BHP Group has said it will link a portion of bonus payments for Chief Executive Officer Mike Henry and key leaders to progress by the world’s top miner on lowering greenhouse gas emissions at both its own operations and those of its customers.
The organization is seeking to reassure investors it can curb its environmental impact. The most controversial area is Scope 3 emissions — mainly created when customers such as Chinese steel mills use the raw materials they mine. BHP has laid out goals to help its clients cut emissions intensity by 30 percent by 2030, but has stopped short of setting hard targets.
The company’s approach to Scope 3 emissions will attract the greatest scrutiny from investors and climate scientists. As with oil majors, supply-chain emissions typically account for more than 90 percent of BHP’s total, and the responsibility miners take for them is disputed. While the miner won plaudits for its targets to lower its own emissions, its plans for Scope 3 were less well received.
“On Scope 3 emissions, BHP has been generous with hope, but stingy with delivery,” said Julien Vincent, executive director of Australian environmental campaign group Market Forces. “These targets need to be set as a minimum standard, and backed with the sort of investment you’d expect from a company trying to preserve its customer base.”
BHP will also seek to help the maritime industry reduce emissions intensity by 40 percent by 2030, the Melbourne-based company said Thursday in a statement. However, it stopped short of setting hard targets.
Rivals such as Rio Tinto Group have argued that any targets on Scope 3 emissions would be impossible to meet because it has no control over how steel-makers use iron ore.
Some analysts argue that setting intensity goals is less valuable than more precise targets for absolute reductions in emission volumes. Major polluters, including miners and oil producers, are also facing more scrutiny over the immediate steps they are taking toward emissions reduction targets that are typically decades away.
Henry, promoted in January, and other executives will have 10 percent of short-term incentive payments tied to measures to curb emissions across BHP’s supply chain. That includes the use of its iron ore and coking coal in a steel-making sector that accounts for about 7 percent of all global emissions.
“We expect our actions to catalyze broader emissions reductions throughout the steel and maritime sectors,” Henry said according to notes of a speech to investors. “We are also making a direct connection between these measures and executive remuneration.”
BHP’s plan to cut its own operational emissions over the next decade is seen by the company as a way-marker on a longer-term path to have net-zero emissions at its sites by the middle of the century.
“Too few investors have made commitments on executive pay in this regard, and BHP’s announcement linking a portion of leaders’ compensation to progress in cutting greenhouse gas emissions is an important step for the company,” said Fiona Reynolds, CEO of Principles for Responsible Investment, in a statement.
The miner’s plans compare with rival Rio’s intention to cut absolute emissions at its operations by 15 percent by 2030 from 2018 levels. London-based Rio argues it has less scope than competitors to make additional large reductions, and is also opposed to setting targets for reducing carbon emissions generated by its customers. Oil and gas producer BP PLC is targeting a 20 percent cut in emissions from its operations by 2025.
BHP offered little new detail on its plans to help customers curb their emissions, though reiterated it would invest in the development of new technologies, including carbon capture and storage projects. The company also acknowledged it faces a complex task to decarbonize its vast truck fleet.
“BHP continues to rely on unproven and horribly expensive carbon capture and storage to decarbonize its Scope 3 emissions, rather than simply leaving fossil fuels in the ground,” the Australasian Centre for Corporate Responsibility said.
The producer, which last month confirmed plans to sell some coal mines, sees itself as well positioned to continue to generate profits in a world seeking to limit the impact of climate change to a temperature rise of 1.5 degrees Celsius above pre-industrial levels.
“The greater the global efforts to decarbonize, the stronger the impact on demand for copper, nickel and potash,” Chief Development Officer Johan van Jaarsveld said in the speech notes.
It will also increase the “need for more steel to build wind farms, pumped hydro and other decarbonization-enabling infrastructure,” he said.