which is prepared under the UK and Australian Modern Slavery legislation.
We support industry association programs and other initiatives that bring together participants in a product’s life cycle to improve sustainability performance. Our participation in such programs is aimed at ensuring the standards and thresholds are meaningful and drive a fundamental change in the industry. For example, we are members of the International Council on Mining and Metals (ICMM), apply the ICMM Mining Principles and participate in the ICMM Materials Stewardship Facility. In FY2020, we developed and implemented a plan to conform to the updated ICMM Mining Principles, which now include clearly articulated performance expectations and requirements for asset-level validation. We are members of Responsible Steel, and in FY2021, we signed our letters of commitment for Olympic Dam, Escondida and Spence to the Copper Mark assurance process. Copper Mark is a credible assurance framework that seeks to promote responsible practices and demonstrate the copper industry’s contribution to the United Nations Sustainable Development Goals. We are aiming to achieve Copper Mark accreditation by the end of CY2021.
Through our mandatory minimum performance requirements, including those that address capital projects, environment, climate change, water, tailings storage facilities and closure, we set standards that require that, in project design, operation and de-commissioning, we consider cost effective measures for the efficient use, recovery, reuse or recycling of energy, natural resources and materials.
BHP encourages the responsible design, use, reuse, recycling and disposal of our products throughout our value chain, in line with the ICMM Mining Principles.
For our marketed products, our Sales and Marketing team works to maintain compliance with all product regulatory requirements in relevant markets. This includes assessing the hazards of the products of mining according to United Nations Globally Harmonised System of Hazard Classification and Labelling or equivalent relevant regulatory systems and communicating through safety data sheets and labelling as appropriate.
Where possible, BHP works directly with those involved in the processing and use of our products to improve environmental performance throughout the value chain and to promote the sustainable use of our products. For example, we work with individual customers to design and test raw material blends that optimise environmental performance. We also collaborate on research with customers, industry bodies and academia to identify sustainable product and process improvements. We sought to improve materials traceability and transparency of products through piloting blockchain initiatives with industry consortia and in FY2021, we commenced traceability pilots in each of our Nickel and Copper value chains with downstream partners.
In July 2019, BHP committed to set public goals related to Scope 3 greenhouse (GHG) emissions. During FY2020, we investigated BHP’s opportunities to influence emissions reductions through an analysis of our value chain and consultation with suppliers, customers, investors and other stakeholders. As a result, we set Scope 3 GHG emissions goals for 2030. In September 2021, we announced our enhanced Scope 3 position that reflects the challenges and opportunities for our contribution.
Our interest in the value chain also extends to water use. BHP has potential exposure to water-related risks across the value chain and climate change may increase our future exposure. Customers and suppliers may be exposed to areas of ‘high’ to ‘extremely high’ water stress and we must understand these factors and respond to the challenges, working with our customers and suppliers.
Process stewardship and performance
At BHP, we are committed to a high level of sustainability performance at our operated assets, as well as seeking to influence the sustainability performance of our downstream customers and across the value chain. We support industry association programs and other initiatives that bring together participants in a product’s life cycle to improve sustainability performance.
You can read more about our activities below and view our current accreditations.
ICMM Mining Principles require member companies to conduct a prioritisation process to determine which assets will be subjected to third-party validation across a three-year cycle. Third-party validation of self-assessments completed at all of our operated assets involved in the production or refining of minerals or metals for sale or further processing will occur across FY2022–FY2024. BHP’s external validation sequence has been determined in consideration of commitments made by BHP under other standards, such as Copper Mark and London Metal Exchange Responsible Sourcing Requirements, to enable operational efficiencies. For more information on ICMM Mining Principles Assurance and Validation requirements, refer to the ICMM website.
To support continual improvement in environmental performance, each of our operated assets is required to have an Environmental Management System (EMS) that aligns with ISO14001 standards and set target environmental outcomes for land, biodiversity, air and water resources that are consistent with the assessed risks and potential impacts. Target environmental outcomes are required to be approved by the relevant Asset President or equivalent and included in the life of asset plan. Verification of the EMS is either via ISO14001 certification, for those sites that currently hold ISO14001 certification, or internal assurance processes. For more information, refer to our environment approach.