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BHP stresses importance of ‘social value’ in strategic decision-making

While many miners look to emphasise the way they obtain and retain their social licence to operate during exploration, development and operations, BHP said this week that “social value” plays an important role in its decision-making.

At a briefing in London on October 8, BHP Chief External Affairs Officer, Geoff Healy, said: “We are moving from a position of maintaining ‘a social licence’ to creating ‘social value’.

“For us, it is – plain and simple – good business. We are part of a society that expects more of us. We recognise that our success depends on our ability to earn their trust and confidence. And we know that this means changing the way we do business at all levels, from local to global.”

Healy said that when the company makes business decisions, both financial value and social value considerations come into play – “each depends on the other for the decision to be effective”, he added.

During the briefing, Healy said the company makes a relatively small number of large, long-term capital investments that are structurally immobile – “we can’t just close up the factory and relocate when the going gets tough”. This means when BHP invests in a region, it becomes part of the local community for decades, with the miner, sometimes, creating those communities.

“Our portfolio is simple – yet the inherent risks are complex and wide-ranging,” he said, explaining that circa- 80% of the company’s EBITDA is concentrated in Western Australia, Queensland and the northern Atacama region of Chile; 55% of its revenue is derived from China; and over 80% of its products emit CO2 in its customers’ value chain.

“An imbalance in our community relations in a few locations has the potential to fundamentally impact our business: from a reset of fiscal terms, to the refusal of necessary permits and approvals,” he said.

“A disorderly transition to decarbonisation has the potential to threaten the viability of entire commodities in our product suite. And a social and environmental disaster, such as another significant tailings dam failure, has the potential to be existential.”

On the flipside, he said BHP knows that if it manages well its transition – “from ‘social licence to value’” – it will create a “core competitive advantage that will be hard to replicate”.

“Retreating, or seeking a quick, short-term fix, will not work. Getting it right will be differentiating, and value creating,” he said.

In this context, Healy reviewed the results of some of the investments and initiatives the company has undertaken, which has seen the number of high potential injuries reduced by more than 40% in the last three years, the number of women hired since 2015 trebled and over $1.7 billion invested in social programs in the last decade.

Healy said: “All of these commitments stand for nothing unless we hold ourselves to account and are transparent.

“We have made public our emissions targets, our water stewardship efforts, and the taxes and royalties we pay.”

Coming back to the move from ‘a social licence’ to creating ‘social value’, Healy said this transition protects BHP’s business today and positions the company to take advantage of future opportunities.

He said: “To obtain access to the best resources, we must be the partner-of-choice for governments.

“To secure the best talent, we must be committed to making a positive societal impact.

“And, to secure the best partners, we must be trusted by our community partners.”

‘Access’ is the key word here, Healy said, with there being two sides to that word: “One, protecting and maintaining the access we currently have. And, two, securing access to new resources, new talent, and new partnerships to take full advantage of future opportunities.”

In addition to the company’s targets to reduce greenhouse gas emissions, with the recent $400 million investment in technologies to reduce emissions from both BHP’s own operations, as well as those generated in its value chain being the obvious example, BHP is also looking to play its part in ensuring tailings management standards are lifted across all of industry and transforming the way it is managing water and power at Escondida.

The latter includes moving to 100% desalinated water over the medium term and transitioning to 100% renewable power with BHP in the late stages of securing a long-term contract for renewable power supply that could “deliver significant cost savings relative to our current gas-fired supply”, Healy said.

He concluded: “We know that when we consider social impacts in our decision-making; and when we build respectful and mutually beneficial relationships, we create sustainable value for all of our stakeholders; and in particular for our investors.

“We are determined to assess and communicate our progress regularly and transparently.

“And we expect to be judged on the results we produce and the value we create, for you as investors, as well as our broader stakeholders.”