BHP Demonstrates Future ESG Leadership in the Mining Industry

This is part of a full story called BHP’s Labor Disputes Are Likely To Hit Bottom Lines Hard in Areas & Producers

BHP CEO Mike Henry shared insights about the company’s Environment, Social, Governance (ESG) strategy at the 2021 Fidelity Sustainable World Summit. He was asked about the impact on the communities and stakeholders and how their managing the trade-offs between production and maintaining their ESG standards.

Not only was ESG a driving topic for all industries at the end of 2019, but BHP’s rival Rio Tinto was slammed by the global public for its mining blunder in Papua New Guinea in 2020, as well as ongoing disputes over financing issues in Mongolia’s Oyu Tolgoi copper mine in 2021.

This is a sign of the times for the global economy as miners like BHP group must produce metals while taking a more sustainable and environmental focus on their operations globally.

There are basically three main commodities in this future facing commodities space: copper, nickel and potash. The former two are both metals directly related to metal mining and stainless steel production, while the latter is primarily used as a source of fertilizer.

“We’ve needed to demonstrate ESG leadership over time. Not only do we need to be aware of what the needs of today are; we need to be able to look into the future and gauge how societal expectations are likely to change.”

The newest CEO of BHP couldn’t have arrived at a more critical time for the world’s largest metal miner. Mike Henry was officially transitioned into CEO of BHP Group in November 2019 when it was announced that he would succeed then-CEO Andrew Mackenzie.

Mike Henry assumed the role of CEO on Janurary 1, 2020, as the former CEO of BHP told the public on his way out the door,

“Fresh leadership will deliver an acceleration…that will come from BHP’s next wave of transformation. Choosing the right time to retire has not been an easy decision, however the Company is in a good position. I am confident Mike and BHP will seize the many opportunities that lie ahead.”

Little did anyone know what really lied ahead for the company: the global outbreak of COVID-19.

But before the global pandemic it was becoming well known to the public that Mr. Henry was “fully committed” to BHP’s climate change action plan and sustainability strategy. This was indicated by merger talks with Australia’s Woodside Petroleum for BHP’s oil and gas assets in the Gulf of Mexico and Western Australia. Not only is this about lowering the company’s GHG emissions and carbon footprint, as the name of the game since the Financial Times Mining Summit on October 8, 2021, has been about the company’s push to explore and produce future-facing commodities.

No wonder CEO Mike Henry has treaded carefully when discussing the nature of the company’s expansion into future facing commodities — copper, nickel and potash. The concept is still new to most people in the global economy and public sectors.

It has already become synonomous in global business news with “tougher jurisdictions” that are associated with geopolitics and the global economy. Nevertheless, Mr. Henry told the FT Mining Summit in 2021 that BHP Group wants half of its revenues to come from the production and exports of these future facing commodities by 2030.

This implies that that the company will have to venture out to new areas containing the copper, nickel and potash production capabilities desired for such results.

“We will be led by what’s happening in the world around us. For the world to de-carbonize it’s going to need a lot more metals, so something like two-times as much copper in the next thirty years…four-times as much nickel…two-times as much steel, and I think that’s an underappreciated fact.”

It’s already known that the company has valuable production assets in Chile and Ecuador. So what’s uncertain at this point is how the company plans to expand into other places, for instance the Democratic Republic of Congo (DRC), where some of the world’s largest copper mines are available. To this point, geopolitical trends are likely to have an impact on BHP Group’s strategy to produce more copper, nickel and potash.

BHP Group intends to produce more metals while adhering to ESG practices and GHG emissions reductions. That’s why the company believes producing future facing commodities is not only a more profitable venture but also a sustainable option going forward.

In an interview with CNBC’s David Faber on March 4, 2021, CEO Mike Henry elaborated on the company’s climate investment program established in 2019, which he claimed gave the company “the lowest emissions intensity footprint of any of the major mining companies…in terms of Scope 1 and Scope 2 emissions…with a $400 million climate investment program” to reach Net Zero by 2050.

What all three of these future facing commodities have in common are their connections to the Energy Transition, with a growing demand for Clean Energy Technologies and Electric Vehicles (EV). Nickel is a critical battery material; Copper conducts the electricity for a wide-range of nascent products; and Potash is one of the main fertilizers that can be mined and produced throughout areas of the world and that do not need to be combined with natural gas.

In BHP’s 2022 economic and commodity outlook report it was stated clearly that: “Longer–term, we see potash as a future–facing commodity with attractive fundamentals. Demand for potash stands to benefit from the intersection of a number of global megatrends: rising population,changing diets and the need for the sustainable intensification of agriculture.”

This reveals the essence of BHP’s push to lead in the future facing commodities space.

Potash production forms a vital source of fertilizer for food production and agriculture products all over the world, which is also a completely new segment for the world’s largest metal miner to undertake. With the global mega-trends listed above, it’s not hard to tell that BHP Group’s strategy to search for future facing commodities is a redefining concept about industry and environment — hence, the focal point of the company’s sustainablity strategy.

Read the full story in Areas & Producers: Mining News — BHP’s Labor Disputes Are Likely To Hit Bottom Lines Hard.