Page 312 - Annual Report 2020

Reference and SPM Methodology
Section 1.7.8 Climate Scope 3 emissions have been calculated on a carbon dioxide equivalent basis using methodologies consistent with the
change and section Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard).
6.6.4 Climate change Scope 3 emissions refers to all other indirect emissions (not included in Scope 2) that occur in BHP’s value chain,
– performance data – primarily emissions resulting from our customers using the fossil fuel commodities and processing the non-fossil fuel
Scope 3 GHG emissions commodities we sell, as well as upstream emissions associated with the extraction, production and transportation
of the goods, services, fuels and energy we purchase for use at our operated assets; emissions resulting from the
transportation and distribution of our products; and operational emissions (on an equity basis) from our non-operated
joint ventures. Scope 3 emissions reporting necessarily requires a degree of overlap in reporting boundaries due to our
involvement at multiple points in the life cycle of the commodities we produce and consume. A significant example of
this is that Scope 3 emissions reported under Category 10: ‘Processing of sold products’ include the processing of our
iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by
us. For reporting purposes, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil
fuels under the Category 11: ‘Use of sold products’, such that a portion of metallurgical coal emissions is accounted for
under two categories. This is an expected outcome of emissions reporting between the different scopes defined under
the standard GHG accounting practices and is not considered to detract from the overall value of our Scope 3 emissions
disclosure. This double counting means that the emissions reported under each category should not be added up,
as to do so would give an inflated total figure. For this reason, we do not report a total Scope 3 emissions figure.
The below methodology describes the emissions from Category 10: Processing of sold products and Category 11: Use
of sold products. These categories are the most material Scope 3 emission categories and together account for almost
95 per cent of Scope 3 emissions.
Category 10: Processing of sold products
Emissions from the processing of intermediate products sold in the reporting year by downstream companies
(e.g. manufacturers) subsequent to sale by the reporting company.
Calculation methodology
The average-data method as described in the Greenhouse Gas Protocol Technical Guidance for Calculating Scope 3
Emissions (Scope 3 Guidance) is used to calculate these emissions, with industry-average emission factors applied to
production volumes (on an equity basis) for each commodity to calculate an overall emissions estimate for this category.
Assumptions
• To estimate emissions from the processing of iron ore, all iron ore production is assumed to be processed to steel.
To estimate the higher-end estimate, the crude steel emission factor is applied to the volume of crude steel produced
from BHP’s iron ore.
• To estimate the lower-end emissions number from the processing of iron ore, it is assumed that the crude steel
emission factor already takes into account emissions from both iron ore and metallurgical coal. Therefore, the crude
steel emission factor is apportioned based on the ratio of iron ore and metallurgical coal input to produce 1,000
kilograms of crude steel (based on World Steel Association’s integrated blast furnace and basic oxygen furnace
route). The crude steel emission factor is split to estimate the emissions from iron ore and metallurgical coal
(calculated in Category 11: Use of sold products). The split factor is applied to the volume of crude steel produced
from BHP’s iron ore. The estimated crude steel produced with BHP’s iron ore is significantly higher than with BHP’s
metallurgical coal (due to higher iron ore production). Therefore, this approach does not capture third party
metallurgical coal emissions in the steelmaking process.
• To estimate emissions from the processing of copper, we apply an emission factor for the processing of copper
to copper wire (rather than alternative products such as tubes or sheets), as this is the most emissions-intensive
process and therefore the most ‘conservative’ assumption.
Category 11: Use of sold products
Emissions from the end use of goods and services sold by the reporting company in the reporting year.
Calculation methodology
The method recommended in the Scope 3 Guidance for ‘direct use-phase’ emissions calculations for ‘Fuels and
feedstocks’ is used to calculate these emissions, with industry-average emission factors applied to production volumes
(on an equity basis) for each commodity to calculate an overall emissions estimate for this category.
For the lower-end estimate emissions from metallurgical coal, the average-data method as described in the Scope 3
Guidance is used to calculate these emissions, with industry-average emission factors applied to production volumes
(on an equity basis) for metallurgical coal to calculate an overall emissions estimate for this category.
Assumptions
• All metallurgical coal (higher end estimate), energy coal, natural gas and petroleum products are assumed
to be combusted.
• In practice, metallurgical coal is primarily used in steelmaking and a portion of the carbon content remains
embedded in the final steel product and is not released to the atmosphere; the quantities involved vary according
to the feedstocks, processing technologies and output specifications of the process route used.
• To estimate the lower-end emissions number from the use of metallurgical coal, it is assumed that crude steel
emission factor already takes into account emissions from both iron ore and metallurgical coal. Therefore, the crude
steel emission factor is apportioned based on the ratio of iron ore and metallurgical coal input to produce 1,000
kilograms of crude steel (based on World Steel Association’s integrated blast furnace and basic oxygen furnace
route). The crude steel emission factor is split to estimate the emissions from metallurgical coal and iron ore
(calculated in Category 10: Processing of sold products). The split factor is applied to the volume of crude steel
produced from BHP’s metallurgical coal. It should be noted that in reality, BHP’s metallurgical coal may not end
up with the same customer as our iron ore.
• All energy coal is assumed to be bituminous, which has a mid-range energy content among the three sub-categories
of black coal (the others being sub-bituminous coal and anthracite) listed in the NGER Measurement Determination
published by the Australian Government (Australian NGER Determination), from which these emission factors are sourced.
• All crude oil and condensates are assumed to be refined and combusted as diesel (rather than alternative products
such as gasoline) as the most emissions-intensive, therefore the most conservative assumption. The energy content
of the crude oil and condensate volumes is used to estimate the corresponding quantity of diesel that would be
produced, assuming that no fuel is ‘lost’ during the refining process.
• Emissions from LPG and ethane volumes are included in emissions reported for ‘natural gas liquids’ (NGL) production
and are assumed to be combusted with the same NGL emission factors. This assumption has minimal impact on
estimated emissions due to the small volumes involved.
This methodology has been prepared in accordance with GRI standard 305-3.
More information on the calculation methodologies for other reported categories, boundaries assumptions and key
references used in the preparation of our Scope 3 emissions data can be found in the associated BHP Scope 1, 2 and 3
Emissions Calculation Methodology, available at bhp.com/climate.

310 BHP Annual Report 2020