Ladies and gentlemen, my name is Ken MacKenzie and I'm your Chair. Thank you for joining us toda y on Remembrance Day, and I'd like to welcome you to this annual general meeting. It is unfortunate that we cannot be together in Perth as originally intended for today's meeting, but I am glad we are able to hold this meeting virtually. Today, I'm in Melbourne at our global headquarters, joined by Chief Executive Officer, Mike Henry, and Group Company Secretary, Stefanie Wilkinson. We are joined remotely by our directors based in both Australia and around the world. We also have our external auditors from Ernst & Young and Chief Financial Officer, David Lamont, in attendance. Now, let me first thank Ian Hunter, Wurundjeri Elder, for his warm welcome to country.
I'd like to acknowledge and pay my respects to the Wurundjeri people who are the traditional owners of this land from which I am speaking to you. I'd also like to pay my respect to the elders, both past and present, of the Kulin nation, and extend that respect to other First Nations peoples who are joining us today. I can confirm that there is a quorum present and as the time is shortly after 4 P.M. in Melbourne, we can now start the meeting. The notice for this annual general meeting was sent out and made available to shareholders on the 14th of September 2021. The notice itself is set out on page five of that document and provides the full text of each resolution, noting which is proposed as an ordinary or special resolution.
I'd now like to ask our Group Company Secretary, Stefanie Wilkinson, to outline the procedures for this virtual AGM. Stefanie.
Thank you, Ken, and hello, everyone. My name is Stefanie Wilkinson, and I am the Group Company Secretary of BHP Group Limited. Today's meeting is being held virtually via the Lumi platform. I will now run through the procedural aspects of today's meeting. We have published on our website a guide to using Lumi. If you experience any technical issues, please refer to the Lumi help guide available on our meetings page of our website. In the unlikely event that we do experience any major technical issues, we will provide you with updates through our website and the exchanges. Voting on all items today will occur by a poll. On a poll, each shareholder attending online or present by proxy or corporate representative has one vote for every share held. If you are eligible to vote, a polling icon or a voting tab will appear on your screen.
Selecting this icon will bring up the resolutions and voting options. To cast your vote, simply select For, Against, or Abstain for each resolution. Your selection is automatically recorded. There is no submit or enter button. You are able to change your vote up until the time that the Chair declares voting is closed. The Chair will shortly be opening the poll and you can then vote at any time. You do not need to wait for the resolution to be discussed before casting your vote. All of today's items of business will be treated as joint electorate actions with BHP Group Plc shareholders in accordance with the company's constitution. All votes cast today will be added to the votes that were cast by BHP Group Plc shareholders at their meeting on the 14th of October, 2021.
The total sum of votes will represent the final voting result for each item of business for both meetings. Results of the voting will be announced to the stock exchanges in London, Australia, New York, and Johannesburg shortly after the conclusion of today's meeting, and will also be published on the company's website. Tim Hughan from Computershare has been appointed Returning Officer for the meeting and will scrutinize the vote. Turning to the items of business in the notice of meeting. Items 1-20 in the notice are endorsed by your board, and the board recommends that you vote in favor of them. Items 21-23 have been requisitioned by two groups of shareholders in BHP Group Limited. Item 21 is a special resolution seeking to amend the constitution of BHP Group Limited.
Item 21 is not endorsed by your board, and the board recommends that you vote against item 21. Items 22 and 23 are advisory resolutions and will only be valid if item 21 passes. Item 22, in the board's view, is substantially aligned with BHP's existing approach. Accordingly, the board recommends that you vote in favor of item 22 as a non-binding advisory resolution for the reasons set out in the explanatory notes in the notice of meeting. However, item 23 is not endorsed by your board, and the board recommends that you vote against item 23. In order to ask a written question, please select the messaging icon in the Lumi platform and type your question in the text box. Please state in the text box which item of business your question relates to. To submit your question, click the arrow symbol.
If you wish to ask a verbal question, you must first pause the webcast, then select the link under Ask an audio question. This will open a new window in your web browser. Enter your name and your topic or question, then select Submit Request. You will need to allow access to your microphone by selecting Accept in the pop-up window. You will then be placed in a queue. You will be able to hear the meeting audio as you wait to ask your question. When it's time for you to ask your question, you will be introduced by the moderator. You will hear a single beep indicating that your microphone has been unmuted and you may ask your question. Once you have asked your question, you can either hang up or rejoin the queue to ask another question.
If you hang up and wish to watch the remainder of the meeting, simply navigate back to the Lumi Webcast screen. You will need to press the play button on the broadcast bar to continue watching. I encourage you to submit written questions or comments now to assist us in getting through as many questions as possible. Questions should relate to the items of business under consideration at today's meeting. We will deal with each question at the relevant item of business. We will ensure that there is a reasonable opportunity for shareholders as a whole to ask questions or make comments at this meeting. However, we may not be able to answer every question or address every comment received. Please refer to the help guides on our website if you are having any difficulty in connecting to the platform or have any other question. Back to you, Ken.
Thank you, Stefanie. The poll is now open for all the items to be considered at today's meeting. I will also give you a warning before the end of the meeting to ensure that you are able to cast your votes. Now turning to my presentation. This year has been exceptionally challenging. The COVID-19 pandemic has continued to spread across the globe and has tested all of us. I've always felt honored to serve as your chair, however, never before have I been more proud of the performance of our company and people than in the past year. During this period of global disruption, we have continued to produce the commodity the world requires, kept our world-class assets running safely and efficiently, and played a substantial role in global economic development.
Importantly, we've been able to continue to make a valuable contribution to the communities where we operate, partnering with local businesses and communities, supporting local jobs, and continuing to pay taxes and royalties to governments, an economic contribution of approximately $41 billion for the year. Please note all my references in this presentation are in US dollars, which is our reporting currency. Throughout this time, we have been grateful for the support of all of our partners, our customers, our suppliers, and our communities. We're also grateful for the support from you, our shareholders. I've always enjoyed the opportunity presented by the AGM to thank you in person for your ongoing support. As Australia opens up, I look forward to the time when we can all meet again in person. BHP performed very strongly in financial year 2021.
Earnings were up 69% to $37.4 billion. We generated record free cash flow of $19.4 billion, up 140%. Net debt finished down 66% for the year at $4.1 billion, and return on capital employed strengthened to 32.5%. On the back of these strong results, a record total dividend of $3.01 was paid per share for FY 2021, bringing BHP's returns to shareholders to more than $15 billion for the full year and more than $38 billion over the past three years. Our performance is underpinned by our purpose, to bring people and resources together to build a better world.
Our five priorities, safety, portfolio, capital discipline, capability and culture, and social value, are the foundations that enable us to deliver now and into the future. The safety and well-being of our people remains our top priority, and it is pleasing that we've had over two and a half years without a fatality at our operated assets and key indicators continue to improve. However, we know that our commitment to health and safety requires more work. Sexual harassment is a critical health and safety issue for BHP and for our industry, and we remain committed to ensuring that all our people can go to work feeling safe and respected. Moving to another of our priorities, portfolio. At BHP, we're always looking to the future. As our world continues to evolve, we must be ready to position the organization to capture future opportunities and unlock value for our shareholders.
Given the strength of our position, we believe now is the right time to make a number of strategic, transformative changes. The first of these is our intention to unify BHP's corporate structure under BHP Group Limited. The current dual listing structure was established to help facilitate the BHP and Billiton merger in 2001. Although it served us well, its suitability for our organization has diminished over time. Unification will offer a number of benefits due to the simplification of the company's structure. These include moving from two parent companies to one parent company with one share register and one share price globally. If unification is implemented, BHP Group Plc shareholders will have their shares exchanged for BHP Group Limited shares on a one-for-one basis. There will be no change for BHP Group Limited shareholders. BHP's board, management, strategy, and dividend policy will remain the same.
The unification proposal is subject to a number of approvals, including shareholder meetings and votes in the first quarter of 2022, and I look forward to discussing the proposal with you at that time. Now, in addition to unification, we have also announced a number of strategic steps towards transforming our portfolio for the future. As the world moves towards decarbonization, we will continue to assess our portfolio to help meet the global demands of the energy transition and determine the right mix of attractive commodities and assets to create shareholder value. Now it's against these dimensions of value and decarbonization that we have made two important announcements. First, is our investment in the Jansen Stage one potash project in Canada, which provides significant exposure to this future-facing commodity with strong demand and potential growth.
Second, is the proposed merger of our petroleum business with Woodside, which we believe will unlock value for BHP shareholders as the combined business will be better positioned to navigate the energy transition. We are confident these changes, alongside our commitments to climate leadership and our financial and value-based decision-making, will ensure we are well-positioned to be at the center of global demand for key commodities into the future. Now moving to climate change. Now this year, we have made strong progress towards meeting our commitments, including initiatives focused on reducing our operational and value chain emissions. We have, at an estimated cost of $2 billion-$4 billion, established a substantial pipeline of decarbonization projects and plans aimed at achieving our emissions reduction target of at least 30% by financial year 2030.
As part of our $400 million climate investment program, we have also committed a further $75 million to partnerships focused on steel decarbonization with four of our major customers who represent more than 10% of global steel production. As you know, we've asked our shareholders to vote on our new climate transition action plan. BHP is the first company in the Australian market to provide this opportunity to shareholders. We believe it is important that all our shareholders have an opportunity to engage with us on our climate strategy and actions, and this advisory vote has provided an important forum for discussion and feedback on the plan. Now we look forward to continuing to hear your views on this important topic. Now today, I have spoken about our climate change position. However, it represents only one aspect of our social value agenda.
We are committed to making a positive contribution to society, to our people, partners, economy, environment, and local communities. Now today, there is one other key area of social value I'd like to particularly highlight, our continued work with traditional owners and other indigenous representative organizations to further strengthen our cultural heritage management practices. The long-term nature of our business gives BHP the opportunity to establish lasting relationships with indigenous peoples. We understand that indigenous peoples have a deep connection to their natural environments, and that these are tied to their physical, spiritual, cultural, and economic wellbeing. BHP recognizes and respects the significant contribution that indigenous peoples make to national and international economic prosperity.
As one of many examples across the world, the journey of iron ore from Banjima or Nyiyaparli country in Western Australia is a story in which an essential element of global growth is enabled by two proud and culturally strong traditional owner communities. We recognize our responsibility to respect and sustain the cultural landscapes in which we operate and work in partnership to ensure we respect the rights of indigenous peoples who are its custodians. This year in Australia, we've worked closely with the First Nations Heritage Protection Alliance to jointly develop a set of principles to guide BHP's approach to indigenous cultural heritage in Australia. I sincerely wish to thank those who have given their support and guidance on this important work.
Now before I hand across to Mike Henry, I'd like to acknowledge our directors, Anita Frew and Susan Kilsby, who will retire at the conclusion of this meeting. I'd like to sincerely thank Anita and Susan for their considerable contribution to the board and to the shareholders of BHP. During the year, we continued our focus on board renewal and welcomed Xiaoqun Clever and Christine O'Reilly to the board in October 2020. I'm also pleased that Michelle Hinchliffe will join us as a director in March. Michelle brings significant expertise in financial risk management and strong global experience, and we look forward to welcoming her early next year. We will continue to focus on our board renewal process, and we'll seek to appoint another female independent non-executive director in this financial year. In conclusion, there is no doubt we continue to live in an uncertain and challenging world.
Despite this complexity, the good news is BHP is in a strong and resilient position. We have a clear strategy to deliver long-term value by repositioning our portfolio towards future-facing commodities. We have strength in our balance sheet, our people, and performance culture. We have announced an important step towards redefining our corporate structure for the opportunities that lie ahead. In short, we believe the future is clear. It has been a significant year for BHP, one that will transform the company and unlock long-term value for our shareholders. I wish to thank you for your ongoing support. It's now my pleasure to invite Mike Henry to speak with you.
Thanks, Ken. It's a pleasure to join you today. In current times, we've all needed to get used to connecting virtually, but I have to say that I am really looking forward to when we can return to getting together in person. Following on from Ken, I'd like to talk a little bit more about the underlying business, our recent operational and financial performance, how we're shaping the company to create value and returns through meeting the world's resources needs. Our approach to our operations and engagement with those around us in a way that maximizes long-term shareholder value and generates value for others who depend on and support BHP. Thanks to the resilience and commitment of BHP employees and contractors and the support from our partners and communities, we delivered a strong set of outcomes in the last financial year.
Most importantly, we improved overall underlying safety performance, and it's now been more than 2.5 years without a fatality in BHP operations. Safety remains priority number 1. As Ken noted, our strong operational performance, coupled with the tailwind of high commodity prices, saw us deliver record free cash flow, an even stronger balance sheet, and of course, a record final dividend to shareholders. In addition to seeking to maximize returns for every dollar invested through running the base business very well, with a strong focus on operational and cost discipline, we are also seeking to grow value through ensuring that we have the right portfolio and are able to capitalize on the opportunity to meet the world's growing needs for certain resources.
Guided by our capital allocation framework, last year, we invested $2.3 billion in maintenance, in line with our intent to ensure reliable operations. We also invested more than $5 billion in development, growth, and exploration across our business. Our focus on operational excellence shone through in production and throughput records at Western Australia in iron ore and Escondida, our highest ever copper production at Olympic Dam since BHP acquired it 16 years ago, and delivery of four major projects on budget and on or ahead of time. This focus is unlocking further significant value for shareholders and is supporting our ability to continue to grow value for those others who benefit from BHP's presence. In the year past, we paid $2.1 billion to local suppliers in the communities where we operate.
We announced significant funding towards global response and recovery efforts from the COVID-19 pandemic last year. More than $50 million was invested in community programs in areas where we operate in Australia, North America, South America, and Asia to support greater access to local health services and relief programs. The BHP Foundation is now working with 40 partner organizations across 49 countries to advance solutions to some of the world's most pressing sustainable development challenges. This includes working with Transparency International to identify corruption risks in mining, licensing, and permitting processes, partnering with UN Women to provide second chance education for marginalized women and girls to reenter formal learning environments, and supporting Indigenous Australians in landscape-scale conservation programs through the 10 Deserts Project, covering a vast area of the Australian continent.
Now, in addition to the economic and social benefit our presence brings to so many others, we are also very focused on ensuring that the assets we run and our supply chains are operating sustainably. This includes a strong focus on showing leadership when it comes to reducing the greenhouse gas emissions that accompany the production and processing of our products. We recently released our Climate Transition Action Plan, which reflects our resolve in this regard. Shareholders are being asked to vote on this today through the Say on Climate resolution. Within this plan, we outline our continuing commitment to net zero operational emissions by no later than 2050, and our midterm target of at least 30% emissions reduction by 2030 on 2020 levels.
We've been taking action on this front for over two decades now, and our signing of multiple renewable energy contracts recently will help accelerate this reduction in the near term. Of course, it's not just about operational emissions or Scope 1 and Scope 2 emissions. We also must focus on the emissions generated by others in the value chain through the transport and processing of our products and the provision of goods and services to BHP. These are our Scope 3 emissions. While we can't determine the outcomes on that front alone, we are working with our customers and suppliers to stimulate and support their efforts to reduce emissions. This is in keeping with our long-term goal to pursue net zero Scope 3 greenhouse gas emissions by 2050 for our reshaped portfolio.
In the past year, we have entered into research and development partnerships with companies covering 12% of the world's steel production to assist steelmaking decarbonization efforts. We undertook the world's first LNG-fueled bulk carrier tender, which will lower emissions of shipping of our iron ore and have subsequently set a target of net zero emissions from the maritime transport of our products by 2050. We are also targeting net zero for our direct suppliers emissions from the provision of goods and services to BHP also by 2050. We continue to deliver strong operational and financial performance and ever more sustainable outcomes. Our company is in great shape, and this is shining through in the numbers.
Building upon this solid base, as we look to the future, we will seek to grow value through positioning the BHP portfolio to benefit from the big trends unfolding in the world around us. These include population growth, rising living standards, electrification, and decarbonization. We want to grow in those commodities that stand to benefit greatest from these trends. Against that backdrop, we took the decision to proceed with the Jansen Potash project in Canada, which will contribute to more sustainable farming. We announced the intent to merge our petroleum business with Woodside, creating a large, more resilient company, better able to navigate the energy transition and grow value while doing so.
Earlier this week, we announced the sale of our interest in the BMC coal assets in Queensland as we reshape our portfolio to focus on higher quality metallurgical coal to increase efficiency and lower emissions in steel making. We intend to continue to grow our already strong positions in nickel and copper. In copper, we have some solid growth ahead over the next five years, thanks to the recently commissioned Spence growth project, improving grades at Escondida, and more reliable production out of Olympic Dam. We've increased our exploration effort and have work underway in Ecuador, Peru, Chile, Mexico, the U.S., and Australia. We are currently looking at targeted investment in early-stage development options, as we did with SolGold in Ecuador and the Elliott Copper Project in Australia. In nickel, we have established agreements with Midland Exploration in Canada and made an offer to acquire Noront Resources.
This combination of exploration, targeted early-stage investments, and unlocking significant organic growth in our existing operated assets sets us up to deliver more of our products to meet the world's needs. Now, everything I've spoken about, safety, strong operational and financial performance, growth only happens with great people and culture, and this is something that I am really passionate about. We need to continue to build capability, and we have a number of efforts underway to do so. We're strengthening our organizational capability as a competitive advantage. We're recruiting new talent, as well as developing even greater technical and operational capability through our centers of excellence. We're investing in building skills through the BHP FutureFit Academy, where we trained more than 500 apprentices and trainees in the past year, with a commitment to 2,500 over five years.
We're enabling our people and improving the way we work through the BHP Operating System, which makes continuous improvement part of what we do in our business every day. Our plans to unify the BHP corporate structure and provide a single share register will make us simpler and more agile, which is in line with our broader drive for a high-performance, inclusive workforce and culture. We're not yet fully where we want to be, and perhaps there will always be more to do, but we're making some strong progress. Female participation at BHP has increased by more than two-thirds since we set out our aspirational gender goal in 2016, and we are a better-performing company for it. We remain wholeheartedly committed to the important effort underway towards gender balance.
Indigenous representation in our Australian workforce has risen to 7.2% and 7.5% in Chile. We remain focused on partnering with Indigenous and First Nations peoples in all the regions in which we work. Our proximity to indigenous communities makes them critical partners whose rights, connection to land, and cultural heritage we respect. Understanding these rights and working with indigenous peoples is integral to our exploration and mine planning processes. At our Jansen Stage one project, our goal is for First Nations employees to make up 20% of the workforce, and we have opportunity agreements in place with six First Nations communities around the site. These are both firsts in the potash industry. We remain frustrated that we continue to experience instances of sexual harassment and assault in our camps and operations.
This conduct is completely unacceptable, and we are absolutely committed to eliminating it from BHP. This year, we introduced a policy to limit alcohol consumption at our Australian camps, and we launched a dedicated support service providing assistance to anyone in our workforce impacted by sexual assault or harassment. We focused initiatives on education and on-site security, with a further AUD 300 million committed for security improvements in 2022. We also continue to take an approach to ensuring consequences for those that behave badly. That's designed to send a clear message that there is simply no place for this conduct in our workplaces.
We are determined to create and maintain an environment at BHP where we attract and retain the best talent, and where we empower our people to make the daily decisions that make us safer, more productive, and more capable of meeting the needs of our customers, communities, and nations. The future of BHP is clear. We are shaping our company to meet the world's needs, and we are shaping our teams to get the very best out of our assets. We're doing so because it drives results and fosters high performance. It enables us to get the most out of ourselves and out of the commodities we produce. Importantly, we're doing it because it adds value to the world, to the communities we work in, and of course, to our shareholders.
The plans we've announced and the strategy underpinning them will allow us to continue to create even greater value now and into the future. It's an exciting time for the company. I want to thank everyone, our stakeholders, and especially our shareholders, for your ongoing support for our company. Back to you, Ken.
Great. Thank you, Mike. We will now be opening the floor for questions. We'll do our best to get to as many of your questions and comments as possible. Lisa Fairley, our Vice President of Communications, is here today to assist in moderating the flow of questions. Welcome to you, Lisa. Stephanie outlined the voting and question procedure. To ensure that shareholders as a whole have a reasonable opportunity to be heard at today's meetings, we ask that you limit your questions to two or your comments to no more than a minute or two. Items one to six are routine business for the company's annual general meeting, including receipt of the financial statements, the appointment and remuneration of the auditor, and share capital authorizations. I'll now take questions and comments on items one to six.
Now, if your question relates to executive remuneration, director reelections, the climate transition action plan or climate more broadly, or a shareholder requisition resolution, you'll have the opportunity to ask your question when we come to those items. I'll now move to the first question on items 1-6. Thanks, Lisa.
Thank you, Chair. Our first written question is from Mr. Steven David Main regarding unification of BHP's DLC structure.
Mr. Main has asked, "Well done for finally committing to unifying, but why did it take this long? Don Argus was the chair of two companies which created merger-driven DLCs around 20 years ago, Brambles and BHP. Brambles unscrambled their DLC in 2011, yet we waited another decade. Why?
Great. Well, thanks for the question, Mr. Main. Look, we've confirmed at many of our AGMs that we keep our DLC structure under review. The DLC, as you rightly noted, was implemented in 2001. It was done to facilitate the merger of BHP and Billiton. It served its purpose back in 2001, but it was a result of that event in history. As a company, we prefer simplicity. Having two parent companies listed in two locations is complex. Mike and I have been talking about the benefits of simplification for many years. Like everything we do at BHP, we need to have a business case for change. To answer your question, up until now, the business case for unwinding the DLC wasn't compelling enough.
However, a number of things have changed over recent years. First, importantly, the costs of unwinding the DLC have come down considerably by about $1.2 billion since 2017. The earnings generated from our PLC entity have also decreased. Back when the DLC was first put in place, about 40% of the earnings were generated through the UK PLC entity. Due to changes over time in our portfolio, this is down to about 5% today. This means that a number of the key barriers to unification have been removed. There are important benefits of unification. For example, a simpler and more efficient corporate structure that will reduce duplication. It'll streamline our governance and internal processes. A unified structure will improve our flexibility and agility to reshape our portfolio and maximize value for shareholders over the long term.
It will position the company for the future operating environment. In terms of the fundamentals of the BHP business and the investment proposition, we do not expect much to change for Limited shareholders. The BHP board, management, assets will not change as a result of unification, nor will the dividend policy. This wasn't part of your question, but for the benefit of shareholders, in terms of the process from here, we're still working through the regulatory process. The board will then meet to resolve on a final approval, after which there will be a shareholder vote for PLC and Limited shareholders, and we expect that to take place in the first quarter of calendar year 2022. Thanks, Lisa.
Thank you, Chair. We have several questions here from Mr. Duncan Seddon on behalf of the Australian Shareholders' Association.
Mr. Seddon's first question relates to thermal coal. He asks, "You have 12 months left on your timeline to sell the Mount Arthur Coal coal mine in New South Wales, with as yet no apparent clear buyer. In the meantime, coal price futures have halved, in large part due to the actions by the PRC to prevent speculation and increase domestic production. You have already written down the value to negative $300 million prior to this revaluation. What is the newly estimated impairment, and are you now considering shutting the mine? If so, what is the financial impact?
Okay, thank you for that question, Mr. Seddon. Look, I think there are some specific questions around Mount Arthur Coal in your question. Maybe just to step back and think about it a little bit more broadly first. To help guide our strategic decision-making, we use a range of long-term scenarios or views. We developed four climate-related scenarios across a range of temperature outcomes, including a Paris-aligned 1.5-degree scenario at one end of the spectrum, as well as a +3-degree scenario at the other, and a couple of scenarios in between. What our scenario analysis indicated is that BHP would do best in a transition to a world aligned with the 1.5-degree scenario. In other words, the more the world decarbonizes, the better positioned and the more valuable BHP would become.
That's because a number of our commodities are expected to do well: copper, nickel, potash, iron ore. There are some commodities that, in that analysis, fare less well, like thermal coal. Using this scenario analysis as a guide, we announced last year that we were exiting thermal coal, and this included both the Cerrejón asset in Colombia and Mount Arthur Coal here in New South Wales. Those assets represent about 1% of EBITDA. We're just over one year into a two year process for the divestment or the exit of those assets. While the current price environment is helpful, to your point, this hasn't changed our long-term fundamentals-based view on the attractiveness of the thermal coal commodity.
We remain open to all options with regard to Mount Arthur Coal, and any adjustments to valuations will follow our usual process. At the moment, there is nothing to change the previously announced valuation.
Thank you, Chair.
Mr. Duncan Seddon from the ASA's next question relates to trade with China. He asks, "China has made it quite clear that it will continue to take action to reduce trade with Australia whenever it has alternatives. What is the potential exposure for BHP in iron ore, coking coal, nickel, and copper sales, respectively? What provisions have you taken in the accounts for this?
Okay, thanks, Mr. Seddon. Demand for iron ore has remained strong. We see the demand remaining that way for the long term. Our business-to-business relationships, quite frankly, have never been stronger with our customers in China. Strong outlook for iron ore. In terms of copper and nickel, China is roughly half of the global market for those commodities. A limited amount of our Australian copper is currently sold into China. The vast majority of our copper is produced in Chile, and China is the largest market for our Chilean copper concentrates. It's therefore not impacted. Global battery production is at the moment concentrated in China. China is therefore our largest market for Nickel West.
As you have seen in our recent announcements with Southwire USA on carbon-neutral copper, and our Nickel West deals with both Tesla and Toyota's battery JV company, there is a lot of interest in our non-ferrous business from outside of China as the world seeks to decarbonize. We have not had access to the Chinese market for either metallurgical coal or energy coal this calendar year. This is not a situation that we expect to change in the near term, but you know, we are low-cost producers, high-quality producers, and we've been able to place that product in other markets.
Thank you, Chair.
Mr. Duncan Seddon's next question relates to diversity and gender balance. He asks, "You have committed to gender parity by calendar year 2025, and are on the path to that target. Can you share some of the findings you have made so far on the business benefits of this move?
Great question. Yes, our aspirational goal is to achieve gender balance across the company by 2025. Diversity in its broadest sense is good for business. It drives better decisions, healthier culture, and more efficient use of talent. Our assets that are more diverse are safer and more productive, and we've said that over many years. When we last assessed the impact of diversity within our teams, we found that 67% fewer recordable injuries, 28% lower unplanned absences, 11% higher planned and scheduled work delivery. Our more diverse teams are safer and more productive. Our aim is to increase female representation by 3% each year, and this is embedded into the scorecards against which bonus outcomes are assessed. I think it's terrific outcome by the company. We've now reached 30% female participation across the business.
That's up from 17% when we first made the pledge. We are making good progress against that ambition.
Thank you, Chair. We have another question related to diversity from Insight Investment. The question is, "So many photos of women working at BHP in your presentations. Well done. What steps are you taking to increase the representation of women at executive and board level? When will we get to 50%?
Great question. I'll talk to the board, and Mike, you can talk to the great progress we're making at executive level, at the management team. Our aspirational goal is to achieve gender balance across the company by 2025. This includes a fixed target of maintaining board diversity above 33%. Today and for all of 2021, BHP has had four women on our board. That's 33%. It's in line with UK best practice guidance. As you would have heard in my speech, Susan Kilsby and Anita Frew are not seeking re-election this year because they have recently taken on significant chair roles. We have announced that Michelle Hinchliffe will join the board in March 2022.
We've also announced that we will appoint another female NED this financial year. Today we're at 33% of our NEDs being female. At next year's AGM, we expect to be at 36% of the board being female. We're hoping that trend continues at board level. Mike, at management level?
Thanks, Ken. At management level, if I take my direct reports first, in fact we've already achieved balance. We're slightly more female direct reports than male, but overall balanced. In the broader leadership population, we're not yet there, but as Ken you said, the goal is to achieve that balance by 2025. Now, how are we going about doing that? Creating the right environment, an environment that's attractive for people to come to from externally and to stay. Of course, there's focus on development and career progression as well. We're making strong progress just like we are throughout the broader workforce. At the senior-most levels in the company, we've already in fact achieved balance in the past two years.
Great. Thanks, Lisa.
Thank you. Our next question is from Mr. Robert Paul Kosovich related to BHP's portfolio.
Mr. Kosovich asks, "Assuming the divestment of petroleum occurs, this represents around 6% of group revenue, and there is a substantial period of time before potash is expected to make a material con tribution. Generally speaking, what are the plans in the interim for filling this void?
Terrific. Thanks, Mr. Kosovich, for that question. First and foremost, just for clarity, it's not strictly a divestment of our petroleum business. It's actually a demerger. You may be aware that we've announced a merger with Woodside, which will then result in a demerger of those Woodside shares for the combined entity back to BHP shareholders. In short, BHP shareholders will continue to have the opportunity to participate in the petroleum business combined with Woodside if they so choose to do so. We don't really think of it in terms of filling a void. We like to think in terms of positioning our portfolio as really targeting attractive commodities, attracting competitive assets within those commodities, and pursuing strong returns for shareholders.
As for your question, generally speaking, the approach that we're taking is to identify those, and we call those future-facing commodities. Both Mike and I talked about those in our upfront presentations. You know, if you look forward in a decarbonizing world, the world's gonna need a lot more steel, probably twice as much steel in the next 30 years as it has in the past 30 years. But it's also gonna need twice as much copper in the next 30 years as it has in the last 30 years, and four times more nickel in the next 30 years than in the past 30 years. We see copper and nickel as key components of our future-facing commodities.
Thank you, Chair. Our next question is from Ms. Catherine Lee McDonald.
Ms. McDonald's question relates to Scarborough and BHP's investment in fossil fuels. She asks, "I have inherited my shares from my grandfather, who worked at the Whyalla Steel Works. I have two young sons, two and five years old. How do you suggest I explain to my sons why I did not divest of these shares when BHP continues to invest fossil fuel production in the Scarborough Project and the North West Shelf LNG facility?
Okay, thanks for that question, Ms. McDonald. Great question, and I love hearing about multi-generational ownership of BHP shares, particularly when they come from a coworker as well. You're right, we've been in petroleum for 60 years, and probably back when your father was working at Whyalla, we were in the, you know, in the petroleum business. We've been in the petroleum business for a long time. We regularly assess our strategy and portfolio of assets. We like petroleum as a commodity, and we see strong medium-term demand for oil and gas through the energy transition, at least for the next decade and likely beyond. However, when we look at petroleum versus the other mineral commodities in our portfolio, we think it's gonna struggle to compete for capital. You know, cost of capital in petroleum is going up.
We've considered a number of options for our petroleum business, and we believe, as I mentioned previously, a merger with a dedicated oil and gas producer is the best option to create value for shareholders. We're proposing a merger transaction with Woodside. That was announced with our results back in August. There's still a way to go with this transaction, but we are confident the proposed transaction with Woodside is the best outcome for shareholders. That, that's that transaction. To specifically answer your question, even as the world decarbonizes, it will still need oil and gas for decades to come. We're comfortable that Woodside is the right partner, and you know, if we move through and we're successful with the SPNA and our regulatory approvals, and we go through with the demerger, then you'll receive Woodside shares.
We are comfortable that Woodside is the right partner. It's publicly supported the Paris Agreement. It has very similar operational emissions reduction goals to BHP. It's got a long-term net zero goal by 2050. It's got a medium-term 30% reduction target by 2030. It's got a short-term 15% reduction target in emissions by 2025. It's also committed to a Scope 3 strategy and sound climate, as we've put forward this year for our shareholders at its 2022 AGM, and it's committed to playing a role in the world's energy transformation through new energy and low-carbon solutions like hydrogen, ammonia and carbon capture and storage. We are going to be exiting the petroleum business through this transaction, but we think it's going to be in very responsible hands.
Our next question also relates to Scarborough from Ms. Tracy Hamilton.
Ms. Hamilton says, "My question relates to the Scarborough LNG development. Is it good management of shareholder funds to invest in a potential stranded asset with a decreasing gas demand scenario?
I'm not sure. I think I've answered that question. Mike, you know, I think through the Woodside transaction, the strength of the business that we're gonna create with the combined business of Woodside.
Sure, Ken. I might just start by saying that the Scarborough asset itself, within the world of gas developments, is at the very low end of the spectrum in terms of its greenhouse gas emissions intensity. You know, in a world that is seeking to decarbonize, it's going to need gas for a period of time yet. Scarborough is going to be a lower or have a lower emissions footprint than many other projects out there.
If I take it up a level, back to the point that you raised, Ken, around what it is that we're going to achieve with the merger between BHP's petroleum business and Woodside, it's going to be a much more resilient company that is able to navigate the energy transition, and it's going to have the financial wherewithal to be able to invest in the technologies that are required for that energy transition. These are things like hydrogen, ammonia, carbon capture and storage. As Ken has highlighted, Woodside is very committed to that and already has a number of initiatives underway in that regard.
We expect that's going to continue post the merger, and in fact, the company will, given its increased size and broader portfolio, have better ability to do that, to address the energy transition, whilst at the same time continuing to grow value for the shareholders in the combined entity.
Our next question is from Mazira Proprietary Limited regarding our share price. A lot of things make up a share price movement, but part of the recent $15 collapse of the price of shares in recent months can be sheeted home to the amalgamation of the Australian and UK companies as the historical discount premium has been washed out of the respective prices as all of the shares become the same. This, of course, has not favored the Australian company, and I was wondering how you assess this when making the plans to unify and how many dollars you think the effect has been.
Great. Well, thanks for that, Lisa. Look, there's a number of things that go into how the market determines the share price for BHP. You're right, the share price was over $54 back in August 2021. We don't speculate on why the share price moves, but there are many potential reasons for that. I think first and foremost, there was a significant fall in the iron ore price post our results announcement and the announcement of unification. It's down more than 50% from its peak in May 2021, which was $233 US a ton. I think today, Mike, we're below $100 US a ton.
Yeah.
That's clearly gonna have an impact on the share price. Secondly, when the shares go ex-dividend, and we announced a large dividend from the second of September, then there's also an impact on the share price. We think the strategic announcements we've made at BHP set it up to continue to deliver long-term value for shareholders. The recent movements are in line with similar recent share price movements across the broader resource sector. If you were to compare our share price movement over since the beginning of the calendar year or since our results announcement against our peers, you'd see similar performance. And then if you look at the ten-year TSR for BHP, it's about 70%, and the ASX 200 resources is about 40%.
I think there's many reasons for the share price movement. We think unification, for all the reasons I talked about it, earlier on, is the right outcome for BHP shareholders.
Thank you, Chair. Our next question is from Mr. Eugene Schulisser, who has a question about lobbyists.
Do you employ lobbyists? And if so, how many and how do they work?
Thank you, Mr. Schulisser. When I hear the word lobbyists, I think of politics. I might just talk to political donations, Mike, and then perhaps you wanna talk to industry associations. Just for clarity, we've had a consistent policy over 10 years. We don't make any political contributions or donations for political purposes to any party, politician, elected official or candidate for public office in any country. I think can't be clearer than that in terms of our political donation policy.
Well, thanks, Ken. I might talk to two things. One is industry associations and any other lobbyists. In the case of industry associations, we've had an ongoing effort underway to ensure alignment of industry association advocacy with our own policies. Then where we identify any gaps between the two, we take action in that regard. We published our global climate policy standards last year or recently, which set out our expectations on how associations advocate on climate policy. That's an ongoing effort. We have a further industry association review that will be published in 2022. As we've done historically, if we identify misalignment, we'll consider a range of remediation measures, including suspension or cessation of membership.
On the specific question around lobbyists, as you mentioned, Ken, our code of business conduct outlaws or bans any political contributions, and that's either in cash or in kind, and it's both direct and indirect, and that's been in place for some time now. To the extent that we do have third parties operating on our behalf, they're all required to operate in line with BHP standards. Where we engage companies, and there's a limited number of companies out there that we would engage who do also provide lobbying services, irrespective of whether they're providing those specific services to BHP or not, they do have to comply with all of BHP's requirements in this regard, as well as, of course, local regulatory or legislative requirements.
The final point I would note is that all government contact in BHP is managed or overseen centrally, and that's to ensure both coordination but also a degree of oversight and alignment between the positions that are being taken, and it gives us consolidated assurance around the interactions that are taking place with governments on behalf of BHP employees as well as those representing BHP.
Thank you. The next several questions come from Mr. Steven David Main.
Mr. Main's first question is a general shareholder question that relates to proxy advisors and proxy instructions. Mr. Main asks, did any of the five main proxy advisors in the Australian market, ACSI, ASA, Ownership Matters, Glass Lewis, and ISS, recommend a vote against any of today's resolutions? Has there been a material proxy protest vote against any of today's resolutions? Why not follow ASA guidelines and disclose the proxy votes before the debate on today's resolutions, so shareholders can ask questions if there have been any protest votes?
Right. The question is around the disclosure of third-party proxy recommendations. We don't do that. We don't think it's appropriate. We're not a client of the proxies that you mentioned in your question. That's their proprietary information, but they provide that information to their clients. A lot of it finds its way out into the press anyways in our experience, but it's non-public information, and we just don't see that as our role to provide that information.
Thank you, Chair.
Mr. Main's next question relates to postage of the annual report. Why did you send the 312-page annual report to shareholders who haven't signed up for electronic communications when Australian law this year only required a one-page letter alerting shareholders to the online materials? How is this sustainable and cost-effective practice? Why not just send the 50-page notice of meeting given that this is what the AGM is all about?
Thanks for that question, Mr. Main. We've actually changed our process around that. We do get a lot of requests for the annual report from shareholders. We therefore changed our process. They actually have to positively opt in in order to get a mailed out annual report. If they don't specifically contact the company and opt in to receive a mailed out report, they don't get one. That's our process. As you know, we're required to send the notice of meeting out by post if we don't have a shareholder's email. We do that as well.
The next question is again from Mr. Main regarding AGM transcripts. Best practice AGM transparency is now moving to providing a full transcript of the AGM, not just access to the archive of the webcast, which is time-consuming to wade through. Will BHP follow the lead of companies like Woolworths, Crown Resorts, AGL, and ASX to move to best practice by publishing a full transcript of today's AGM for the first time?
Great. Again, thanks for the question, Mr. Main. Hasn't been our practice in the past, but we do keep our eye on what best practice is, and we take it on board.
Thank you, Chair. Mr. Steven David Main's last question here is related to business strategy.
The WA state government has about AUD 50 billion of debt even after iron ore royalties jumped from AUD 1.1 billion in 2007-2008 to almost AUD 10 billion in 2021. With total WA iron ore production hitting almost 900 million tons in 2021, generating revenues of more than AUD 200 billion and pre-tax profits of more than AUD 100 billion, is it politically sustainable to stave off future royalty increases or another resources super profits tax proposal? Is there another resources jurisdiction in the world which has been so profitable for those private companies given a license to access a state-owned resource?
Thanks again, Mr. Main, for that question. Look, there's a global competition for capital, and it's only gonna increase. So fiscal settings must be competitive in order to attract capital investment. We need to have a mature stakeholder conversation on the most pragmatic way to deal with the legacy of the public debt left by the unprecedented COVID-19 crisis response. We support policies that accelerate economic growth, and there's no question that companies should pay their fair share of tax. BHP has paid more than AUD 80 billion in taxes and royalties in Australia over the past decade. As I mentioned up front in my presentation, in financial year 2021, our total economic contribution in Australia was more than AUD 34 billion, including more than AUD 12 billion in Australian taxes, royalties, and other payments to government.
Our effective tax rate, if you include royalties, is over 40%. You know, it's a good question. We are on an island, but we're competing in a global sense, and we need to be competitive, and we need to have that mature conversation.
Thank you, Chair. Our next question is from Fiona Deutsch regarding the BMC divestment.
She asks, "BHP is supportive of net zero emissions by 2050 and states a 1.5-degree world is better for its business. Why has BHP divested an 80% interest in BMC and sold it to Stanmore SMC Holdings, a sub-subsidiary of Stanmore Resources, a company that has repeatedly proven its disregard for the Paris Agreement?
Thanks, Ms. Deutsch, for that question. In a previous shareholder question, I did talk about how we think about our portfolio, the fact that we do scenario analysis. In that scenario analysis, we identified that coal was non-core. Or energy coal was non-core for BHP, and that we were gonna progress this two-year exit. In the case of BMC assets produce metallurgical coal, which is used for steel making, including infrastructure required for renewable energy and decarbonization. So it's not energy coal, it's metallurgical coal. And as shareholders know, we announced our review of our 80% share in BMC assets about a year ago to focus our portfolio on higher quality, lower emission assets. At that time, we said it would be a two-year process.
The current announcement, the sale price is $1.2 billion in cash consideration, and there's an earn-out as well. Net proceeds will be incorporated into and evaluated in accordance with our capital allocation framework to determine the appropriate manner to maximize value to shareholders via future dividends, share buybacks, or a combination. But to your point, any buyer must be a responsible operator of these assets. This is a core consideration for the board. I might ask Mike to provide details of the due diligence that we've taken on Stanmore.
Sure. Thanks, Ken. As part of the divestment review for BMC, we did conduct a very thorough bidder engagement process to identify parties who've satisfied stringent considerations around safety, environment, governance, as well as who've demonstrated commitment to partnering with the workforce and the community. We identified that Stanmore is a capable and competent successor to BHP in operating BMC. It has existing operations in Queensland's Bowen Basin. It's listed on the Australian Securities Exchange, and it's bound by Australian law. It's committed to oversee and operate BMC in compliance with industry best practice in relation to safety and environmental performance, as well as regulatory, community, and workforce engagement. Very importantly, coming back to the thrust of the question, Stanmore supports Australia's commitment to the Paris Agreement.
It abides by legislative climate management requirements, and it's pursuing its own greenhouse gas efficiency improvements.
Thank you. We've had Mazira come back with, referencing an earlier question. Chair, Mazira have asked, "With due respect, Mr. Chairman, I do not think you adequately addressed my earlier question. I did not ask you to give the reasons for the share price movement. I asked you to specifically about the dollar effect in your view of the washout of the traditional discount and premium range between the two entities that you must now have been aware of when planning the changes.
In the case of PLC and Limited, if you look at the relative pricing of those markets, the LSE and the ASX over a long period of time, there's always been a historic premium on the Limited line, and the PLC line has always traded at a discount. Not just BHP shares, not just Rio shares, but if you look at the PE ratios of each of those markets broadly, the ASX trades at a premium. There's many reasons for that, and one of them is obviously the franking credit implications. As we unify, and there's that exchange of PLC shares for Limited shares on a one-for-one basis. The PLC shareholders, they will likely benefit from an uplift in their share price, and we've seen that.
When we look at the Plc line today, the historic premium that was in place has come down quite a bit. You know, traditionally, it's been in the range of in the order of 15%-20%. Today, the last time I looked at it's in the order of 5%. That premium gap has closed. In terms of the Limited line, you know, shareholders still have the same assets, the same cash flows, the same board, the same management team as they've had before. Nothing changes for the Limited line. As I said, if you look at the share price since the announcement, you know, it's broadly in line with peers.
As we look forward, I mean, the reason that we're doing all of this is, you know, we believe it's in the best interest of shareholders that the dual listed structure is complex. We will be a simpler, more agile business that will benefit shareholders in the medium and longer term.
Thank you, Chair. We're now moving to some questions on the phones. Our first phone question is from Ms. Jan McNichol regarding future prospects. Ms. McNichol, please ask your question.
Thank you, Mr. Chair. Is BHP still planning to divest the Mount Arthur mine, or will the company demonstrate true leadership in the energy transition by responsibly managing down the asset in line with the net zero by 2050 scenario and supporting employees to transition to new roles?
Thank you for the question, Ms. McNichol. As I've already said earlier in today's Q&A session, we have made the decision to exit our energy coal businesses. We've already exited. We only had two. We had Cerrejón and Mount Arthur Coal. Cerrejón, we've already completed the transaction. Or we sort of announced the transaction. We still have to complete the transaction, but that's well in train. In the case of Mount Arthur Coal, we did give ourselves a two-year timeframe. We're one year into it. You know, cards on the table, it's challenging. All options remain on the table at this point in time.
Thank you, Chair. Our next phone question is from Mr. David Grice related to business operations and project risks. Please go ahead, Mr. Grice.
Well, thank you for the board's effort. A new report published this week declared that many essential environmental approvals and heritage approvals required for Scarborough LNG to reach final investment decision is, and I quote, "a mess." According to the report, almost every environmental and heritage approval for the project remains outstanding due to unresolved legal challenges, required updates, and being massively and significantly behind schedule. My question, what has BHP done to alert its shareholders to the risks associated with the project? Thank you.
Thank you, Mr. Grice. I think the question is the status of the approvals for the Scarborough project. I mean, again, I've talked in depth around our plans for the BHP petroleum business. You know, again, the plans are a demerger alongside a merger with Woodside and a demerger to BHP shareholders. Mike, do you wanna talk specifically about the Scarborough approvals and the status?
Yep. Thanks, Ken. Well, first of all, I would start by saying Woodside is the operator. Any specific questions should be directed back to Woodside, of course, of the project. The core approvals are in place for the project as it stands.
Next one. Next question, please.
Thank you, Chair. The next phone question is from Mr. John McIntyre regarding financial risk. Please go ahead, Mr. McIntyre.
Mr. Chair, I've got two questions. How do you explain to shareholders the ongoing investment in the Scarborough project, given that the project faces legal action in the Supreme Court of Western Australia, has risks relating to the availability and cost of labor, and a shrinking, increasingly competitive international LNG market to sell to?
Sorry, Mr. McIntyre, did you say you had two questions?
Well, the second one, BHP has multiple carbon neutrality agreements. How can these be met, and therefore the expectations of shareholders and the Australian community when you continue to invest in fossil fuel projects or sell them off rather than winding them down?
Thanks for that. I'll answer the second question first. As I mentioned earlier, we've done a thorough scenario analysis for our business. We've taken a look at both a 1.5-degree Paris-aligned scenario. We've looked at a 3-degree scenario. We've looked at a number of scenarios in between. What we found is that the more the world decarbonizes, the more valuable BHP becomes. I've already talked about that. Through that process, we've also made the decision to exit thermal coal, which we've talked about in detail. We've had the Cerrejón asset that we've already exited. We have the New South Wales energy coal business, which is very much a work in progress, and all options are on the table.
We've announced the BMC transaction on the lower value metallurgical coal business used to make steel, and with that transaction announced to Stanmore, and Mike's talked about the responsible exit there. Finally, again, on petroleum, the plan there is to exit the business through the merger with Woodside. Now, BHP shareholders, when that transaction concludes, will get shares in Woodside. They can make the decision on whether or not they wanna continue to participate in petroleum or not. That's the broad portfolio plan. In terms of Scarborough, I think we've answered the question, but Mike, would you like to add?
Well, look, I, Ken, if you don't mind, I might just say a few other things. Any project decision that we take, of course, as we've said over a number of years now, gets run through our capital allocation framework. Part of that process sees us assess the project against potential different future scenarios. Ken has spoken earlier in this meeting about the sorts of scenarios that we run. Of course, any project that we are going to commit BHP shareholder capital towards has to have a pretty strong bias towards positive outcomes and greater than cost of capital returns under the full range of those scenarios.
You know, the fact that the world is going to need, continue to need gas for quite some time yet, even under an accelerated decarbonization transition, is pretty widely accepted. It's against, you know, that full range of scenarios we'd be assessing a project like Scarborough when it does come to the sanction decision. I can provide assurance that any decision taken to proceed with Scarborough will be done against, you know, full consideration of a range of scenarios, both upside and downside, when it comes to the pace of decarbonization.
Thank you. Next on the phones is Ms. Claire Cunnington, and Ms. Cunnington has two questions. Over to you, Ms. Cunnington.
Thank you. My first question. BHP claims leadership on climate action and says it supports the goal of net zero emissions by 2050. Why then is the company planning to offload oil and gas assets to Woodside, whose expansion plans are incompatible with net zero by 2050? This shirking of responsibility is the opposite of climate leadership and would leave shareholders exposed to increasing climate risks while handing over control of those risks to a company that clearly has no interest in managing them. My second question is, per reporting in the AFR last night, Woodside has recently revised down volumes of gas held in the Wheatstone and Pluto fields, leading analysts from Macquarie to reduce their valuation of Woodside shares and projections for the Scarborough fields.
There's too much volatility around Woodside right now for BHP shareholders to have any confidence that the proposed scrip deal the board is progressing gives us fair value. Will the board demand more concessions from Woodside to address Woodside's instability? Thank you.
Great. Thanks for the question, Ms. Cunnington. First and foremost, around the question of Woodside and our commitments around net zero 2050, I think I've answered the question, but let me re-emphasize the points that I've made earlier. We're of the view that even as the world economy decarbonizes, it will still need oil and gas for decades to come. We're comfortable that Woodside is the right partner. It's publicly supported the Paris Agreement. It has very similar operational emissions reduction goals to BHP. A long-term net zero goal by 2050, to answer your question very specifically, and again, medium-term 30% reduction by 2030 and a short-term 15% reduction by 2025. It's also committed to Scope 3 strategy and a say on climate as we've done this year.
It's committed to playing its role in the world's energy transformation, as I've talked about earlier with investments in hydrogen and ammonia and carbon capture and storage. I think that answers the question around Woodside and the net zero 2050. In terms of the reserves downgrade, having made the strategic decision to exit from the petroleum business, the board and management considered the options that would generate shareholder value. We believe the proposed merger with Woodside is the best option for shareholders. We've done our own due diligence on the Woodside business. The downgrade doesn't change our assessment of or our appetite for the merger. The reserves are one of many factors that go to the valuation and merger ratio. We're comfortable. Thank you, Lisa.
Thank you, Chair. Next on the phones is Ms. Angela Meyer, who has a question regarding financial expectations. Please ask your question, Ms. Meyer.
In recent months, opposition to the Scarborough LNG development has increased in its intensity in the number of people it represents and in the geographical spread. The development is now subject to nationwide multifaceted campaign across climate, finance, Aboriginal heritage, and conservation concerns. This campaign is widely regarded as the biggest response to a fossil fuel development since the Adani. Have you made your shareholders aware that this unprecedented opposition is snowballing? Has BHP made their shareholders aware of the inherent risk and outstanding regulations to your Scarborough project?
Okay. Again, thanks for that question, but I think that's a very similar question to the ones that we've had before. Have I missed anything here? No. Okay. Next question, please.
Our next question on the phones is from Dr. Claire Smith. She has a question about the North West Shelf LNG project. Please ask your question, Dr. Smith.
I actually have two questions. The first one, is BHP comfortable with gag clauses and funding agreements in place which prevent Traditional Owners of Murujuga from raising concerns about impacts on their cultural heritage due to the processing of gas on Murujuga, given BHP's interest in the North West Shelf LNG project and the Scarborough project?
I can only again, as Mike's mentioned, Woodside's the operator of the Scarborough project, so I'm not across the cultural heritage detail, but I can speak for our processes. In the very specific case of gag clauses, we don't have gag clauses in our agreements with traditional owners. If there was anything that could be interpreted as a gag clause, in any of our agreements with any of our traditional owners, then we have specifically written to them and told them that we wouldn't enforce any sort of gag clause. In our case, we don't have gag clauses in any of our traditional owner agreements. I can't speak for Woodside.
Thank you, Chair. Next on the phone is Ms. Elizabeth Downes regarding a new copper projects and explorations. Please go ahead, Ms. Downes.
Hi. I've got two short questions. Can I ask them both at the same time or one at a time?
Sure. Go ahead, Ms. Downes.
Okay. The first one is about free, prior, and informed consent. Consent requires the option to say no, otherwise it's via coercion. How can shareholders be assured that BHP protects the right to free, prior, and informed consent and abides by relevant national legislation regarding protection of cultural heritage, given BHP's publicly documented intentions to both invest in or undertake copper mining operations in higher risk regions around the world, such as Ecuador and the Democratic Republic of Congo, as well as in jurisdictions with recognized cultural heritage sites of First Nations groups, i.e., in the U.S. and Australia? That's my first one.
Yep. Thank you, Ms. Downes.
My second one is what. Oh, yeah. Sorry.
Go ahead, Ms. Elizabeth Downes.
Okay. Second one is about environmental governance. Part of a letter directed to BHP by residents of Intag in northern Ecuador in August 2021 regarding copper exploration in the region. BHP's concessions overlap thousands of hectares of protected forests registered in the Socio Bosque Program, and all intersect with the buffer zone of the Cotacachi-Cayapas National Park, which is one of the most biologically important on the planet. Intag also has 38 community hydrological reserves covering 12,000 hectares of cloud forest and contains over 270 endangered species. Since 2019, mining has been expressly prohibited in local ordinances. The question is, what guarantees can BHP provide its shareholders that it's-
Explorations in Ecuador are in compliance with local ordinances and protected areas under Ecuador state systems and within the company's own ESG standards.
Okay. Thanks, Ms. Downes. I'll answer your questions in order. In terms of free prior and informed consent, our approach to engaging with and supporting indigenous peoples is articulated in the BHP Indigenous People's Policy Statement. Our commitment includes social and environmental impact assessments, seeking to agree on documented consultation plans with potentially impacted indigenous peoples, and working to obtain the consent of indigenous peoples. We seek to avoid or minimize impacts to cultural heritage through planning and ongoing consultation with indigenous communities. We're engaged now with many of our traditional owners and also the First Nations Heritage Protection Alliance. Our processes provide opportunities for indigenous stakeholders to identify culturally or traditionally significant sites and objects and to be consulted and engaged with in relation to decisions regarding the protection and management of cultural heritage.
It's really through good faith negotiation to reaching agreements with indigenous people that we seek to deliver sustainable improvements in their economic and social and cultural wellbeing. In terms of Ecuador, I might pass it to Mike in a second. Let me talk about Ecuador in general. Very early days for us. At this stage, we're talking about a greenfield exploration project. We're undertaking low impact preliminary works, and recently we've commenced drilling our first exploration holes. Just to give you an example of type of work that we're doing, you know, it's water and sediment and soil sampling, as well as what we call in the industry airborne geophysics, which is basically flying over the areas and surveying them aerially.
Our work in Ecuador, as well as our exploration activities in general, is governed by our exploration management system, which enshrines careful engagement with stakeholders, and environmental due diligence. Very, very early days and very light touch at this point. Mike, anything you'd like to add?
Probably the only thing I would add, Ken, is there was reference in the question, I think, to approach from local stakeholders, and we did receive a letter from Intag local government representatives at our local office in Quito. We did hold a meeting at the time with relevant stakeholders about these issues, and I think from memory that was back in September. As you said, to be clear, the effort that we have underway currently is very early stage exploration. This is low impact assessments such as mapping and stream sediment sampling, and that will help guide our decision-making.
Now, in order to further reduce the footprint, the work that is underway around drilling and so on is all helicopter-supported because that reduces the impact on the local environment. There's a number of engagements and sustainable development programs all underway to in conjunction with local communities. We're certainly aware of the sensitivities. Any activity that's undertaken there is done, of course, in line with the very strict standards that BHP has in place, both around FPIC, but also around community engagement more broadly.
Thanks, Mike. Next question, please.
Thank you. Next on the phones is Katherine McDonald regarding investor responsibility. Over to you, Katherine. Katherine, please ask your question. Seems we may have lost that question.
Next question. Thanks, Lisa.
Thank you, Chair. Our next question is a follow-up question from Ms. Jan McNichol, who has a general question on mining operations. Please ask your question, Ms. Jan McNichol.
Thank you, Mr. Chair. Is BHP comfortable with the reliance on outdated Section 18 Aboriginal heritage approvals for the processing of gas at the Karratha gas plant and from BHP's share of the Scarborough field, despite strong scientific evidence that industrial pollution from gas processing is causing permanent and irreversible damage to the Murujuga Rock Art proposed for World Heritage listing?
Great. I think that's a Woodside is the operator of Scarborough, and I think those are questions best directed to them, Ms. McNichol. In terms of our own processes around Indigenous heritage and Section 18 approvals, you know, we are very clear around that even though we achieve a Section 18 approval, we need to make sure that we have the free prior and informed consent of our traditional owners. We've made a number of improvements in our processes since the tragedy at Juukan Gorge, which we're all familiar with, to make sure that we've got that ongoing engagement with our traditional owners.
Even if we have a Section 18 approval, as an example, we have a number of mechanisms in place to ensure that if we get new and updated information since the approval was granted, that gets taken into consideration and we reconsult with our traditional owner partners through that process.
Thank you, Chair. Dr. Claire Smith is next on the phones with a follow-up question. Over to you, Dr. Smith.
How is divesting from the enormously polluting Scarborough development and leaving its operation to Woodside, a company repeatedly linked with avoiding trailing liability and cleanup costs, consistent with BHP's commitment to decarbonization?
Well, Ms. Smith, I think I appreciate your comment and clearly you feel very strongly about it, but I've answered the question. We feel confident with Woodside as a partner. They're aligned with the Paris Agreement. They've got similar targets to our own. They're going to be coming out with a more fulsome climate transition action plan like we've done. They'll take it to their shareholders for a vote, and they're working hard on a clean energy transition program as well. I think we've answered the question.
Thank you, Chair. The next question is a follow-up question again from Angela Meyer. Please ask your question, Ms. Meyer.
The offshore oil and gas regulator, NOPSEMA, has indicated it may place conditions on Woodside's approval for the Scarborough gas field development to control carbon pollution, including Scope 3 emissions. Given Woodside's equity share approach to managing carbon liabilities, will BHP become responsible for costs associated with its equity share of emissions from the Scarborough field? If so, what are BHP's current estimates of these costs?
I'm sorry. I dropped out there for a second. Can you repeat the question? Okay.
The question, Chair, was broadly around equity accounting for carbon. First point was NOPSEMA. The statement was that NOPSEMA has indicated that it may place certain requirements on Woodside around carbon emissions, including Scope 3. Secondly, Woodside accounts for emissions on an equity share basis, which is in line with-
Right.
the practice in the petroleum industry.
Got it.
Would the liability accrue to BHP?
Okay. Well, thanks again for the question. Couple of things around our petroleum business and Woodside and Scarborough. First and foremost, as I've already said, you know, it is our plan to merge our petroleum business with Woodside, and then de-merge that out to BHP shareholders. Going forward, still some work to be done, still some agreements to be signed, some regulatory approvals to be done, but that's clearly our intent. The petroleum business, including the Scarborough project in its entirety, assuming it was FIDed, it was approved, BHP shareholders would have the option on whether or not they wanna continue to participate through the ownership of Woodside shares.
If that transaction weren't to happen and we had FIDed, we do have an agreement in place with Woodside where we would have a put option to put that, our shareholding in Scarborough back to Woodside, which we would then consider at that time. It's our intent to exit the petroleum business, and we have the option post an FID of Scarborough, if that weren't to occur, to either participate or not participate in Scarborough going forward.
Thank you, Chair. We now have a follow-up question from Catherine Lee McDonald. Please ask your question.
Hi. I don't think this is working yet. Can you hear me?
Yes, we can.
Oh, goodness. Oh, you can. All right. Amazing. Thank you. Sorry, I didn't think I turned my microphone on. Thanks for taking a second question. We have been talking a lot about Scarborough, but I do have one more question. Is BHP aware of the comments made by the CEO of the Murujuga Aboriginal Corporation, that's Peter Jeffries, who said, "I think the monitoring will provide the scientific evidence to prove beyond reasonable doubt that emissions are affecting our magnificent cultural heritage here on the Burrup." If so, does this concern BHP, given its involvement with the Scarborough project and the North West Shelf LNG facility?
Again, thanks for the question. I think we've discussed Scarborough in a lot of detail, given that, you know, if you look at the relative weighting of the business within BHP, it's certainly gotten a lot of airtime here today, and I think we spent a lot of time explaining our position around that. Again, these are questions best directed at the operator, which is Woodside. I'm gonna draw a line at this point, Lisa, under further Scarborough questions, and I think we should move on.
Chair, there are no further questions on items 1-6.
Great. Terrific. Thank you very much. I think we've had a reasonable opportunity to discuss these items. We'll conclude discussion on items one to six, and we'll now move to items seven to nine, which relate to remuneration. During the 2021 financial year, our remuneration committee focused on achieving remuneration outcomes that fairly reflected the performance of our company and the contribution of our employees and that would be aligned to the interests of shareholders and other key stakeholders. The 2021 financial year was the second year of application of the revised remuneration policy that was approved at our 2019 AGMs. We believe this policy is serving shareholders well.
During the year, Mike Henry, our CEO, achieved an outcome of 115% of target or 77% of maximum against the FY 2021 cash and deferred plan scorecard set at the start of the year. The vesting outcome for the 2016 long-term incentive plan awards was 100%, with BHP significantly outperforming both the sector peer group and the MSCI World Index. Approval is also being sought for share awards to the CEO. This year, these awards are being made under the cash and deferred plan and long-term incentive plan described in the remuneration policy that was approved at the 2019 AGMs. Both awards are based on strict performance hurdles and are subject to a holistic five-year look back by the board on performance. Are there any questions on items seven to nine?
Chair, there are no further questions on items seven-nine.
Okay. Well, thank you. Let's move on to the next items. Items 10 to 19, which relate to the re-election of directors. There's 10 items here. 10 of your directors are seeking re-election. There are no directors seeking election for the first time. Are there any questions on director re-elections in items 10 to 19?
Thank you. Our first question is from Mr. Duncan Seddon from the Australian Shareholders' Association, related to board tenure.
We note the newness of the board, where 5-10 of the directors have been appointed since 2020. It was due to this that, in part, Mr. Broomhead is standing for re-election for a further year. Given the size and complexity of BHP's business, what is the process to get these new directors up to speed, and what time commitment have they agreed to? Now that you will be delisted from the LSE, can we expect more stability and longevity in tenure?
Thank you. Great question, Mr. Seddon. When I became chair, the tenure of the board members was somewhat unbalanced. We had a number of short tenured directors, sort of three years or less, and a number of long tenured directors, sort of seven, eight, nine years. We didn't have much in between in terms of tenure. In the subsequent years, four directors have retired at their full term. That's Wayne Murdy and Lindsay Maxsted and Carolyn Hewson and Shriti Vadera. This year, as I mentioned in my speech, we're sorry to see Anita Frew and Susan Kilsby step off the board, both due to being appointed as chairs of significant international companies and then their workload no longer allowing them to continue to be NEDs at BHP.
We are excited to welcome Michelle Hinchliffe early next year, and we're progressing the appointment of a further female NED director in 2022. We've got a healthy succession pipeline. You know, Gary Goldberg, Xiaoqun Clever, Christine O'Reilly, and Dion Weisler have joined the board over the last couple of years. All have made strong contributions already. We have a very experienced board that is working very effectively. Now, to answer your question in terms of onboarding, you're correct. You know, this is a really important job. We tailor the program to specific directors' backgrounds, and their familiarity with the business and the mining sector, and the onboarding is fairly extensive.
We also look at new and emerging issues within the sector, and that applies to all directors, including directors with longer standing tenure. Obviously, the executive team is highly engaged and highly involved in that induction as well. So it's not really the nine-year tenure that has. Because if you look at this year, you know, Malcolm Broomhead, we've extended him a further year. I think he's been on the board now it'll be 11 or 12 years. We have the flexibility when we think it's necessary in order to extend tenure, but it's not our intent to change the guideline of nine-year. That was really not any reason why we have a shorter or longer tenure.
It was really the construct of the board, where we had some short-term directors and some longer tenured directors, some of that driven by the demerger of South32, when some of the directors left the board at that time.
Thank you, Chair.
Thank you, Lisa.
Thank you. The next two questions are from Mr. Steven David Main.
The first question is related to Indigenous board diversity. After the Juukan Gorge disaster, Rio Tinto responded by appointing their first ever Indigenous director to the board in former WA State Labor Treasurer Ben Wyatt, who also joined the Woodside board. Congratulations on Indigenous employment reaching 7.2% in Australia. Can the Chair see a day when we too will have an Indigenous Australian sitting on the BHP board?
Thanks very much for that, Mr. Main. Look, I think there will be a day when there'll be an Indigenous Australian sitting on the board. I think we, you know, we're embracing diversity and diversity as a capital D, as I like to call it, not just, not just gender, but diversity of thought, ethnicity, you know, onwards. Diversity is a very powerful tool. We had a question from the ASA earlier on asking for the data around our performance of our diverse teams, and we provided that, and you can see that our diverse teams are higher performing. You know, in terms of our engagement, it's, you know, Indigenous heritage is an important topic. I'm personally engaged with the First Nations Heritage Protection Alliance around that. Management's heavily engaged in our sustainability committee.
They're also engaged with our through their site visits, going out and engaging with Indigenous communities. It's part of their remit. We also have what we call the Forum for Corporate Responsibility, which is a group of individuals with diverse backgrounds, both environmental, Indigenous, backgrounds that are available to both the board and management on an ongoing basis. We use them in a systemic way to engage with management and the board on issues around social value, diversity, climate, Indigenous heritage, environmental issues, et cetera.
Thank you, Chair. Mr. Main's second question relates to the annual director elections under the U.K. law. He asks, "Do Ken and the board like the annual election of directors as required under U.K. law, and will this be continued voluntarily under the reunification back to Australia where directors get three-year terms? Could Ken comment on what he sees as the pros and cons of annual elections of directors?
Yeah. Thanks, Mr. Main. Look, the short answer is we've made the decision to continue with annual re-elections at BHP voluntarily. We think it's a good process, and we're gonna continue with it.
Thank you, Chair. The next question is from Mr. Cameron Terendi also regarding board diversity targets.
Could you please update us on the progress towards gender balance targets of the board?
Yes. Thanks. Thanks very much, Mr. Terendi. As I mentioned earlier, in an earlier question on this topic, board diversity today is at, gender diversity today is at 33%. Our target for next year, at the AGM would be at 36%. We're continuing on that journey. As we are doing in the balance of BHP, where we've moved overall female participation from 17% up to 30%, and Mike already has a gender balanced leadership team, we're continuing to go after our ambition of having a gender balanced organization across the board.
Thank you, Chair. We have another question from Mr. Main related to the FIRB requirements relating to the board and CEO.
He asks, "What is the nature of our undertakings to the Australian government dating back to the Billiton merger in terms of board and CEO composition and location? How Australian do we have to be? And once the DLC has collapsed, are we likely to return to having a majority of Australian-based directors? What is the minimum amount of Australian-based or Australian citizen directors that we require?
I think this is an item that's up for discussion with FIRB as we move through unification. Where we ultimately end up is for discussion with FIRB and the government. Where we are today is we do have a requirement for both the CEO and the CFO to be resident in Australia. That's a FIRB condition.
Thank you, Chair. There are no further questions on items 10-19.
Okay. Well, look, we've had a good discussion there. Why don't we move on to item 20, which is a non-binding advisory vote on BHP's Climate Transition Action Plan. An outline of the Climate Transition Action Plan was included in the notice of meeting, and a copy of the plan is available on our website. Now, before I go to questions on item 20 in our Climate Transition Action Plan, I thought it would be useful to set out what the plan is and why we've put it to the meeting. Now, at BHP, we accept the science of climate change, and have been taking action on climate change and disclosing on climate risks and opportunities for many years.
In 2020, we conducted our own climate scenario analysis, which indicated to us that the more the world decarbonizes, the more valuable BHP becomes. This was critical as it demonstrated an alignment between our business agenda and our climate agenda. As we pursue these combined objectives, it's important that our investors understand what we're doing. The CTAP represents our policy, targets, and goals on climate change. Now, as I've said earlier in questions on Scope 1 and 2, we have previously set targets of at least a 30% reduction in operational greenhouse gas emissions by 2030 and net zero emissions by 2050. Our current best estimate is that the capital cost required to reach this goal will be up to $4 billion. Now, on Scope 3, we're pursuing a long-term goal of net zero Scope 3 emissions.
This year, we've set targets of net zero emissions for our direct suppliers and shipping of our products. The CTAP is not just about what we are doing or what we plan to do. We're also explaining to shareholders some of the challenges associated with the rapid decarbonization of the global economy. It's been a great discussion that we've been having with shareholders in the lead up to the AGM. I think a really good example of this is steel manufacturing. Right now at BHP, we cannot see a definitive pathway to the full decarbonization of the steel manufacturing industry by 2050. However, that doesn't mean a pathway won't appear as technology advances, as policy changes, and as the market reacts. It also doesn't mean that we'll sit still.
That's why we're investing $75 million in Scope 3 research and development partnerships with four of our customers who collectively represent more than 10% of global steel production. It does mean that at this stage, we can't set a hard target for Scope 3 steel emission reductions. Doing what we say we'll do is a core principle at BHP, and we cannot set a target where we don't have a reasonable basis to believe we can achieve it. The purpose of the Say on Climate is to provide shareholders with an opportunity to provide their feedback on our plans, on our targets and goals, and our approach to climate disclosure. Responsibility for delivering on the CTAP and executing our strategy will remain with the board and management as it must. Your feedback will be taken into account as we judge our next steps.
Do we have any questions on item 20 or our climate agenda more broadly? Lisa?
Yes, we do, Chair. Our first question is from Invia Custodian.
who ask, "BHP is to be congratulated on the Climate Transition Action Plan, but what can be done to exceed the 30% reduction in Scope 1 and 2? As we have seen from COP26, 30% by 2030 will be insufficient to hold global warming to as low as or below 1.5 degrees.
Great. Thank you. Well, I'll let Mike talk to the specific actions that we're taking around that, but thanks for that question. Our target on Scope 1 and Scope 2 is at least a 30% reduction by 2030. We have a detailed plan on how we're going to get from where we are today to that 30% reduction. Largely, what we need to do is use renewable energy for our operations and to resolve the issue of the diesel that we use, the fossil fuels that we use, and the earth-moving equipment at our mine site. Those are the two big levers that we're pulling, and that's you know, $2 billion-$4 billion of capital in order to get to that 30% reduction.
Now, the 30% reduction target is in line with the Paris Agreement, the well below two degree scenario. We've come up with our targets using the absolute contraction method. In other words, making sure that we're keeping up with the global ambition to get to the Paris Agreement and delivering what we need to deliver by 2030. Mike, is there anything you'd like to add?
No. Look, it's, I think it's a great challenge. We have said it's kind of at least 30% by 2030, and we're starting from a very a high base or low base, depending on how you want to put it, because we've had effort underway for so long in this regard. Now what are we doing specifically? Renewable energy projects. Ken flagged that this is a key area of focus. In Chile, for example, we put contracts in place over the past year or two that will see us fully move fully to renewable electricity for our Chilean operations in the coming couple of years. That's going to have a very significant impact on our Scope 1 and 2 emissions, positive impact.
We've put in place similar types of contracts for our Queensland coal operations for 50% of their power supply, for our Nickel West operations, and we're looking at what further we can do in this regard. Renewable energy is just one part, of course, of reducing Scope 1 and Scope 2 emissions. Another very big area of focus is how we go about removing diesel from our operating sites. Now, in this regard, it is a harder area of transition, but we're taking that challenge on, and we have collaborations in place with industry peers. We launched the Charge On Innovation Challenge with Rio Tinto and Vale to try to advance a mining truck or the electrification of mining trucks.
We're removing diesel from use in these big trucks that transport dirt and ore on our sites. We've become a founding member of Komatsu's Greenhouse Gas Alliance, which aims to develop a commercially viable zero greenhouse gas emission haul truck. We've partnered with Caterpillar to develop zero-emissions mining trucks. We've been a very active participant and leader when it comes to the International Council on Mining and Metals in their collaboration with equipment manufacturers, again, with the same focus in mind, which is how we go about removing diesel from mine site equipment.
Multiple initiatives underway where we're bringing together others in industry, both on the manufacturing side of things, but also in terms of producers like BHP to see how we can together collectively tackle the challenge of removing the need for diesel in mining operations.
All right. Thanks, Mike. Next question, please, Lisa.
Our next question is from Ms. Fiona Deutsch regarding offsets.
She says, "The potential scale of offset use in BHP's decarbonization strategy is uncapped, with frequent references to the use of offsets as required. Can you please confirm how much BHP will be relying on this technology, how much will be spent on it, and what the company is doing to advance it? The Science Based Targets initiative has recently stated that no more than 5%-10% of residual emissions should be neutralized with high-quality carbon capture and storage.
Great. Thanks for that question, Ms. Deutsch. Great question. First and foremost, we prioritize operational emissions reductions over using offsets, full stop. We're gonna do our best to reduce our operational emissions and reduce to an absolute minimum the use of offsets. That being said, offsets will be required globally to meet the Paris Agreement's goal of net zero in the second half of the century. In order to meet our net zero goal and in the absence of new abatement technologies, we may have an ongoing requirement to use offsets to address hard to abate emissions like the fugitive methane from our mining operations. Offsets form a long-term systemic element of our climate change strategy, but there is no doubt that we prioritize operational emission reductions over using offsets.
You know, I think the big challenge that we have is going to be around Scope 3 and steel manufacturing emissions. You know, even in the IEA study, you get to 2050 and the steel industry is emitting carbon. Yes, there's some displacement of some reduction of emissions through hydrogen use in steel making. There's some use of CCS, but even the IEA, you know, view that the steel making is gonna be very challenging to fully abate the emissions. And in their own highly talked about scenario, the IEA has the steel making emitting emissions in 2050. You know, our view is that we will have to use offsets in some areas for the hard to abate emissions, but we definitely wanna minimize those.
Thank you, Chair.
Ms. Deutsch has a follow-up question regarding gas-fired recovery. She says, "Does BHP support the Australian government's gas-fired recovery, which has delivered more than AUD 2 billion in subsidies to the gas industry?
Well, I think in the case of Australian government policy, you know, we believe that the world must pursue the Paris Agreement goals with increased levels of national and global ambition to limit the impacts of climate change. We are pleased that the Australian government has confirmed its ambition to achieve net zero emissions by 2050. This aligns with our own goals of pursuing net zero across our operational and value chain emissions by the same date. You know, we're looking forward to the Australian government providing further detail on its plans and how it's going to achieve those key milestones along the way, and we look forward to supporting them.
That being said, we're getting on with our own plans, which we've articulated clearly around Scope 1, Scope 2, and Scope 3, targets and goals. In terms of gas-fired economic recovery, that has a lot to do with it, with you know, power, with power generation. You know, I think the challenge around power generation going forward is to provide you know, affordable, reliable power, but at the same time, meeting all of our goals around emissions reductions. We'll continue to work collaboratively with the government of the day on helping them to achieve the ambitions of net zero by 2050.
Thank you, Chair. Our next question is from Arable Proprietary Limited. They have two questions here, one for you, Chair, and one for the auditor. It's a bit of a long question, so please bear with me. Scientists have estimated that globally we have a budget of no more than 500 gigatons of CO2 emissions before there is irreversible harm and unlivable planet. BHP Scope 1, 2, and 3 emissions in FY 2021 were 418 million tons. At this rate, there would be 12 gigatons of emissions in the period from now to 2050, a staggering 2.5% of the total global budget just from BHP. The first question is for the chairman. In assessing their reliability of val.
In assessing the value of its assets, has BHP forecast the Scope 1, 2, and 3 emissions of its operations for FY 2022-2050? If yes, can these be disclosed? If not, why not, given this is a critical factor for asset values? The second question is for the auditor. Has EY included an assessment of the 2022-2050 emissions when doing its audit of asset values?
Okay. I think we had a lot of discussion around what our objectives are, you know, in terms of Scope 1, 2, and 3 emission reductions and the time frames around all of that. In terms of the capital that we're going to allocate towards that, we're gonna be using our capital allocation framework and the capital that we're going to be deploying to emissions reductions rates very highly in our capital allocation framework, alongside safety, for example, and maintenance of our operations. It's very much at the very top of our capital allocation framework, and I've talked previously about the $2 billion-$4 billion that we're going to attribute to that.
You know, in terms of the value of our emissions, we do use a price on carbon internally. We do that specifically for the evaluation of our capital projects going forward. I think we publish that price on our website. We are using a price on carbon internally. Even though there isn't a global price on carbon as yet, we are using one in anticipation that there could be one going forward. When we're evaluating a project, we like to take that into consideration. In terms of the question for the auditor, do we have the auditor available?
Hello, Chairman. Can you hear me?
Yes, Tim. Go ahead. Did you hear the question?
Yes, Chairman. Thank you. This is an increasingly complex aspect of most businesses, including for BHP. From an accounting perspective, climate change or emissions are not a specific accounting balance, but important considerations to asset carrying values. There is currently no specific standard covering sustainability, but in the last two weeks, a new international sustainability standards board was announced, with one objective being to develop a sustainability standard. Asset carrying values are complex and one that we considered was a key audit matter that we included in our audit report. BHP's financial report is therefore prepared under the current accounting standards. Auditing the recoverable amount of assets is complex and subjective due to the use of forward-looking estimates.
Key estimates in BHP's determination of the recoverable amount include commodity prices, reserves, discount rates, and estimating operating costs. As the chairman just mentioned, those operating costs include costs associated with safety, capital allocation and new development, including technologies and direct sustainability or emission costs, including carbon. The operating cost estimates include both the current costs as well as future rehabilitation costs. Importantly, the assumptions that BHP use reflect BHP's plans for each asset, which cover the life of the asset, not just for the period between 2022 and 2050. As those plans are based on BHP strategies, and those strategies are fully disclosed in the basis of preparation section in the financial report and are therefore considered in our audit.
BHP's climate change strategies focus on reducing greenhouse gas emissions, investing in low emission technologies, and supporting emission reductions in the value chain, including some of the things that Mike and Ken have just discussed. From our audit perspective, we involve our sustainability experts as our audit considers all of these matters, including the potential financial impacts of climate change and a transition to a low-carbon economy, and those impacts are disclosed in note 13 to the financial report. Finally, Chairman, our EY also provides an assurance report over BHP's sustainability report, which includes procedures and assurance over the group's greenhouse gas emissions.
Great.
Thank you, Chairman.
Thanks, Tim. Thanks for that comprehensive answer. You know, question's a very good one. As you can see, it's a very complex and evolving area in terms of the accounting for climate related disclosures. We're a key participant in that process and have been for some time through the TCFD initiative.
Thank you, Chair. Our next two questions are quite similar from Harriet Kater, so I'll just read them in succession.
They're quite long, so bear with me. The first question: As a metallurgical coal and iron ore miner, BHP has a major Scope 3 emissions footprint of 402 million tons of CO2 equivalent per annum. How is BHP balancing its conflicting need to decrease Scope 3 emissions from steelmaking with its ongoing metallurgical coal production from BMA? The second question is: No options can be left on the table if we are to decarbonize steel production in line with a 1.5-degree pathway, including efforts to increase demand for green steel. The SteelZero initiative requires signatories to commit to purchase 50% of green steel by 2030 and 100% by 2050. Will BHP commit to the SteelZero initiative as part of a broader suite of efforts to address its major Scope 3 emissions footprint?
Great. Thanks for that, Ms. Kater. You know, very good question. We've talked extensively about the steel industry and the challenges around the steel industry for emissions reduction. What's interesting in all of this is, in order for the world to achieve its ambitions around emissions reduction, it's going to need more copper for electrification, it's gonna need more nickel for battery storage, and it's going to need more steel. Our estimates are twice as much steel in the next 30 years as it has in the last 30 years in order to provide the infrastructure for decarbonization, like wind turbines and solar and the like. You know, it's a real conundrum because we need more steel in order to achieve our ambitions, but steel itself is an emitter.
There is a role, an ongoing role for metallurgical coal, and it's an essential raw material in the production of steel. Even in a 1.5-degree Celsius world, there's an ongoing role for metallurgical coal. As I mentioned, steel is gonna continue to be needed. There's no ready substitute for steel. That's the other challenge. Given this ongoing demand, technologies to reduce emissions from the production and use of metallurgical coal are essential. That's why we continue to deliver partnerships and programs with our key customers, and we've announced four programs or four customer programs with an expenditure at this point of $75 million in order to identify pathways for the decarbonization of the steel industry. There's a lot of work going on.
There's a lot more work to be done. To answer your question around green steel, yes, you know, there is electric arc furnaces today which are greener, especially if they're powered by renewable energy, but they require recycled steel. The reality is there isn't enough recycled steel in the world in order to meet the requirements for decarbonization going forward. We're going to need fresh steel. Today, the technology for fresh steel, the blast furnaces, require metallurgical coal. Now, we think it'll be working hard. You know, over the next few decades, we may be able to identify new pathways, either through carbon capture and storage or through some replacement of metallurgical coal with hydrogen.
In the meantime, there's the opportunity to continue to reduce emissions through steel by using higher quality materials, and that's really the metallurgical coal that BHP mines and provides to customers largely through BMA. That's why our focus is on the higher value add metallurgical coals because they are lower emitting than the lower value add metallurgical coals. Thank you, Lisa.
Thank you, Chair. Our next question is from the Australasian Centre for Corporate Responsibility. The question is: Rio Tinto recently committed to reduce operational emissions by 50% by 2030. Similarly, Glencore has committed to reduce emissions by 50% by 2035. BHP's target of 30% by 2030 is now significantly lagging its peers. When will this target be updated?
Great. Well, thanks again for that question. Look, we welcome both Glencore and Rio's contribution to addressing climate change via their strategy goals and targets. Action on climate change is important, and all of us in the mining industry have our role to play. No two portfolios or mix of commodities are the same, and therefore, the plans, actions, and targets that are required to deliver on a Paris-aligned climate strategy will differ. We look forward to seeing how both, you know, Glencore, Rio, and our other sector peers progress in delivering against their ambitions. Reducing operational emissions is the bedrock of an effective response to climate change, and that's why we've been setting Scope 1 and 2 targets for several decades now.
Our current target is to achieve at least a 30% reduction in emissions by 2030. It's great to see others joining with us in that ambition. Again, the portfolios are different. I mean, in the case of Rio, just to give a perspective here, the scale of the challenge for Rio is that even after it achieves its operational emissions targets, and we all hope they do, their emissions in 2030 will be about the same as BHP's today and about 50% above where BHP expects to be in 2030. We all have our own challenges.
The targets won't necessarily be perfectly aligned because of the differences in our portfolios, but it's great to see the whole industry, the whole sector coming out with ambitious targets.
Thank you, Chair. There are no further questions on item 20.
Terrific. Let's move on to the last three items of business that have been requisitioned by two groups of shareholders in BHP Group Limited. As Stefanie mentioned earlier, items 22 and 23 will only be deemed to be valid if item 21 is passed as a special resolution. Item 21 seeks an amendment to the constitution of BHP Group Limited to permit shareholders to express opinions, ask for information, or make requests about the management of the company by advisory resolution at general meetings. Item 22 recommends that BHP suspends its membership of industry associations where their record of advocacy is, on balance, inconsistent with the goals of the Paris Agreement. Item 23 recommends that BHP disclose further details pertaining to its thermal coal, metallurgical coal, and oil and gas assets as part of its annual reporting.
Now, the board gave these resolutions very close consideration and ultimately concluded that while item 22 substantively aligns with BHP's existing approach, we could not support items 21 or 23. The board therefore recommends a vote in favor of item 22 and a vote against items 21 and 23. For clarity, that's a vote in favor of item 22 and a vote against item 21 and 23. Further details are set out in the notice of meeting. Lisa, do we have any questions on these items?
Yes, we do, Chair. We have a question from Mr. Steven David Main on item 21. It's a comment and a question.
"I've never understood why boards continue to reject opinion-based resolutions when these are standard in the U.S. What is so wrong about a group of shareholders putting up a resolution that expresses an opinion? It's a great way to gauge shareholder sentiment. You've been accommodating on certain climate issues, so please be more accommodating on this question of opinion-based resolutions by voluntarily accommodating them when the Constitution gets reworked as part of the reunification.
Well, again, Mr. Main, thanks for the question, and we'll take your suggestions on board. Look, first and foremost, you know, item 21, which is the amendment to the constitution, is there. In the structure that's put forward through the notice of meeting, there's no limitation to, and there's no limitation in the response to BHP or our shareholders around those special resolutions that follow number one. Number two, I think in the case of constitutional reform, you know, I think it's dangerous to look at this at a company-by-company basis. You referenced the U.S. We've looked at this very carefully. You know, there are very specific hurdles. It's more a well-developed framework in the U.S., and it's legislated. It's not company by company.
I think, look, if this is the way that the market wants to go, then I think it's for governments to take a look at this and to put in place the appropriate mechanisms as opposed to, you know, each company doing it on a case-by-case basis and adjusting their constitution.
Thank you, Chair. The next question is from the Australasian Centre for Corporate Responsibility. Does BHP believe Australia should update its 2030 nationally determined contribution?
Well, look, again, I think I've answered that question. We believe that the world must pursue the Paris Agreement goals with increased levels of national and global ambition to limit the impacts of climate change. We welcome the announcements by the Australian government to confirm its ambition around achieving net zero emissions by 2050. That aligns with our own goals, so we think that that's very positive. We'll continue to work with governments around the world in terms of increasing ambition and alignment to the Paris Agreement. Our primary focus is to get on with the job of reducing our own Scope 1, Scope 2, and Scope 3 emissions.
Thank you, Chair. There are no further questions on items 21 to 23.
Okay. Well, thank you, ladies and gentlemen. Thank you for all your questions. This now concludes the formal business of the meeting. We value your comments and feedback. We'll continue to work for ongoing improvement on your behalf. I'm gonna close the poll five minutes after the conclusion of this meeting, so if you haven't already done so, please complete your voting now. All votes cast today will be added to the votes cast by BHP Group Plc shareholders at their annual general meeting, which was held on the fourteenth of October, 2021. The total sum of votes will represent the final voting result for each item of business. Results of the overall voting from both general meetings will be announced to the stock exchanges in London, Australia, New York, and Johannesburg shortly after the conclusion of today's meeting and will be published on the company's website.
Ladies and gentlemen, that concludes the business to be dealt with at this annual general meeting, and I now declare the meeting closed, subject to the finalization of the poll. Thanks again for joining us today.