Okay. Good morning, good afternoon, and welcome everybody, and thank you for joining us today for the second of our sustainability performance updates for 2021. Well, next slide, please. For those that are avid readers of legal documents, we've got one here for you. Preferably, we'd like you to read it in your own time. Next slide, please, Rob. Good. The order of play today is, I will provide the update on our ESG performance, and then I will talk to the next steps on our climate journey, and hopefully you'll have seen our releases earlier this morning. Jon Samuel , our Head of Responsible Business Partnerships, and he leads our socioeconomic development work, will talk to a very different approach we're taking to supporting livelihoods in our host communities and countries.
We believe this approach is well beyond the traditional model for mining and is certainly something that we are continuing to develop. Finally, Zahira Quattrocchi, who leads our global tax practice, will explain other exciting ways that we're modeling good corporate citizen behaviors, trying to be a trusted partner with our communities, our governments, and all of our stakeholders. Next slide, please. Thanks, Rob. We'll start with health and safety. Again, keep moving it, Rob. Let's start with the most important issue we've had to deal with in the course of the last 18 months, obviously COVID and our WeCare program. You've heard us talk about the holistic and coordinated program we've had in place since the outset of the pandemic to protect both lives and livelihoods.
In many ways, the pandemic has proven more challenging this year than last, particularly in those countries where vaccination roll-outs have been slow and certainly remain low. Our work this year has been focused on keeping employees and community members safe, making sure that people know their status, so they help us keep everyone safe, while at the same time we help each other manage the unintended consequences of the pandemic. Mental health and gender-based violence programs have been very important in managing some of these secondary but also very material issues through our communities. Pushing the longer term solution around vaccinations, both within our operations and in our communities, has been a key part of our work. In many places, we're actually administering vaccines to both employees and community members, and that's been a very important part of our program.
At the same time, we need to bring our business back up to capacity, has been a very important part of the measured and carefully managed process throughout the operations. Making sure new protocols protect people while COVID remains an issue in society in the broader sense. It's about making sure that we're also making people aware of the issues, making sure we're tackling complacency, between the respective ways and to help people move beyond the many unhelpful mythologies and false information that we have, circulating around communities, and through social media on vaccines. That's again, a very important part of the work we're doing, and certainly in some of our open forums, we've been able to debunk some of the silly stories going around, but there's still a lot of work to be done. Next slide, please, Rob.
Now, for us, going into the central part of the conversation, which is more specifically our ESG work. You've seen our strategy work before. You can go to the next slide, Rob. And needless to say, clearly ESG is at the heart of our strategy. Our portfolio guides our strategy, and our strategy has three interlocking areas. Sorry, our purpose guides our strategy, and our strategy has three interlocking areas of endeavor: portfolio, innovation, and people. It's about making sure we've got the right assets. We're making sure we're bringing those assets to account, and you can only do that if you've got the right people doing the right work at the right time. Of most relevance to our discussions today and central to our innovation work is FutureSmart Mining, which is again, our holistic approach to driving competitive transformation.
FutureSmart Mining is about driving sustainability outcomes through technology and digitalization. Developing and implementing step innovations to transform how we source, how we mine, process, move, and market our products to customers. It's not a new concept. We've been talking about FutureSmart and how we're linking all these key elements together since 2015. Certainly, it's central to our progress around safety and the reduction of our energy, water, social, and physical mining footprints. Next slide, please. Thanks, Rob. Our Sustainable Mining Plan addresses the E, the S, and the G, although we have our own names for each of those to help bring them to life and drive the change we want to see across the organization. We have to make it live for all employees.
The E equals healthy environment. The S equals thriving communities, and the G is about being a trusted corporate leader in all of its dimensions. Each term and each conversation has a clear set of stretching goals that we set three years ago. As you would expect, as we improve, we continue to increase the stretch in these targets. This is about making sure we improve and we're covering the right ground and continuing to improve as part of our culture and as a way of doing things across the organization. For our mines to be safe, responsible, and productive, they need to operate in areas that are thriving. This is where our collaborative regional development. When we talk about areas, we're talking about within communities, both in the local sense and on a broader scale, whether it's provincial or in regions.
This is where our collaborative regional development approach comes in, which is all about creating collaborative mechanisms that drive economic development that is wholly independent of mining in our host community. We get together with other mining companies, we get together with other businesses, we look at the infrastructure we each need and try and position those infrastructures so the community has access to and gets a broader benefit so they can also develop new commercial opportunities. I should also point out, again, as you would expect, that safety, health, environment, and social metrics are embedded in our executive and senior management pay mechanisms, both bonuses and long-term incentives, including specifically around emissions and off-site job creation. Next slide, please, Rob. On safety, health, and environment, we continue to focus on our improvement journey.
We have come a long way, but up to today, we still have more work to do. Looking at safety, while I'm pleased with the progress, which reflects the great work of the Elimination of Fatalities Task Force, and in fact, if you go back to 2013, we've reduced fatal incidents by 93%, but we've still got a way to go. Obviously, with the sad loss of Carlos Gonzalo Rodriguez at Quellaveco a couple of months ago, it does tell us there are still things that we can do better, and certainly lessons we can learn across the business. We're certainly working hard to get to that zero. For us, we've had one fatal incident in the last 14 months. That's one too many.
We can see zero, we can touch it, but we're not there yet, and we will continue to work as hard as we can to get there, and more importantly, in the longer term, work a lot smarter. In terms of health cases, ongoing improvements in controls and our focus on the elimination of the hazards at source are having a very positive effect and impact across the operation, which is really important to us. That's exposure to dust, chemicals, and other environmental hazards that have immediate potential health impacts. On the environment, no incidents to date, touch wood. Again, a good result, and that reflects the work we've done to improve our planning and operating disciplines across the business.
When we were in a conversation almost two years ago now regarding a couple of upsets in the platinum operation, I pointed to this chart saying, "Look, we've come a long way. We've improved. We've got much more consistency in the operations, but we're still not at that level where we want to be." I think this chart is a good chart, and it's almost a surrogate for other parts of the business. We're doing better, but we've got more work to do. Next slide, please. Excuse me. We've also been improving our performance on a broader front, and the pandemic has reinforced to the outside world the importance of a mining company's social performance work.
We support over 138,000 enterprise development jobs in our local communities, and it's around 200,000 if you factor in the impacts of our local procurement activities. We have ambitious plans as part of the SMP, that's the Sustainable Mining Plan, to achieve our 2030 target of supporting five jobs outside the mine gate for every job inside the mine gate. That talks to future of work and other concepts that we understand and are developing to make sure that our workforce and our communities are connected, and we're making a real difference in the communities for the longer term. Looking at female senior management representation, we're making good progress towards our goal of 33% by 2023. We're actually at 28%. We've actually been at 29%.
We've had some changes, but again, the direction of travel has been very positive, and I certainly expect to get to 33% by 2023. Finally, last year, we launched our new Social Way 3.0 program, and that is our package of social standards and practices. We're working to fully transition to the new higher bar that we've set, which really is the industry benchmark for community engagement and social performance. In stepping back, you can see our trends of improvement across this range of non-financial metrics, and certainly, something that we all talk about on a regular basis within the business, and it certainly defines the approach, the thinking, and how important it is to us from a cultural perspective. We believe the market recognizes these improvements as indicators to how we think and create a resilient and sustainable business. Next slide.
Thanks, Rob. Now, a quick update on our progress towards Sustainable Mining Plan goals across the board. In some of the more mature areas, such as reducing carbon emissions, we have initiatives up and running. In others, it's strategies and baselining work is where we're focused at the moment. On the whole, the major goals are on track. As you would expect, COVID has slowed progress on some interim milestones, but the teams are working on ways to catch up, and we remain on track in terms of the overall programs. We are looking at whether there are ways that we can define our goals in more, in a more tailored way to our portfolio as it evolves. This reflects CO2 emissions are addressed globally.
Water needs are more local, and so we need to think, I think, a little more creatively in how we present metrics that represent those local jurisdictional issues in a way that's meaningful to the broader public and our stakeholders. That's a work in progress. If anyone has thoughts on that, we'd be very open to listen and see if you've got ideas that we could consider. From our point of view, big areas of focus, obviously Chile, water-stressed environment, so water scarcity continues to be a major challenge. In the central zone in Chile, where Los Bronces is located, it continues to face unprecedented climate conditions with the continuation of the longest drought ever recorded, and 2021 likely to be the driest year ever recorded.
First and foremost, we recognize that fresh water sources must be prioritized for human consumption. The work around Los Bronces has really been about identifying new water sources, converting what may have been brackish or other types of water sources to sources that we can use. There are a whole range of solutions that the team has put together to keep us operating. We'll need to continue on that work to make sure that we've got capacity for the longer term. It's clear in the longer term we'll need enhanced water security that will require the construction of desalination capacity. Our focus at the moment is to work collaboratively with our stakeholders to ensure that whatever solution we proceed with contributes to a better outcome for all.
That's with local businesses where we share water resources, it's local communities, and on a broader basis in terms of Chile. That work is currently underway. It's not currently our intention to construct a desalination facility as we believe we have appropriate water security. Certainly I think it will remain in the mix as part of the longer-term options that we're looking at. Our near-term focus is on enhancing water efficiency as well. I think we're up to about 87% recycle of water used in Los Bronces as we speak. Again, we still think we can squeeze a bit more out of the system, so more work to be done there.
We're also looking at new technologies, and we're trialing these technologies in El Soldado, such as Coarse Particle Recovery and bulk ore sorting, along with other infrastructure investments. That looks at use of tailings thickness to improve those efficiencies, and that should help continue improve our access to water. At Collahuasi, we're expecting approval of an EIA, which will facilitate this construction of a desalination solution and is expected to commence ramp up by the end of 2024. This timing will enable a significant reduction of water use from continental sources, which will then be incorporated into our expansion programs for the site for the longer term. Our share of initial investment at Collahuasi is expected to be around $900 million for all desalination, pipeline, and electricity infrastructure.
Importantly, it is modular, allowing us to increase water supply over time as the operation grows. As you know, the resource has significant potential. The project will provide around 60% of the operations requirements. Current water recycling rates are around 77%, so there's more work we can do on the efficiency side. At the same time, the guys are doing reasonably well, but we can do a little bit better. Overall, we're happy with the progress on the Sustainable Mining Plan, and as said, we're running a process to refresh the plan to stay in line with emerging issues, which we'll also update you on next year. Again, some learnings through COVID that we'll incorporate into the new plans. Certainly I think, we'll take another step over the next 12 months in getting better at water right across the business.
Next slide, please, Rob. Excuse me. Now, to look at the first pillar in our SMP, that is the environment. In April, I said that we were finalizing our work on Scope 3. Coinciding with the release of our latest climate change report that we published this morning, there are three key areas I'd like to highlight from the report. Rob, next slide please. The key point, our products enable a sustainable future. Remember, mining has a critical role to play in providing the metals and minerals needed for a low-carbon world, particularly in terms of energy and transport.
Without copper, nickel, PGMs, high-quality iron ore, and met coal we produce, and the extremely low carbon fertilizer we will produce, which we do think is a game changer, the world cannot transition to a lower carbon future or indeed feed itself. Our transformation of the quality of the portfolio is firmly in line with those trends, that is, to improve those trends, with the addition of the Woodsmith project and our exit from the last of our thermal coal operations in our most recent portfolio changes. In line with an ever greater proportion of the portfolio supporting the future we all wanna see, over 90% of our growth capital is earmarked for projects in future enabling products. That's a really important point to make. Next slide, please, Rob.
More specifically, in looking at how the our Scope 1, Scope 2 carbon emissions evolve over time, our responsibility to society and our customers is to produce metals and minerals while protecting the environment through efficient and environmentally responsible footprint management. This is the stuff we control directly. Our 30% Scope 1 and 2 reduction target by 2030 targets are clear, and our ambition to deliver carbon neutral production across our operations by 2040 has been articulated very clearly. Our pathway to carbon neutrality is shown. The first steps are around renewable energy. Contracts are in place in South America, and I will touch on our plans in Southern Africa a little bit later. With those plans in place, our FutureSmart Mining technologies are key to reducing energy use in an absolute sense, thereby increasing efficiency.
This is all about reducing our costs so that we're improving our competitive position, which also provides us with the ability to develop cleaner technologies such as hydrogen haulage, which is all about replacing diesel that we use in the operations. Diesel represents about 17%-18% of our carbon emissions. Again, that's a material step that we need to take to make sure we get to neutrality by 2040. Tackling the challenge of methane emissions in our met coal operations is also very important. You can see the orange section on the slide. What we need to do and what we're working on with industry partners is the vent air methane, and we have some promising technology solutions which we're about to start testing.
Finally, if we can't abate emissions from every source, we do see a role for negative emissions technologies, either through nature-based solutions or mineral carbonation. Now, I know these things have gotten a lot of airplay in the last three or four months. We've been looking at this stuff for about three or four years, so we've been well into the research and the conversations about what we can do, and carbon sequestration in laterites is a good example of those technologies in play. The guys understand it. We've done work both in De Beers and across Anglo, and certainly there's some interesting technologies. But what we don't want to do is rely on those technologies to actually get us to carbon neutrality. We're looking at, in a broader timeframe, looking at those as being additional carbon sinks. Next slide, please, Rob.
On our hydrogen truck, I've literally just come back from South Africa. I've seen the chassis, I've seen all the moving parts. I've actually been through the building that you can see there. The pilot project is progressing well. It is in South Africa at Mogalakwena. It's really important to make these points. Firstly, we're not building a trial unit that can run around a car park for 10 or 15 minutes. This is a fully functioning 2 megawatt to full in-mine functionality. It's a fully usable truck that is loaded, hauls, and dumps material at the crusher. It's a 290-ton capacity unit. It's the real deal. No one has done it yet. This is a first and is at least 2 years ahead of our competitors.
That first truck is on site and being built as we speak. As I said, I've just come back from the visit to the site. The guys are working that through. We expect that to be operational early next year as we put all the pieces together, and we do the full early field trials, and we expect it to be functioning, as I said, early next year. When we look at the whole truck fleet, we're already looking at the second pilot unit based on what we've learned in building this first unit. We'll finish the trials off, we'll then go into the second phase, and then after that we'd expect to start changing the truck fleets starting around 2024. We would look to replace our global truck fleet, it's around 400 trucks, over the following 10 years.
As our trucks come up for lifecycle changes, we would go 10 trucks at a time, which includes the electrolyzer unit that goes with those trucks, and we'd progressively implement that change over the 10 years. We do expect the technologies and the efficiencies to improve over time as well based on what we've learned through the process, based on what we're hearing from those that are further down the track in the automotive sector. For us it's an exciting time. Longer term, we believe this fleet configuration is right up there with any fleet configuration in terms of efficiency, unit operating costs, and it really is about being part of the future. It's also a unit that's quite flexible.
It's a hybrid hydrogen battery unit, which allows us to be flexible in our stripping, which is the biggest part of our mining costs across the operation. That's where you want that flexibility. For us, again, this change represents a reduction of 15% of our carbon emissions. Again, a very important component of the program that we've had to take the lead on because the OEMs weren't in a position to drive this. We've driven it and now they're following us. That's good news. Long term, don't need to be a truck manufacturer, but we needed to set the pace of change and that's what's happened and others are following. That's good news for the industry. Next slide, please, sir. Rob.
In terms of renewable electricity, again, I'd like to make the point that we're not just talking about change, we're doing it. Today, our Scope 2 emissions is about switching to renewables. We've now signed contracts for all of our South American operations, and by the end of next year, we will be 100% South America renewable supply. This will take our renewable electricity from about 36% of total electricity into sites across the globe to about 56% in 2023. So 56% of our input energy, main supply energy, will be renewable source in 2023. To get the last 44% requires us to think differently again in some other jurisdictions, and I'll talk a little bit more about that later. It does require some investment, either from us or third parties.
The interest we've had from third parties and other producers of electricity in those areas in which we'll go certainly gives us confidence that, one, we can return our investments. We can get a return on our investments. The capital or the outgoing capitals will be relatively easy to manage depending on the absolute cost we're chasing and the returns that we want for the capital that we put into the system. It is a work in progress, concept and scoping, but certainly the pathway looks pretty good. Certainly we believe we're gonna be able to wash our face or better in terms of capital inputs. That, from our point of view, is part of that competitive positioning that we see that we think is quite different to our competitors. Next slide, please.
Now, to give a very specific example of where the bulk of that 44% next step will come from. We talk about Southern Africa. At the moment, we don't have the same grid systems that we've got in South America in terms of hydro supply. We've got to create a different grid or be part of a different grid through the country, which we then use in Southern Africa. It goes more broadly beyond South Africa. The system that we're talking about involves wind power, solar, and other technologies that would provide us with energy in absolute terms to supply all of our sites. We would wheel some of that energy through the South African grid.
We'd have some inside the fence, which we would use and dedicate to production of our operations locally. We would also use that capacity to produce hydrogen. We'd also use our deep underground mines that store water, and we use that water basically as a battery, where we pump the water up when we've got excess renewable power and allow that water to run back down. It effectively becomes a battery. That system, from the work our teams have done, would actually reduce our storage capacity, which is important as it goes with the renewable approach, by around 50% compared to lithium batteries or even hydrogen storage. It's a really smart solution based on the physical assets that we've got in the country that are underutilized and provides us with a really cost-effective solution for the whole South African package.
Again, Tony and the team have been working hard on smart solutions that improves our competitive position while delivering carbon neutral operations by 2040. That's what the team's been working on over the last five years. We've prioritized South Africa. 75% of our remaining Scope 2 emissions, which comes from South Africa. That's why this is such an important project, given that we've already done or we will have 56% of the renewable supply in place by 2023. It also supports South Africa's commitment to Paris and contributing to just transition. Again, it ticks all of the boxes for ourselves, for our stakeholders, for the countries in which we work. It's a better outcome because ultimately we think those hydrogen networks can be used in our broader community.
A number of things that help us in our whole sustainability strategy. It's a hybrid project. It does involve investment inside and outside the gate. The exact mix will be designed up over the next 18 months, but we're very excited. It certainly looks like a good investment, and from our point of view, is a genuine operations improvement opportunity. It's a genuine economic opportunity. The good news is it's a sustainable project. Again, through Tony and the guys who've really come up with some smart ideas on that front. Next slide, please. Rob. Getting to Scope 1, Scope 2 carbon neutrality. We've got pathways. We've got plans. We've got the projects. We know how to get there. We're in process. As I said, we're already at 36% renewables moving to 56%.
We're not talking about it, we're actually doing it. Consistent with that approach, we've been working on the Scope 3 emissions conversation, a very important part of the story, and you would have seen our emission targets that we set out this morning in our releases. It is different to Scope 1 and 2, so the way we think about it has to be different too. Now, Scope 3 is always the Scope 1 of another enterprise, so we cannot directly control it. We do have and have done a lot of work to understand it, which is then the key to being able to influence it. There is a detailed inventory in the climate report of our 115 million tons of greenhouse gases. They're our Scope 3 emissions, but a few things do need to be pointed out.
While the Greenhouse Gas Protocol provides a framework to measure Scope 3, there is a significant scope for interpretation, and companies have developed different methods appropriate for them to understand the carbon intensity of their value chain and how they'll track the reduction in that intensity. Our approach builds on our 2019 disclosure and reduces double counting as much as possible. We're attributing our emissions into met coal and iron ore in producing a ton of steel. We've tried to get that balance right, make sure we're not double counting those numbers. That gives us more confidence that the targets we're setting are in fact real and can be looked at in the context of the broader emissions conversation. It does provide us with the tracking of the effectiveness of our solutions as well.
It achieves both outcomes. We'll come to it in more detail, and this will be expected as this would have been expected. It's also worth noting that 77% of that 115 million tons is related to the steel value chain. That's not a surprise. It's a statement of what the numbers are, and so that's where the real focus is in making sure that we're influencing downstream outcomes. Next slide, please, Rob. As you've heard the announcement today, we're reducing our Scope 3 emissions by around 50% by 2040 on the baseline that we've laid out.
We're confident that we can deliver the ambition, and if the steel industry is able to decarbonize in line with the 1.5-degree target, that's the Paris-aligned trajectory, we believe that we could reduce our Scope 3 by as much as 80% by 2040. Because certainly from our point of view, with the high-quality products that we produce, those products are valued and would be priority feeds for green steel applications. That's how we're thinking about the contributions we can make both now and in the medium to longer term, and we become part of the long-term green steel solution. Our baseline excludes the thermal coal operations that we demerged this year.
You can see it on the chart there, but we're putting it there to show you the trajectory that we have from where we were in 2020 to where we'd be in 2030. The light blue area actually reflects growth in the business. As we're driving and growing copper production, nickel production and those products that will actually help drive the transition. That's what the world needs. We are continuing to improve to reduce the intensity of our production, and that increase that you see to 2030 has been mitigated by the efficiencies that we've delivered. Then we track down very aggressively through 2040 based on those efficiencies applied against those volumes in the following 10 years.
It really doesn't reflect how hard we're working in that first 10 years, 2020 to 2030, but we are building and growing the business, and we're building and growing those materials that are needed to drive the energy transition in any case. I think that's a really important point to make. Certainly from our point of view, it shows how we are in different dimensions, driving real change and providing the products that will help drive the broader transition. If we were to take those incremental products back in terms of credits, then obviously our 2030 number would look far lower if we took the credits back for where copper and that was being used in other applications. That'll be a conversation for another day, and we'll get that tuning over the next couple of years. Next slide, please, Rob. Okay.
We have three primary levers to pull to help us deliver our reduction ambition. First, our portfolio composition, especially the quality of the products we supply. High-quality iron ore from Minas-Rio and Kumba is well suited to be used as DRI pellet feed. DRI is already a more carbon efficient means of producing and coupled with renewable power, and then ultimately hydrogen is a pathway to green steel. We're well placed to serve that market. We're also going to work with our customers to ensure we're always innovating to provide the best products associated with their needs for efficient production. That's an ongoing improvement journey. Now met coal is also high quality met coal, hard coking coal. It brings emission benefits in terms of blast furnace efficiency. That's obviously key in the short term.
Longer term, met coal will be transitioned out of the steel mix, but we expect that to be more like 2040 and certainly with our resources and reserves, our long-term life would also correspond to that transition. We think that's a consistent mix with the broader targets in reducing Scope 3 emissions. Second, as with others, we're forming partnerships to support our customers' efforts to decarbonize. Finally, we've set ourselves the ambition of achieving carbon controlled ocean freight by 2040 as well. Again, working on a number of fronts, the technical team, the operations team, and our marketing teams are all in there making sure that we reduce our carbon footprint across the board.
Next slide, please, Rob. Now talking about or contributing to the just transition, the other element that we talk to is how we connect with communities and other stakeholders to make sure that the transition is being managed in a just way. We thought carefully about the just transition together with the Council for Inclusive Capitalism. We brought our expertise, experience and expertise in social performance, including the collaborative regional development model, together with our approach to mine closure to the issue. Essentially, the just transition is a form of social economic development and needs to be considered as such.
Again, Jon and the team have done fantastic work in making sure that we think short, medium, longer term in terms of how we're transitioning and providing new opportunities for our communities, such that, for those areas where we're leaving, we're leaving a positive footprint to work with, to provide other commercial opportunities in those communities. Now, Jon will talk to that in just a moment. Next slide, please, Rob. To recap on climate change, and if you look at the top and then the second row of initiatives. To deliver on our initial carbon emission strategy, we have targets. We delivered on our initial emission reduction targets one year early. That's a positive outcome.
We're on track to hit carbon neutral for Scope 1 and 2 by 2040, aided by our plans for South African renewables in that strategy. We've stretched ourselves to go further now with a 50% reduction ambition for Scope 3. We're thinking about climate in an interconnected way, including in relation to biodiversity, but also within the context of the just transition. Next slide, please. With that, I'll hand across to Jon. Jon, we're in your hands.
Thanks very much, Mark. As Mark said, I'm gonna talk a little bit about the livelihoods work that we do in Anglo American, and it's obviously relevant to many of the challenges we face of just transition, as Mark has mentioned. It's also really relevant at the moment in terms of supporting COVID recovery in our host communities. It's relevant to the debates about automation and of course, the expectations that our host communities and countries have for economic benefits from mining operations as well. I think it's important to say, we see this as a source of competitive advantage and increasing advantage for us, given where we expect future mines to be developed, which are, you know, predominantly non-OECD locations. It's something we've thought about for a long time.
I'm obviously not gonna read every word on this slide, but our founder, Sir Ernest Oppenheimer, was talking about the contribution of mining to host communities and countries back in the 1950s. We had our first professional social investment function established in the early 1970s. Our first enterprise and supplier development function focused on black South Africans in the late 1980s. That innovation and codification of what we're doing and professionalization has carried through to this day. As Mark mentioned, we have significant stretch goals in the Sustainable Mining Plan on education, health, and livelihoods, and we have livelihoods as part of our long-term incentive plan structure as of this year. Next slide, please, Rob. To help us reach this much higher level of ambition that we've set out, we've developed something we call collaborative regional development or CRD for short.
What this is really trying to do is move away from isolated one-off projects to much larger, longer-term interventions that support broad economic diversification in the regions where we operate. We do it at the regional, not at the neighborhood level. As you can see, there are some key features that we apply. Firstly, governments obviously do development planning, but we think we can bring something with a business approach as well to complement that and to build on that. Secondly, there's deep engagement with stakeholders to understand what their aspirations are. We also back that up with rigorous data analysis for the region. For example, we will look at things like climate, soils, infrastructure, skills.
We will look at tourism and environmental resources and so on, to try and build up a holistic picture of that region. From that, we can identify what are the untapped opportunities. You know, are there tourism resources that are not being exploited? Is there a mining value chain that's really not developed as much as it could be, given the demand that exists within the region and further afield? We identify the untapped potential, and then we build partnerships and take those projects forward. Importantly, we do that under a multi-stakeholder governance framework. We think it's really important that we, as Anglo American, aren't seen as driving all of this. We want many stakeholders to buy in, including, of course, government, but also companies, including mining companies as well as NGOs.
Then this is all underpinned by a rigorous project management cycle. Next slide, please, Rob. There are a few principles that we're always trying to apply, given our sort of particular lens as a business. Firstly, as I mentioned before, we're looking for programmatic interventions, big, long-term, scalable. The reason for that is it allows us to plan much more rigorously, evaluate impact, and improve much more rigorously. It also allows us to attract the best partners. We see partnerships as really essential, both in terms of expertise. There are many organizations out there that have been doing socioeconomic development work much longer than the mining industry as a whole.
Partnerships also bring legitimacy and credibility, and they also bring access to new funding pools to support the interventions we're looking to promote as well. As a company, we always try and bring a productivity lens, whether that's supporting the efficiency of small businesses, for example, that we're supporting or other suppliers, or whether it's improving the quality of education and healthcare through supporting existing public service providers by allowing them to be more effective and efficient. We're always trying to pull the levers that we have within the company, and the biggest of those is our supply chain, our procurement, which is roughly about $11.5 billion a year. That's typically about 100 x our social investment budget.
We also look at things like the skills within the business, and we've been rolling out a group-wide skills-based employee volunteering program to tap into some of that expertise, for example. Next slide, please, Rob. Agriculture is just one example of how CRD can work out, and it sort of lends itself quite nicely to an illustration of how it works. One of the things we've identified in many of our host regions is that there are actually much more valuable crops that can be grown than are being grown at the moment. There's a catch, which is that for them to be viable, they need in-region processing. To have in-region processing, you need the right volume and quality of feedstock.
No one actor on their own, acting in isolation, can actually provide that level of feedstock. If we work with partners, we think we can bridge that gap and actually bring in the offtake partners to do the processing and then find route to overseas markets. This is a schematic illustration of a model we're working on in South Africa, where at its heart there'll be a commercial farm, and that might be on our land, or it might be on other partners land. On that, we will put in the right infrastructure to support high-value agriculture, and we will draw on mine infrastructure, for example, things like water, power, logistics. Then around that, we will actually allow other participants to use that infrastructure as well.
That might be other farmers, commercial farmers, but it might also be other smallholder farmers. It could even be people growing small amounts of crops in their backyards as well. Some of the things we're looking at can be literally grown in oil drums, for example, and they could sell their crop to this central processing hub. By doing this, we believe we can, A, get better value for our land and for other landholders, so there's a commercial win for us, potentially. There's lots of jobs we can support, and we can uplift the livelihoods of many thousands of people around our communities in South Africa. To give you a couple of examples, if you go to the next slide, please, Rob.
In South America, we've been working with Inter-American Development Bank and TechnoServe, which is a specialist NGO that focuses on business solutions to poverty. We've been working with them in Brazil, Chile and Peru on a project we've called Beyond Extraction, and you can see the targets for that program there. We've actually supported or created almost 5,500 jobs. We actually met the targets in that program, and you can see it for the businesses that participated, almost a 1/3 increase in turnover from the expertise they benefited from in the program. A newer program in Zimbabwe called Takura, again, working with TechnoServe. We are planning to support about 600 farmers, almost 2,000 jobs. We're in the second year of the program. We're actually slightly ahead of track despite COVID.
That project, for example, is already exporting fresh produce to the U.K. and the Netherlands, for example. It doesn't rely on local economies and brings in much needed foreign income. Can you move to the next slide? Just finally, we don't think that our higher ambition in this space means that we have to massively increase our social investment budget. Social investment has been the traditional way we've supported this work, but we think there are other pools we can draw on. Third-party grants is an example, and the Beyond Extraction partnership I just mentioned did secure $2 million of co-funding from the Inter-American Development Bank, for example, which was obviously incredibly welcome. We see the commercial sources of funding available to support sustainable development as perhaps the most powerful.
To give you one example, in South Africa, we're running a pilot on impact investment. Impact investment has been something we've been interested in for some time. When we looked at that market, what we found was that actually there's a lot more funding available than there are good projects. Rather than us set up our fund, what we are doing is investing our cash in supporting the identification of businesses that want to receive investment and then their capacitation so that they can actually become investable by the impact funds. Then we've created a network of appropriate impact funds that are interested in the sorts of businesses that operate in the regions where we are located. The pilot's going very well so far. There are currently about 25 businesses in the pilot.
They are looking for almost $90 million worth of investment. Not every one of those deals will be successful, but if they were, that would be about 5,000 or 6,000 jobs. It's actually costing us very little in terms of support from our side. What we're really just paying for is the assessment and the capacity development of the entrepreneurs, and that's not expensive from our point of view. Meanwhile, we will continue to look at pulling the levers we have even harder. About 80% of our procurement spend is already sourced in our host countries, but we're working to try and get more of that into our host regions as well to support socio-economic development in those regions. We will look at other options, such as our infrastructure.
Mark talked about some of that with the hydrogen economy, for example, as well as further trying to tap into the skills and expertise we have in the business to support host regions. I'll leave it there, and I'll hand over to Zahira, who's now going to talk to some of our sustainable tax work.
Thanks, Jon. Thank you very much. Yeah, I wanted to provide an overview of the contribution that we're able to make across the host countries where we operate. I also wanted to link this with a very strong connection and fundamental connection that we see between tax and ESG. As tax people like data very much, I thought I'd start by taking you through some of our numbers, you know, on our tax and economic contribution as it is sort of shown in our tax and economic contribution report. You have the link to the tax and economic contribution report at the bottom of the slide.
We think it's a very powerful document, a very powerful tool. It fosters real transparency and better engagement and conversation with our stakeholders. It really helps explaining the principles and values of our approach to tax. It's not just about numbers, it is really about much more. I really encourage you to go check it out if you're interested. We've been publishing it for seven years now, we started to do that because there was a wide interest coming from civil society, stakeholders and host countries about critical issues about tax. We wanted to be clear and transparent.
Over time, we really improved the level of information that's actually brought in in the tax and economic contribution report, adapted it to best practice and transformed the way we communicate about tax to be more about information rather than just you know, inundating stakeholders with data. As you can see from the chart, the report last year shows a quite significant economic contribution of more than $25 billion. Of those $25 billion, more than $5 million are tax borne and collected, so quite huge.
We expect a larger contribution this year, very happily so, because we see paying the right tax at the right time and in the right place as a key part of the partnerships that we've developed and we continue to develop with host countries. It is not just about tax, as I was saying. It's about how we continuously contribute to countries throughout the life of the investment. During the discovery phase, we do that through job creation, through collecting taxes on employee wages, through local procurement and by paying our own indirect tax. When we start mining and be profitable, we also make royalty payments and obviously pay corporate income tax. Next slide, please, Rob.
Such substantial contribution has to be grounded on excellent governance, obviously, and has to be measured against relevant and best-practice metrics because we want to make sure that we keep on striving for continuous improvement and want to be at the forefront of transparency. We think that governance and how we measure ourselves against the appropriate metrics are key to continuing that journey. It is not an easy journey because we recognize that transparency expectation continue to evolve and will continue to evolve. We really want to stay on top of that evolution and continue to be on the forefront of that evolution.
This slide shows six key areas which are sourced from the Global Reporting Initiative Tax Standard from DJSI, Sustainalytics, FTSE Russell. We try to really stay on top of what are the relevant metrics for our stakeholders and for ourselves to make sure that we measure our progress and what we do against those metrics. We also really try very hard to make positive contribution to ongoing developments we have created in our organization and a tax and sustainability head, so a tax and sustainability organization to make sure that we really thrive and stay on top of this.
We do support our stakeholders and join the conversation very happily, like we did when the Global Reporting Initiative set up a consultation and working group to come up with a GRI 207 tax standard, which sets best practice on tax reporting and of which we are early adopters. Who knows about tax, but generally about sustainability, knows that a standard one way to look at information and data is actually very important to be able to compare apples with apples. We advocate for more and better tax transparency and better tax systems, which foster good tax governance, and that's really critical for us, as it sets strong foundations and is brought to life by our tax control framework global rollout.
That the tax control framework rollout appropriately prioritizes the conversation about tax risk management in the company and ensures the most effective processes and controls are in place in a standardized way throughout the whole organization, making our top management obviously sleep better dreams. Next slide, please. Finally, just a quick look on how tax is integrated in a Sustainable Mining Plan. I would say not just integrated, really, embedded in the Sustainable Mining Plan. Because for us, transparency is not just about disclosing information, it's not just about ticking a box.
We believe being a trusted corporate leader means embedding Anglo American sustainability drive in all that we do, and being fearless really about how we engage with others, wherever we think there are perspectives and experiences can help build better tax systems, better tax bases that benefit society and communities where we operate in the long term. Again, it's a partnership that we think about. It's not a taxpayer government type of relation where things are very cold and straightforward. We are relentless advocates for open and transparent relationships between companies and government on tax. Transparency is a way to build trust and relying on principles that enables more open conversations. As I mentioned earlier, that's why we're very much involved in consultations and working group on how to build trust with governments and tax authorities.
We have many examples. The tax morale conversation at the OECD level, the cooperative compliance, as well. We also spend time with tax authorities to help build understanding of the mining business, create capacity there. We did it in South Africa. We're doing it with other tax authorities. Other recent examples involve the royalty conversation in Chile, the global tax concept measure the OECD is coming up with, and the discussion on tax and green transition. That's really topical at the moment. We're particularly focusing on the Carbon Border Adjustment Mechanism the EU is coming up with, because that really has game-changing effects and also creates a level playing field for us.
Most important thing is that we're not just reacting to those developments. We're taking a positive role in the discussion to help build solution that are sustainable for all. With that, I pass it back to you, Mark. Thank you.
Thank you, Sam Jon and to Zahira, our most trusted corporate leader. Thanks, guys. Ladies and gentlemen, Rob, we go to the next slide, just a quick wrap. We'll do a couple slide wrap and then open it up for questions. Rob, next slide. Thank you. Very simply put, underlying all of these changes is our technical and operations in innovation program and our vision for longer term what it can deliver. This is part of our broader conversation. Tony's team have been working on a broad range of technical and digital solutions that will reduce our energy and carbon footprints, our water consumption, and our physical footprints. These work programs double up by delivering operational benefit while also being the key to decarbonizing.
You can take a look at the technical innovations the team talked about recently in May, and that's worth checking out on our website. Very important, and it really does put it all into context. We're also ahead of the curve in building our technical function, where many in the industry were cutting there. Back in 15, 16, when we were going through the tough periods, we were building our technical functions with a view to improving our competitive position, and we're starting to see those benefits roll out into the business. Over the next five years, both from a competitive positioning perspective and in terms of our sustainability programs, starting to see the real payoff coming from those investments and the work we've been doing with people over the last five or six years. Next slide. Thanks, Rob.
Ultimately, when we go back to the touchstones that are really important for us in terms of what we're here to deliver as a business, we talk about purpose, our reimagining mining to improve people's lives, and I talked about that being the starting point for our strategy work early in the presentation. Effectiveness, that is our job, is to deliver free cash flow. For those businesses that can do better than 10% on return on capital employed, that puts you in the top quartile of performers in our industry. It pays for dividends, it pays for reinvestment, it pays for improvement in the business. It does create a virtuous circle.
Measuring efficiency, that is return on capital employed, is all about making sure that we're creating value with the capital we're installing, and the free cash that we do create is not simply a flash in the pan, it's long-term sustainable. That efficiency number, return on capital employed, is critical to us. Obviously our 15% threshold, we're up near 20% at the moment. In fact, it's well beyond 20% at the moment. Certainly we continue to track up and improve. Then ultimately, against our sustainability pillars, safety, health, environment, social performance, people, making sure we've got our talent pipelines, production-based resources that support the production base, our operating cost position, and ultimately where we keep our balance sheet.
As you probably know, Mr Balance is here on the call, and if we've got any finance conversations you'd like me to pull out in a bit more detail, then Stephen's available to answer questions as well. With that, we'd be more than happy to take some questions. Thanks, guys.
The first question is from the line of Alain Gabriel from Morgan Stanley. Please go ahead. Your line is open.
Yes. Good afternoon, everyone. Good afternoon, Mark. I have two questions from my side, and I'll start with the first one. Based on the origin of your Scope 1 and Scope 2 emissions, it seems that South Africa is by far the most important emitter. This means that if you get South Africa right, you will go a long way in meeting your targets. However, from your presentation, it seems that the energy strategy there will depend on a variety of partners fulfilling their part of the bargain. How confident are you about the execution and slippage risks there, given that you are not in full control of these initiatives? How do you plan to fund these initiatives in South Africa? That's the first question.
Yep. Well, firstly, the position we'll have in 2023 is 56% of our renewables will be in place. The big last step, as you correctly point out, or the next big step is obviously South Africa. We have already sat with the government and taken them through the concepts of the wind farms, the east and west coasts, the solar, the underground battery concept with water. Very supportive of all of those concepts. That's really important. Secondly, I note that in the last few days, Eskom, the national energy provider, has talked about $30 billion of investment in creating a new energy strategy for the country. I would expect that they've been thinking long and hard about the proposals we've been putting to them.
Again, very excited with the things we've put forward. We've had a number of players, and I shouldn't name them by name, who are interested in funding the opportunities, both pension funds, infrastructure providers. I don't think there'll be any shortage of funding. In fact, a lot of them have said to us they don't have enough infrastructure projects to fulfill their investment mandates. We don't think that that's gonna be an issue. Some of the projects will be funded where they're inside the mine gate. For example, let's talk about the 100-MW Mogalakwena solar facility, most likely will be funded by us. We will then connect that to the underground storage concept, which is a well-known concept in broader energy places.
Again, for us, that's a no-brainer in terms of providing us with low energy, low cost energy. It provides us with more stable power. It helps build a more stable grid across the country. We are still in concept and scoping phases, and it will be a combination of investments by third parties in running a multi-user facility. Obviously that implies funding that sits outside or certainly off our balance sheet. There will also be some investments we'll have on our balance sheet. Getting that mix right is something we're working through. The most important point to make on the funding of that South African leg of the strategy is that it's still subject to the detail, but it certainly washes its face and gives us a solid economic return.
Now, if you look at the 56% that we'll have in place by 2023, that will have been more than self-funding. In fact, we're already deriving net benefits. Stephen, did you wanna make a comment on what we're already getting from the renewables we've installed in South America?
Yeah. Thanks, Mark. Maybe a couple of points on that and maybe a little bit more broadly, but you covered it pretty well. In the South American scenario, we really only had one cost, and that was when we really paid out some of our existing contracts in Chile, so just under $200 million. Even at that point, which was a couple of years ago, and moving into the renewable contracts, was very, very positive for us. Net present value in excess of half a billion dollars even at that stage.
If you actually came forward to the day and played into that analysis current energy prices, 'cause a lot of those old contracts were indexed to either coal or natural gas, and everyone knows what's happened to those prices in recent times, it would be even more significantly positive. Yeah, we're talking $ hundreds of millions even just in Chile this year. I think it's a great example where we're trying to encourage people to think a little bit differently, that these things can be positive economically and NPV value-wise, as well as good in terms of the transition journey. If we move to South Africa, it's not as easy because not a lot of that same infrastructure exists at the moment. As Mark said, we'll work with quite a lot of parties.
You again indicated there's a lot of interest out there, particularly for these sort of projects that are underpinned by our base load. I think that's a really exciting opportunity. Again, exactly what'll be inside the gate, outside the gate, multi-user, single user is still just being refined. Pretty exciting opportunities. Even to give you another example, in the recent LNG ships that we've committed to, some of this needs early sponsoring. It doesn't mean we have to use our balance sheet forever on these things.
As industry develops and follows, then I would expect in shipping's case, there'll be a great pool of LNG and then, hopefully hydrogen ships in due course. I think it'll be the same in the South African energy strategy, where we may sponsor initially, but it doesn't necessarily mean we have to own these things forever. That, as Mark said, people are really looking for these sorts of opportunities, and I think that plays well into this space.
I think the important point.
Thank you.
...that goes with that is we will look at these opportunities the way we look at our innovation and technology investments on an annual basis, as we go forward. These things pay for themselves, because of the way we structure it and the way we set the opportunities up. The exact configuration has to be agreed with, obviously, the third-party players that we're working with. Gee, the enthusiasm for what we're talking about is significant, and they wanna move quickly. Very exciting. The only two areas of our program that we're still looking at that may.
Are not yet fully covered in terms of funding, but again, in the scheme of things, represent, I think, a relatively low risk in terms of the overall program: the ventilation air methane technologies, which we'll work on over the next 12 months, and then we'll keep people posted on what that looks like. The truck work will actually reduce our operating costs through the implementation of the changeover of the truck fleet. The question is, can you get enough back to fully recover and get an economic return on that transfer? We believe we can. That is not assuming any carbon pricing. If we assume carbon pricing, then we're well and truly in the money. We're assuming no carbon pricing, and these projects all have to wash their own face.
We're not far off getting to that with the truck proposal. Tony and the guys are working through that over the next 18 months, and when we come back with final proposals, I think that'll look pretty good as well. We're pretty encouraged, and we think net-net, this is a competitive improvement strategy, which is part of our business improvement strategy for the longer term. Steve, you happy with that?
Yeah, Mark. I think the one thing with the trucks, obviously, once you start to produce hydrogen for use inside the fence, that potentially opens up opportunities outside the fence as well, whether that's energy to communities. You know, if you're running the train from mine site to port, well, why not run that on hydrogen fuel cells? If that's running on hydrogen, why not run the port on hydrogen? That network of opportunities built off our base load would really help in terms of overall economics in due course as well.
From our point of view, we've got a host of people lining up to be part of this. Big energy suppliers, infrastructure providers, pension funds who have mandates in this type of expenditure. We've got the multilaterals looking to put money in. We don't think there's going to be an issue of is there enough money available? It's who's the best partner? How do we put packages together where we've got synergies? We're well down that track in scoping and the concept work, so we're pretty confident it'll stack up pretty well.
Thank you, Mark. That's very clear. My second question is on your spending budget. Clearly your decarbonization CapEx has been typically embedded in your group CapEx guidance as you have always seen it as an integral part of your business and culture. However, some investors are worried that we would see a significant step-up in decarbonization spending like we have seen with some of your peers recently. Are you able to quantify how much you will need to spend through 2030 to meet your Scope 1 and 2 objectives? Any rough estimates would be okay. Thank you.
Well, firstly, net-net, we've spent nothing up to the 56%. The estimates we're working on now, the way to think about this, if you look at our technology work and the enhancement work that we're doing, and we spend about $300 million-$500 million a year, Stephen, some of the expenditure will be in those numbers. There will be additional amounts. What we'll do is we'll give you a bit more clarity on those issues in December. It'll be a progressive spend. For example, on hydrogen, we're doing 10 trucks at a time with the electrolyzers. We'll keep people up to date as we put those in, but we also get net cost benefits.
Again, that $300 million-$500 million, yes, that will go up somewhat, but not significantly. It'll be incremental annualized, and we'll keep people updated and then show them where those returns come back. It's part of our business improvement program, and I think we'll give you a little bit more color on that in December. That's the approach. Stephen, did you want to add to that?
Yeah. Alain, you probably heard me say this before, but it becomes harder to distinguish as we go forward because a lot of the improvements, particularly some of the technology stuff that Tony's worked on, the bulk ore sorters, the coarse particle recovery, et cetera, just becomes part of the way you do business. They have their own economically positive case anyway. Particularly as they move from trial phase to rolling, they are just part of the business and the capital guidance that we sort of view in front of us. You know, I'm not sure we're gonna be able to in some of the mainstream technology stuff even identify it for you because it will just be part of the capital program. It's good for water, good for energy, and good for business.
You know, that sort of stacks up pretty well. As Mark said, in other areas, yeah, listen, we'll continue to give you guidance. As we're looking at it at the moment, a lot of it has a very positive business case. Some of it may be timing before you recycle, as I mentioned before. I think we've got a really good story to tell here and thinking about it a bit differently so it doesn't just become a cost to the business.
Yeah, I think.
Thank you.
I know it, I know Alain's stretching out as well. From our point of view, we don't see a major funding hole, if that makes sense, Alain. It's incremental, it's delivering a return because it's part of our whole energy efficiency program, and it's incremental on an annual basis. Some of the numbers I've seen thrown around for expenditure but without return, we're nowhere near the size of those numbers in terms of are there any risks. As I said, I think Ventilation Air Methane is the one that I'm still not sure we can get a net return on it, but that's not big in the scheme of things. On the trucks, I think over time you'll see that's a net contributor to our operating cost performance. We'll do that in incremental steps.
I think we're in pretty good shape, to be honest.
Mark, even on the.
Thanks.
Mark, even on the vent air methane, Mark, it's in at this stage, you know, $200 million. Again, that assumes no carbon tax in Australia. If that was to come in, then it's gonna be compellingly positive, I think, for us to do.
Yeah, exactly right.
Very clear. Okay, cool.
Thank you for your question. The next question from Ian Rossouw from Barclays. Please go ahead. Your line is open.
Thank you. Two questions from me. Just on your Scope 1 and 2 emission targets by 2040, and then likewise the Scope 3 targets. You obviously mentioned the sort of three main areas to bring those reductions on the Scope 3 side. Could you give us a sense of how much of that would just be portfolio sort of assets depleting on both those targets? Thanks.
Look, Ian, obviously, depletion of assets over that period, met coal would be, I'm gonna say, around 30%, in that range. We can get the exact numbers, but it would be in that range. Now we think that's appropriate because we think by 2040, the world is moving more to green steel, use of hydrogen. Our high-quality iron ore would be targeting those particular markets, and that's where we've got a natural advantage. It would also be targeting those markets. Our 50%-80% reduction takes into account if we can get all of our steel for those markets, then our reduction is more like 80%. Let's say 30% of that met coal, and then you've got continuing improvements as we allocate products into those markets.
That gives you a sense of what we think is quite possible, but it depends on how quickly steel moves. As we said, we are subject to what our customers do. If you look at 67% Minas-Rio product versus 58% fines out of the Pilbara, there's a 25%-30% difference in Scope 3 emissions just in those two product mixes. That's why we think that this has got an express ticket, the 67% material, and that's why we think being a niche producer in iron ore helps us get a ticket to the game a lot earlier and helps us get there quicker. Again, we've not banked too much on that.
if we get it all in there, then it goes up to 80% from 50%. I hope that helps.
Yes, thanks. Maybe just-
Sorry, one other point.
How much would Kumba be out of-
Sorry. One other point I was g-
There you go.
Sorry, I do apologize. One other point I was gonna make is that the fact that our new production comes from copper and Woodsmith means that proportion of Scope 3 contributions also is enhanced for us because we're getting more of our new production versus old production in those products. We get a real shift in our portfolio. Our returns are actually weighted to the low carbon products as well. That's a big advantage we get as well. Sorry, I should've said that earlier.
No worries. Just on what would Kumba be within that? You're saying 30% would be metallurgical coal.
Yeah. The Kumba, the difference in Kumba over time would again be probably around 20%, Steve. It's somewhere in that range, on the assumption of life where it is. If we extend, and that's what we're hoping to do, we'll reset and advise on what those numbers look like. Based on life at this stage, it is in those numbers, but we are trying to extend life of Kumba, obviously. We'd reset, but again, it's more in the range of about 20%. I think that's about right, Steve. Okay.
It's, I'm not sure we've provided that level of breakout in the climate change report. Just to pick up on your point, obviously, the high-grade iron ore and even the lump, et cetera, also really suitable for both modern blast furnaces that operate today, preferred and much cleaner, but also then the transition through DRI plants and ultimately through hydrogen fired DRI plants with pellet feed, et cetera. I think we're pretty well-placed overall.
One thing about it, Ian, is we use 0.8 of a ton of metallurgical coal in making a ton of steel. We use 1.5 tons of iron ore to make a ton of steel. The proportions sit in that sort of range with a lot of the carbon obviously coming from met coal. That's an important change in our portfolio over that time frame.
Okay, thanks. Just second question, Mark. Obviously you're talking about the sort of spend requirement in South Africa, decarbonization, particularly on the Scope 2 front. What sort of broad numbers are you talking about in terms of overall gigawatts and capital spend? Not necessarily on your balance sheet, but just trying to frame this sort of task.
We're talking about 3.5 GW. That is about. That's a bit higher than our total energy consumption, so it gives us the equivalent of a full renewable input supply. That's where that number comes from. The guys have designed the concepts around the wind solar Northern Cape. It does also take into account that we'll put some solar capacity inside the fence, i.e. Mogalakwena, for example, where we'll use the local underground water storage.
Mark, can I jump in?
Yes, Steve.
Sorry, Mark. I was just gonna jump in. It's a hard one to answer because it's a moving feast at the moment. I mean, yeah, you saw South Africa's announcement. It was yesterday or the day before, about the $30 billion-$35 billion or Eskom's announcement, sorry. How that plays out, what we do as a company inside and outside the fence, what other mining companies or other industries do, how we may do it together, it's a little bit hard to answer precisely. You know, we'll need to use some of the Eskom grid to move power from, say, a wind farm to our location. It's a little bit hard to answer.
I think the one thing I would say, if we can move both us and the country forward and away from coal-fired power, that's an absolutely fantastic thing for us to be a part of. I think it can make fantastic commercial sense for us, even if you just take account of reliability in the system. You know, we lose a quite reasonable amount of production, particularly in platinum, in terms of outages, et cetera, in terms of stability. You know, those things can be easily overlooked and are incredibly valuable if you add those things back into the equation.
There's a fair swing on it, Ian. That's why we're a bit careful with these numbers because, depending on exactly where you install them, Eskom has capacity in place. I mean physical capacity in place that we utilize. We're being a bit careful with the capital numbers because if it becomes part of the Eskom system, where there's a lot of their physical line, wheeling capacity, they would pick that up anyway. That's why we're both being careful. The key number you wanna look at and you can reflect on in terms of absolute capacity is the 3.5 gigawatts. Does that help?
Okay.
What I-
Thank you.
What I-
Yeah, that's perfect. Thank you.
For sure.
Thank you.
I think we're about 2 or 3% of the energy demand, something like that in South Africa, I think.
Ian's number he's probably looking for is the 3.5 GW. As I said, as Stephen said, Eskom's already got a lot of capacity in place that you can piggyback on. That's why we're being a bit careful and a good proportion of the capital will probably be third party anyway. We're doing our work over the next 12 months just to get that mix right. Either way, we think certainly the capacity that's being built will be self-funding, or certainly we'll get a good return on that, on that capital, but depends on. Then we'll work out who should put the capital in. Again, we think that's very manageable.
Okay. Thanks, Mark. Thanks, Stephen.
Thank you for your question. The next question from Myles Allsop from UBS. Please go ahead. Your line is open.
Great. Thank you. Just to clarify a couple of things around Scope 3 emissions. First of all, with the measurements. Your inventory was 226 million tons last year, and you've remeasured it at 115. Part of that's obviously the exit of thermal coal. Part of it is just a new way of measuring the emissions. Could you just confirm, are you like now reporting Scope 3 emissions consistently with the peer group, with Rio, BHP, Glencore and so on? Probably Rio and BHP are the prime examples. It's mostly on the higher side. You know, just on that Scope 3 number you're talking about, the 50% ambition by 2040.
Is it right from what you were just saying that about half of that comes from the end of life at Kumba and the end of life of some of the coal assets, and the other half of the 50% cut comes from sort of transport and other sources? Thank you.
Thanks. Firstly, in terms of the Scope 3 logic, I know there will be some differences. I'll let you do the comparisons on those differences. What we've tried to do is to be intellectually consistent. For example, you have metallurgical coal, where you've got 0.8 of a ton of metallurgical coal going into a ton of steel, and you've got 1.5 tons of iron ore going into a ton of steel. Others may require more iron ore to go in if they've got lower quality. But let's use those two numbers. Previously, we reported 2 tons of emissions, that's steel emissions, for that product that goes in to make 1 ton of steel. There's a double counting. As we said, that's crazy.
What we've done is we've apportioned the emissions to those two inputs into the 1 ton to come up with the true Scope 3 emission. It's a simple logic, but it was a logic that wasn't. You know, we used the parameters that were set out by various industry players back in 2017, and we've said, "No, that's a double count. The questions we're getting, people are confused if we use that logic. Let's sort that logic out and get that straightened up." That's what we've done. We've also included a proportion of trading emissions relative to the economic contribution from what comes from that ton, because most others aren't including their trading emissions, which is crazy. You've got to have something.
We've put some emissions from our trading activities as well, and we've tried to replicate the financial parameters because, again, we think that's consistent with how the numbers should be accounted. We're quite open to share that and show you how we got there between the two sets of numbers. It is different to some because many don't include trading, for example, which we scratch our heads a bit on. Steve?
Yeah, just a couple of quick points from me. Believe it or not, we actually do talk to some of the other big miners about the methodology and trying to evolve the standards, so that we do get elements of consistency and it makes it a bit easier. You know, with my finance hat on, I've often likened it to trying to prepare sets of complex consolidated accounts and then compare them, but not have any international accounting standards. I think the methodology has evolved. The visibility and understanding of that methodology has evolved well. We've also reflected more customer-specific data, I think, in our updates here, so that again, it's an evolution as we understand, as our customers understand more about their own journey, as well in terms of the factors that we use and how we calculate it.
It's a combination. I expect as standards evolve and knowledge improves, that it will continue to evolve and we'll go with that flow and work closely with some of the other major players, and the NGOs and institutions that help govern and set the standards in this space that we'll evolve with all of those.
Yeah, we've had pretty good feedback on what we've tried to do on those numbers. Again, as Stephen said, it's an evolution and we're trying to do that with our colleagues, but I think there's still more work to be done.
With the 50% ambition for reduction, is it broadly right that half of that comes from the depletion of assets and half of that comes from other sources? Is that the way we should think about it?
I think that it's reasonable. Let us do a check on that just to make sure we're right. It's in the range. I think, Stephen, that'd be pretty close to it, I think. We'll do a check for you just to make sure.
Yeah. Yeah, correct.
Thank you very much.
Obviously, the steel industry itself, Mark, decarbonizing is one of the biggest contributors to that, over time. Obviously that really is probably in the period 2030-2040 in combination with, say, a rundown of metallurgical coal as a good example.
Yeah. Metallurgical coal is a good part of that, obviously.
Yeah. One last question just on tax and South America. Can you give us a quick update on, you know, the risk of higher taxes in Peru and Chile?
Are you happy for me to take that, Mark, or?
Yeah, go for it.
Yep. Listen, you're seeing what I'd call an actual journey in some of these discussions in terms of evolution. It's gone a little bit quieter just at the moment in the part of the process that's seen in Chile, given elections and other things coming up. We've had a great opportunity to contribute to those discussions. As Zahira said, you know, we try to actively take a part in those discussions to make sure that there's a fair outcome for all. I noticed there were some announcements in Peru. I'm not sure if that was overnight or the day before, in terms of them raising some of the same questions. Again, we fully respect the rights of countries to work those things through.
As you've heard me on a number of occasions say that, you know, the U.K., particularly this week, has a crack at getting the balance right. The U.S. has had a crack at getting the balance right, and we've seen changes there in corporate income tax, social taxes, spending taxes, et cetera. I expect that a number of other countries will work through those things to balance the books over time. Mining commodity-based economies tend to go towards mining taxes because it's one of the biggest things that can move the needle for them. Sensible discussion, sensible involvement and hopefully sensible outcomes.
Yep, I agree with that.
Thanks.
Thank you for your question. The next question from Sylvain Brunet for Exane BNP Paribas. Please go ahead. Your line is open.
Good afternoon, gentlemen. Two quick ones on the Scope 3 reduction partnerships with steelmakers and other providers. Is there any framework you have in mind to select who you're gonna partner with, and is there a budget against that, or is it still too early days to quantify this. The second question is more like on safety. Given all the progress you've made already, what would you say are the remaining geographies where you'd say there is still room for improvement on safety best practices? Thanks.
Look, on the commitment with partners, we've really got to be convinced that the partners we go with are working hard on the right things. We've announced one. Well, obviously we're doing the shipping work. We've announced our steel partnership. Again, we're also looking at those players that we would most likely be providing product for, particularly the high-grade products, given we're a niche player. So that's really what we're doing. We think the key thing is to have a product that everybody wants and with our Minas-Rio product in particular. Kumba has been very good as well at 67% and 64.5. The key is can you get Kumba up to 65% or better?
There are process technologies that we think we can continue to improve. That's what Tony's working with Themba and the guys. We're doing the same at Minas-Rio with our Coarse Particle Flotation, those new technologies. Do you take it into different products? Over the next 12 months, I would hope to see a few more announcements on those types of partnerships with which look at the whole technical development, where we're giving them better products to help them reduce their Scope 3 emissions. That's the key. That we think is really important. On safety, look, there's no doubt that. Well, firstly, Natasha and the guys have done a great job in the platinum business. Their safety performance has really improved. They've gone 12 months fatal-free.
That's great news in terms of, you know, we've still got quite a significant amount of the workforce working underground. We're really pleased with that progress. We are still having more incidents or more high potential incidents than we would like, particularly around mobile equipment, and not doing as good a job as we can on hazard assessment and management. That's where the focal points are. You know, we've improved 93%. We've still got a way to go. We're not at zero. Our accident frequency rate has improved 60%. I think we need to do a lot more there.
I would say that COVID has added some pressures and some people may not have been focused on all of the important things in terms of the smaller, less serious injuries. You've got to work right across the board. I think we've still got a lot of work to do on our work and task planning to get to zero and in particular, the higher potential incidents need still a little bit more work. Our Elimination of Fatalities Task Force work is still ongoing and still a lot more work to be done.
Thank you.
Okay. One other point, guys, I was going to make, which does come to mind in the Scope 3 conversation. One thing we've been giving a lot of thought to is beyond Scope 3, and particularly in relation to steel, that in our case, we've got about 35 to and we'll have over 50% of our energy on renewables. One has to remember that steel makes a significant contribution to renewable energies. Ultimately there's a net back credit that doesn't get picked up in the Scope 3 conversation. We're advocates of a much more science-based, technically driven analysis of what the decarbonization strategy looks like and how we should be accountable for making those numbers or making the targets for 2030 and 2040.
We think over the next couple of years, there's more of a debate to be had in those areas, 'cause those contributions are really significant that aren't getting picked up in the debates at the moment. Call them Scope 4. It's the next step of thinking because if we can't stop making steel or decarbonization doesn't happen. Yet steel's getting no credit. There's some work we think we need to do. We think we've got great product in that industry that gives us an advantage. I don't think that conversation is sophisticated enough yet. That goes back to Stephen's point about how we as an industry talk to emissions in a more thoughtful and constructive way.
I still think over the next 12, 18 months, a lot more work can be done to make this easier for everybody and also make those outcomes more transparent. That's what we're going to focus on and keep trying to improve the conversation as we go forward.
Mark, I'm just gonna come in very quickly. We've got two more questions on the line, so we're just gonna take those quickly and then we'll have to call it on that. Thank you.
Happy to do that.
The next question is from Oliver Grewcock, from Berenberg. Please go ahead. Your line is open.
Hi. Thank you. There's been some difficult headlines coming out of Kumba regarding workplace behavior for some of your peers. Do you think any of your policies or operational behaviors will change with this in mind? Thank you.
You know, firstly, I'm not gonna talk about other companies and the travails. We still have work to do to make sure that our behaviors in all of our operations are as good as they should be. We really have used some of the news flows to help reinforce our views on the behaviors that we should have within the business. But I can't say that we're 100% where we need to be. We really are using those incidents and our own incidents to explain to people what our expectations are. It's a journey. It's a journey for all organizations, and it's a journey for the industry. We're working as hard as we can.
The fact we had our purpose conversation, and it was a very deep and meaningful, literally, conversation over 18 months. It took us 18 months and consulting 100,000 people to come up with 7 words. We own those words, and then every action that we take has to be consistent with those words. I think that piece is important. Whenever we see a negative headline or whenever we see a behavior in our business, and we still have behaviors we're not happy with, we show the mirror or hold the mirror up to ourselves and say, "Okay, what should we do different? What could we do different? Let's make sure it can't happen here." We've still got a way to go, but it is a journey, and I've gotta say that I'm proud of how far we've come.
We're not where we need to be, and I certainly wouldn't be critical or take shots at anyone else in the industry. I think we're all on a journey and we're part of that journey, and we're trying to get there as quick as we can.
Thank you. Could you remind us about your engagement with host communities? Do you think there's any risk for the longer term mine plans with possible change to heritage laws?
Look, we've done a lot of heritage work. I know at Minas-Rio, when we had. You know, the Minas-Rio project took a long time to get off the starting blocks. A lot of that work was around heritage, both environmental and indigenous issues. I think we learned a lot of lessons at Minas-Rio that we've applied back into Mogalakwena. I think we can do a much better job in our community relocations. We haven't done that well in platinum historically. Natasha and the team are trying to apply those lessons to the `. That will be important for us in the longer term at Mogalakwena. I've talked about our growth at Mogalakwena will be incremental open cut and deep mines.
Longer term, we'll step out, and there's work to be done with communities. I think we have to be at the leading edge of that work. I don't see any immediate threats, but I think over the next 10 years, we've gotta go, you know, five steps further to make sure we've got all those issues right. I think the team's done some really good work. There's more work to be done. I think there's more work for the industry to do, because it only takes one bad player somewhere to create a bigger issue for all of us. I think we've all gotta be part of that solution. I think we're working hard on that stuff, and we're working hard on legacy stuff, as we should be.
Excellent. Thank you for your time.
Thank you for your question. Our next question is on the line with Danielle Chigumira from Bernstein. Please go ahead. Your line is open.
Right. Thanks for taking my question. On water, we know that there's a plan to build desal capacity at Collahuasi. Could you chat through what makes a desalination at Collahuasi appropriate, but not necessarily for Los Bronces? With water, in terms of the 50% target reduction in freshwater withdrawals by 2030, is it possible to get to that target with only the Collahuasi desalination and further efficiencies, or do you need to take more structural steps to get to that 50% reduction?
Let me go to Los Bronces versus Collahuasi first. In Los Bronces, we have more access to other water sources that we think is appropriate to work as hard as we can to pick up those water sources first. They are the most cost effective, but also the most constructive from an environmental point of view as well. I'm not saying desal's not environmentally friendly, but I'm saying that these are things that we should do first anyway. Then the desal option will come after we've made sure we've got all of those options covered, which includes recycle. People know that we've been taking the positive water balance from Andina. Those things make sense for everybody, that's where you go first.
We don't have those types of options available to us at Collahuasi, so it's simply about what are the right things to do by that location versus Collahuasi. Whereas Collahuasi, desalination is the most obvious and most cost-effective source to go for. Albeit, we'd still want to improve our efficiencies as well and looking at new technologies here. That's the simple reason. Sorry, I didn't pick up. What was the second question? Was that about the desalination plant and the fact that that take us at Collahuasi? Was that the question?
Yeah. It was just the overall target to reduce fresh water withdrawals by 50% by 2030.
Yeah.
How you get to that target? Once you've done Collahuasi desal and do further efficiencies, is that enough or do you need other structural steps to get to that 50% reduction?
It takes us a long way there, but doesn't quite get us there. That's what Tony and the team are working on now. We're also looking at some of the definitional issues across the organization in terms of what's abstraction of fresh water. But there's still a bit more work to be done. And again, we'll update next year on our progress. We're well on the way, but not quite there. I couldn't give you know, is it 15% or 20%? It's in that range, but still some more work to be done. And whether it means the implementation of the dry tailings work, that's going to be important. And that goes with Coarse Particle Flotation, because we increase the grind size.
That allows us then to look at tailings very differently and that gives us better recirculating load. We won't have all of our operations with dry tailings by 2030. The question is: What can you get done by 2030? What might take a little bit longer? What other technologies can you kick in place to get yourself there by 2030? That's the problem we're solving for right now. Does that help?
Great. It's very clear. Thank you.
Okay. Bye.
Well, Mark, if Danielle is finished, I'm gonna call that, if I may. Ladies and gents, many thanks for sparing us your time. If our comms can help with any follow-ups, then please, of course, do let us know. Just for the diaries, the next planned event from us is the investor update call on the 10th of December. We look forward to speaking to you then, if not before. Wish you a good weekend and go safely, please. Thank you very much.