Natural resource giant BHP Group will link executive pay to reductions in the company’s greenhouse gas emissions, and will include downstream or “Scope 3” emissions in the calculation, in what the Institute for Energy Economics and Financial Analysis calls a “landmark commitment” that shows “leadership towards implementation of the Paris Agreement”.
The announcement was part of a five-year, $400-million climate-related investment program “to research and implement global warming actions,” IEEFA reports.
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Tim Buckley, IEEFA’s director of energy and finance studies for Australasia, points to the emphasis on harder-to-measure Scope 3 emissions, a category that takes in the climate impacts that occur when end customers actually burn the coal, oil, and gas a company like BHP extracts and sells. “BHP’s move to evaluate and disclose the entire value chain of products the company is involved in will provide significantly enhanced transparency and is a key step towards helping to implement a global climate solution aligned with the Paris Agreement,” Buckley writes.
“BHP is again proving to be a positive player, showing agility when the going gets tough: they did it 20 years ago exiting steel in Australia, they did it more recently exiting shale in the U.S. (albeit not before destroying $20 billion of shareholder wealth), and now the company appears to be limiting its losses in the thermal coal sector,” he adds. While BHP did not depart thermal coal as quickly as competitor Rio Tinto between 2014 and 2018, “its latest move highlights the tough decision-making required of big players and the declining legitimacy of thermal coal.”
The company’s Scope 3 emissions are as extensive as its fossil fuel operations, IEEFA notes. “In addition to gas (LNG), oil, and its coking coal mines that supply the steel sector, BHP’s remaining exposure includes thermal coal mining (used for power generation) from its 18 million tonne per annum (Mtpa) Mount Arthur mine in New South Wales, Australia and its 33% stake in the 30-Mtpa Cerrejón, Columbian mine.”
While CFO Peter Beaven announced in May 2018 that BHP has “no appetite for growth in energy coal regardless of asset attractiveness,” IEEFA says the latest announcement contained “little comment” along those lines.
