Promoting sustainability in our value chain
Our role as both a supplier and a customer means it is important we have a coordinated and integrated approach to sustainability across the value chain. We strive to work with our customers, suppliers and other stakeholders in the value chain to create social value through sustainable practices across the full life cycle of our products.
BHP takes a systems approach to value chain sustainability, 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 extraction, processing and use.
We 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
In June 2022, we launched our social value scorecard with 2030 goals, metrics and milestones. We believe it will enhance our opportunity to run our business in a way that delivers long-term, sustainable value to BHP, our shareholders and the broader community.
Elements of our 2030 goals, metrics and short-term milestones include a focus on value chain sustainability, such as responsible supply chains and decarbonisation. For more information refer to Our Sustainability Approach.
In FY2022, BHP developed a sustainability standards strategy that defines our pathway for the implementation of responsible mining and sourcing standards. The strategy is focused on the foundations needed to enable a more efficient adoption of standards to better position BHP’s participation in the sustainability standards landscape. We also established a global sustainability standards team to enhance our systems and processes, integrate planning and enable a more strategic approach to the governance and implementation of sustainability standards across BHP’s operated assets. This team also has accountability for sustainability reporting and disclosure, bringing together our work on sustainability standards and further strengthening our approach to transparency and standards across the value chain.
The standards that form part of our strategy are:
- the Copper Mark
- the London Metal Exchange (LME) Policy on Responsible Sourcing of LME-Listed Brands
- the ICMM Mining Principles and associated Performance Expectations
- the Global Industry Standard on Tailings Management
- Towards Sustainable Mining (TSM)
We recognise the importance of engaging in the sustainability standards ecosystem and we support simplification of the standards landscape and convergence of standards. Integrating multiple global and commodity-specific standards is a complex task and in FY2022 we engaged in a number of forums focused on sustainability standards – through the ICMM, the Minerals Council of Australia and the Mining Association of Canada, as well as with standard-setting bodies like the Copper Mark, and the OECD and LME.
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 prevent and minimise adverse safety, health, human rights, environmental and climate impacts throughout our value chain.
We manage our relationships through relevant contractual arrangements, applicable regulatory frameworks, Our Charter, Our Code of Conduct and the Our Requirements standard. 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 other than: traded commodities (such as raw materials), ocean freight and their associated supporting services (such as supply chain services), and commodity derivatives.
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 the 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.
Through our Ethical Supply Chain and Transparency program, we take a risk-based approach to identifying potential suppliers for more in-depth assessment of their compliance against our human rights requirements. The approach is based on a combination of questionnaires, due diligence and third-party data. 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 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 Statement, which is prepared under the UK and Australian Modern Slavery legislation.
In FY2022, we defined the scope and plan to align our due diligence management system, where relevant to our minerals and metals supply chain, with the Organisation for Economic Cooperation and Development’s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). Our commitment to align with the OECD Guidance and our corresponding expectation for minerals and metals suppliers is set out in our Responsible Minerals Policy.
The scope of OECD-aligned due diligence relates to BHP’s own operating assets and our suppliers of minerals and metals where such operating assets or inbound supply chain have any extraction, transportation or trade association with any conflict-affected and/or high-risk areas. The scope of our suppliers under this due diligence includes longer-term suppliers that supply minerals and/or metals either directly into our operating assets and physically form part of our products and/or for the purpose of third-party trading.
Our plan defines how we will adopt the five-step framework for risk-based due diligence in alignment with Annex I of the OECD Guidance. The Annex I five step framework involves:
- Establishing strong company management systems
- Identifying and assessing risk in our minerals and metals supply chain
- Designing and implementing a strategy to respond to identified risks
- Carrying out independent audits at identified points in the supply chain where applicable
- Reporting on minerals and metals supply chain due diligence
The risks BHP will consider in this due diligence will include, but are not limited to, the Annex II risks under the OECD Guidance. Annex II risks include any form of forced or compulsory labour, the worst forms of child labour and other gross human rights violations such as widespread sexual violence. We intend to finalise the OECD-aligned due diligence management system and commence implementation of the system within our minerals and metals supply chain in FY2023.
In determining conflict-affected and high-risk areas, BHP considers TDI Sustainability’s Conflict-Affected and High-Risk Areas (CAHRA) list, as a comprehensive list of CAHRAs.
Our initial red flag assessments of supply chain risks aligned with the OECD Guidance has been phased in two stages.
The first stage was conducted for FY2022 and included a red flag assessment for both BHP’s operated assets and our suppliers of mined minerals or metals as structural feed for those operated assets’ production where the input forms a physical part of BHP’s product, as assessed against TDI Sustainability’s CAHRA list. By ‘structural feed’, we are referring to a regular supply of the material as would apply under a long term contract or a consistent series of spot purchases from the supplier.
We determined through that first stage assessment that, in FY2022, none of BHP’s operated assets was located in a CAHRA and, with the exception of Nickel West in Australia, BHP did not have any structural feed requirement for third party mined minerals or metals for our operated assets’ production where the input formed a physical part of BHP’s products. In FY2022, the entirety of Nickel West’s third party structural feed was sourced from Australian origins with all transportation occurring domestically within Australia and so it had no conflict-affected or high-risk areas associated with its inbound supply chain. Accordingly, we did not identify any red flags for FY2022 under this first stage of assessment.
While it does not fall into the scope of structural feed, a single spot purchase of third party copper was made during FY2022 for supply into our Olympic Dam operated asset in Australia. The copper was sourced internationally before development of our OECD Guidance-aligned due diligence program had concluded and we are now undertaking OECD Guidance-aligned due diligence on the supply chain associated with that spot purchase.
The second stage of our red flag assessments, to be undertaken during FY2023, will extend beyond BHP’s operated assets’ production to all mined minerals or metals that we source for the purpose of selling directly into the market.
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. Our participation in such programs is aimed at ensuring the standards and thresholds are meaningful and drive a fundamental change in the industry.
Our Chilean operations Escondida and Spence, and Olympic Dam in Australia were awarded the Copper Mark during FY2022 to recognise their responsible production practices. The Copper Mark is a voluntary assurance framework that independently assesses participants in 32 critical areas, including environment, community, human rights and governance issues for mining, smelting and refining operations.
Escondida, Spence and Olympic Dam also completed independent third-party verification of self-assessments against the ICMM Mining Principles and associated Performance Expectations. The ICMM Mining Principles require member companies to conduct a prioritisation process to determine which assets will be subject to third-party validation across a three-year cycle.
All BHP’s operated assets have completed their self-assessments and the external validation sequence has been determined in consideration of commitments made by BHP to other standards, such as Copper Mark and the LME Policy on Responsible Sourcing of LME-Listed Brands, to enable operational efficiencies. For more information on ICMM Mining Principles Assurance and Validation requirements, refer to the ICMM website.
We disclose aspects of our sustainability performance through the LMEpassport, which is the LME’s digital credentials register to enable companies that trade LME-listed brands to disclose their sustainability metrics and certifications at corporate, asset and brand levels. BHP added information related to our copper and nickel LME-registered products from Olympic Dam, Escondida, Pampa Norte and Nickel West.
You can read more about our activities below and view our current accreditations.
To support continuous improvement in environmental performance, each of our operated assets is required to have an Environmental Management System 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 Environment.
- Copper Mark Assurance Statement Minera Escondida (Spanish)
- Copper Mark Assurance Statement Minera Escondida (English)
- Copper Mark Assurance Statement Minera Spence (Spanish)
- Copper Mark Assurance Statement Minera Spence (English)
- Copper Mark & ICMM Mining Principles Assurance Statement Olympic Dam (Spanish)
- Copper Mark & ICMM Mining Principles Assurance Statement Olympic Dam (English)
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 also continue to identify sustainability-related opportunities in BHP’s value chain.
We see traceability as a key enabler to lifting sustainability standards across the value chain. In FY2022, BHP and leading US copper cable and wire manufacturer, Southwire, completed their first ‘carbon neutral’1 copper transaction, involving delivery from BHP’s mines in Chile to Southwire’s processing activities in Georgia, United States. The pilot forms part of a collaboration for BHP that reflects our Climate Transition Action Plan commitment to support industry to develop technologies for improved traceability and the pursuit of carbon-neutral production.
Additionally, circular economy principles are an increasingly critical consideration for building sustainable supply chains in relation to our commodities that meet growing demand for our products, support goals to reduce GHG emissions and minimise the impact of mining and downstream processing on the environments and communities where we operate. Across the business, we are working to identify opportunities that leverage our capabilities to create solutions that can contribute towards a circular economy.
We recognise the importance of supporting the climate transition in our value chain. In 2020, BHP set Scope 3 emissions goals for 2030 to support decarbonisation for processing of our steelmaking products and maritime transportation of our products. In 2021, we added to these goals with a long-term goal and targets for Scope 3, supported by an action plan of working with industry, including our customers and suppliers, to achieve sectoral decarbonisation. Refer to ‘BHP’s climate change targets and goals’ for our goals and targets for Scope 3 emissions. As a producer of materials that are essential building blocks of decarbonisation, BHP is supporting the global transition to a more sustainable development trajectory by evolving the solutions we provide to our customers and the solutions we procure from our suppliers and partners.
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.
1 ‘Carbon neutral’ is not intended to imply certification under any standard or application of a particular methodology and includes all those greenhouse gas emissions as defined for BHP reporting purposes.