“The evidence is abundant: global warming is indisputable,” defiant words spoken by BHP chief executive Andrew Mackenzie in a powerful speech delivered by one of the most influential figures in the mining industry, Mackenzie announced a $US400 million ($571.1 million) climate investment program to tackle what he described as an “existential” crisis.
Over the next five years, the program will scale-up BHP’s low emissions technologies that decarbonise its operations, driving investment in nature-based solutions.
The landmark decision focuses on the establishment of a medium-term, science-based target for scope one and two emissions in line with the Paris Agreement. But most notably, the mining giant will turn its attention to scope three emissions.
Its significance shouldn’t be underestimated, according to Australian Centre for Corporate Responsibility chief executive officer Dan Gocher, who describes this as a “landmark moment.”
In the past, a focus for mining companies has been on scope one emissions, which are those burnt by companies themselves, and scope two emissions, which are those sourced from the grid.
Scope three emissions, however, are described by Mackenzie as being “generated as customers transport, transform and use our products to serve the needs of billions of people and they are almost 40 times higher than the emissions from our own operations.”
The new program will see BHP work closely with its shippers, processors and users of its products to reduce these emissions.
“Those who enjoy the benefits of our products should be able to do so with less and less impact,” Mackenzie says.
BHP’s CEO referenced last year’s International Panel on Climate Change’s (IPCC) report that revealed projected physical impacts and risks of global warming are much worse at two degrees than 1.5 degrees.
This led to BHP updating its climate portfolio analysis in 2020, as the company will evaluate the potential impacts of a broader range of scenarios and a transition to “well below two degrees.”
Mackenzie also revealed that BHP would strengthen the link between executive remuneration and emissions performance from 2021.
“For many years performance against emissions targets has been considered in BHP’s executive remuneration plans. From next financial year we will clarify and strengthen this link and further reinforce the strategic importance of action to reduce emissions,” he says.
While admitting there is “no one simple silver bullet” to solve the issue, Mackenzie says the risks involved with the crisis could be “existential”, requiring a holistic approach from the mining giant.
Gocher hopes BHP’s plan is the catalyst for widespread collaboration within the mining community, given recent responses by other major companies regarding the issue have fallen short of what is required.
“Rio Tinto said it was out of their hands earlier this year, they faced a shareholder resolution about scope three emissions, and they pushed back. Glencore falls somewhere in the middle, they’ve set a cap on production which has come from pressure from investors to accept responsibility,” Gocher tells Australian Mining.
“BHP is trying to be ahead of its peers, and they’ve bought some time and set a target, hopefully that leads to healthy competition in the industry now.”
Indeed, with growing angst among the wider community, Gocher says it is becoming increasingly hard to ignore the mounting expectations regarding climate change.
“Companies can’t ignore the protests and it’s not just from school kids, it’s also activists and the community,” he says.
“It’s a funny place Australia, our climate politics is a bit far behind and companies such as BHP spend a lot on marketing, they are aware of the risks of ignoring climate change.”
This is seemingly apparent among executives at BHP, with Mackenzie responding adamantly to the global outlook on climate change.
“As we have seen from activism and debates from schools to parliaments all around the world, we see this period as an escalation towards a crisis,” he says.
“However, the global response does not yet match the severity of the threat, in part because of the outright complexity of the problem. So, we must tailor our response to address this complexity and start with an acknowledgement that solutions will take on a range of forms.”
Mackenzie emphasises that a combination of solutions is necessary to tackle the climate crisis, given that sometimes the contribution of any one solution can be exaggerated.
Pointing to the aura surrounding electric vehicles, Mackenzie explains they are considered to be lower carbon than internal combustion engines, but the climate effect is redundant if power is generated from fossil fuels being released further up the production chain.
Consequently, “there is an opportunity cost for any decision we make,” making it necessary for an ‘all of the above approach.’
A consistent theme which Mackenzie highlights is that climate change is not a “sovereign issue,” rather, it requires a “coordinated global response.”
It represents a call to arms of sorts from BHP and while Gocher says the $US400 million is “a drop in the ocean” for a company this size, it could still spark a sentiment that permeates around the globe.
“I’d like to think the leadership and language shown by BHP will force its peers to step out of the shadows,” he says.
“A lot of companies are too shy to act on the issue; they don’t want to stick their necks out.”
These companies stand in contrast to BHP which is now adopting a diverse approach to the climate crisis, based on technology-neutral regulation and leadership that focuses on the trade-offs and full-cycle carbon footprints of its actions and purchases.
This extends right through the supply chain to include producers’ businesses and retail customers, which will be required to grasp the impact they are having, while working alongside governments to address climate issues.
“We cannot just back the horse with the best PR campaign,” Mackenzie says.
“Instead we require a considered and orderly transition to a lower carbon world in which resource companies, like BHP, have both critical expertise and a key role to play and hence are worthy of continued investment.”
While it certainly is a step in the right direction, the significance of BHP’s announcement will be amplified considerably if other major miners follow suit.
Source: Alex Gluyas / Australian Mining
2 September 2019