Demand for commodities is insatiable as emerging economies continue to develop and the challenge is to ensure “the world’s need for metals and other resources is met in the most sustainable way possible,” said BHP’s CEO Mike Henry at Conexus Financial’s recent Fiduciary Investors Symposium.
The ambition under the Paris Agreement to limit global warming to 1.5°C is a metals-intensive effort and increased supply will have to come from mines that are lower grade, smaller and in tougher jurisdictions explained Henry. “We’re at a point in time where industry, capital markets and other actors need to lock arms to figure out how we can go about accelerating the efforts to improve ESG standards and governance.”
“And in doing so ensure that the world’s need for resources is met in an efficient way, and a way that minimizes the downside impacts,” he said.
Lowering emissions
On its part, BHP has been making strides to lower its Scope 1 and 2 emissions. Henry cited the example of the miner exiting coal-fired power generation for its copper production in Chile at a time where there was no external pressure to do so. “Recognising power makes up approximately 40 per cent of the scope 1 and scope 2 emissions that we have in in BHP, we elected to go early,” he said.
The company initially used gas-fired power for its Chilean operations and is expected to rely fully on renewable energy in the next two years, a move that will reduce its overall Scope 1 and 2 emissions by around 15 per cent.
As one of the world’s largest dry bulk charterers, BHP is using its significant purchasing power to work with ship owners to develop LNG-powered bulk carriers, which emit about 30 per cent less greenhouse gas than existing bunker fuel.
However, Henry recognised the challenge in lowering Scope 3 emissions across its value chain as “we don’t have the ability to drive that investment decision.” The lack of global standards on how to measure and report on Scope 3 emissions as well as the absence of technologies in certain supply chains to eliminate this category of emissions also add to the difficulty.
BHP is also collaborating with other firms to develop technologies to remove diesel from its operating sites such as using electrified overhead tram systems.
China relationship
A strong relationship between Australia and its largest trading partner China is in the interests of both nations and it is vital the relationship gets back on to a more constructive footing said Henry.
“It has been in both nations’ interests for that trade relationship to be strong. That will remain the case going forward because China will continue to grow,” he said.
“We would not enjoy the living standard that we enjoy today, if not for the economic kind of miracle or growth that’s occurred in China over the past few decades,” he said. And China’s growth would have been more difficult without Australia providing a steady supply of resources. Australian exports to China hit $180 billion in 2021, mainly in commodities such as iron ore, gas and coal.
However, while government-to-government relations have been tense, business-to-business relationships and to some extent business-to-government ties have “never been better” he said.
The Australian economy is in the midst of a structural change as demand for traditional exports such as coal, oil and gas softens amid the de-carbonisation of the global economy. “So at a time when Australia needs to be developing alternative industries to take up the slack that will be created over the long term, I think it’s pretty important that we have access and [a] constructive relationship with the biggest market,” said Henry.
