BHP : Scope 1, 2 and 3 GHG Emissions Calculation Methodology 2022

Scope 1, 2 and 3 GHG emissions calculation methodology

2022

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In this report:

	Organisational boundary	4
	Energy consumption	5
	Scope 1 emissions - operated assets	5
Scope 2 emissions - operated assets	7
Scope 1 and Scope 2 emissions - non-operated assets	8
Operational GHG emissions (including carbon offsets)	9
Operational GHG emissions (Scope 1 and Scope 2) targets	9
Scope 3 emissions categories	11
Scope 3 goals and targets	11
Overlap in Scope 3 calculation boundaries	12
Scope 3 Standard emissions categories	13
	Category 1: Purchased goods and services (including capital goods)	13
	Category 2: Capital goods	13
	Category 3: Fuel and energy related activities	14
	Category 4: Upstream transportation and distribution	14
	Category 5: Waste generated in operations	15
	Category 6: Business travel	16
	Category 7: Employee commuting	16
	Category 8: Upstream leased assets	16
	Category 9: Downstream transportation and distribution	17
	Category 10: Processing of sold products	17
	Category 11: Use of sold products	19
	Category 12: End-of-life treatment of sold products	20
	Category 13: Downstream leased assets	20
	Category 14: Franchises	20
	Category 15: Investments	21
	Glossary	22
References	24
Appendix	25
	Appendix 1: Processing of sold products (steelmaking) calculations	26
	Appendix 2: Use of sold products calculations	28

2 BHP Scope 1, 2 and 3 GHG emissions calculations methodology 2022

About this document

This document describes the calculation boundaries, methodologies, assumptions and key references used in the preparation of BHP's reported inventory of Scope 1, Scope

2 and Scope 3 greenhouse gas (GHG) emissions for FY2022, as published in the BHP Annual Report 2022 and BHP ESG Standards and Databook 2022, available at bhp.com/climate.

GHG emissions for our business are calculated using methodologies consistent with the Greenhouse Gas (GHG) Protocol: A Corporate Accounting and Reporting Standard, with reference to the additional guidance provided in the GHG Protocol: Scope 2 Guidance (amendment to GHG Protocol), GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard) and GHG Protocol Technical Guidance for

Calculating Scope 3 Emissions (Scope 3 Guidance) as appropriate.1

We have also reviewed GHG emissions guidance across a range of other standards in preparing the disclosures, including the Intergovernmental Panel on Climate Change (IPCC) Guidelines for National GHG Inventories, International Standard ISO 14064-1 and the Sustainability Accounting Standards Board (SASB).

This document, in combination with the published data on Scope 1, Scope 2 and Scope 3 emissions in relation to our business, meets the disclosure requirements of the Global Reporting Initiative (GRI) standard GRI 305.2 Our disclosures are also aligned with the recommendation of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) that organisations disclose 'Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks'.

Changes from prior year

GHG emissions reporting area	Details of change
Scope 1 and Scope 2 emissions - Caval Ridge	In FY2022, the Caval Ridge operation moved to a facility-specific emissions calculation methodology
fugitive emissions (BHP Mitsubishi Alliance,	for fugitive emissions as detailed in Australia's National Greenhouse and Energy Reporting (NGER)
Queensland, Australia)	(Measurement) Determination 2008 (Method 2 - extraction of coal). Previously, default factors were used as
	provided in the NGER (Measurement) Determination 2008 (Method 1 - extraction of coal) for open-cut coal
	mines located in Queensland, Australia.
Scope 1 and Scope 2 emissions -	In FY2022, we improved the equity share accounting approach for our Minerals Americas assets in Chile to
equity share accounting	better reflect the overall net emissions position between our non-operated Kelar power generation facility
	(Kelar) and operated Escondida and Pampa Norte assets.
	We refined the emissions reporting boundaries for Tamakaya Energía SpA (Kelar) to allocate emissions
	associated with spot power purchased by the asset to the Scope 2 category. Previously, these emissions
	were combined with Kelar's power generation activity emissions under Scope 1. In addition, for our equity
	share GHG emissions inventory, we amended the adjustment made to Escondida's and Pampa Norte's
	Scope 2 emissions to more accurately exclude emissions from electricity generated and supplied by Kelar
	(noting these emissions are included in our equity share GHG emissions inventory under Kelar's Scope 1
	and Scope 2 emissions).
Scope 3 emissions from purchased goods	In FY2022, we piloted switching the emissions estimation of high-spend goods from select categories
and services	(including explosives, grinding media, conveyor belts, tyres and select bulk materials) from spend-based
	emission factors to industry average quantity-based emission factors or emission factors sourced directly
	from suppliers. These changes are intended to improve the accuracy of the GHG emissions estimate. We
	have restated FY2021 and FY2020 emissions for this category to allow for comparability.

Scope 3 emissions from upstream transportation and distribution

In FY2022, we successfully developed and operationalised a carbon accounting and decision support system tailored to ship chartering, leveraging DNV's Veracity platform. In FY2022, we also added emissions associated with inbound freight to this category of purchased goods that we transitioned to a quantity method in the 'Purchased goods and services (including capital goods)' category. These changes resulted in a restatement of our maritime emissions in the 'Upstream transportation and distribution' category in FY2021 and FY2020 to allow for comparability.

Scope 3 emissions from processing	In FY2022, we updated our approach to estimating GHG emissions from the downstream processing of our
of sold products	copper products, and developed a new methodology for estimating emissions of our nickel products.
	We increased the granularity of calculations for downstream emissions associated with the processing of
	our copper products. We now split our product volumes into copper concentrates that are processed into
	cathodes by third parties and our own copper cathodes, which are assumed to be processed into copper
	semi-fabricated products. This has also removed the double counting of our Scope 1 and Scope 2 emissions
	previously present in our calculations. These changes resulted in a restatement of copper processing in the
	'Processing of sold products' category for FY2021 and FY2020.
	We also began reporting downstream Scope 3 emissions for nickel processing to increase transparency as
	our nickel business grows to be sufficiently material to report. Our methodology accounts for battery and
	non-battery products' downstream emissions.
Scope 3 emissions from downstream	In FY2022, we successfully developed and operationalised a carbon accounting and decision support
transportation and distribution	system tailored to ship chartering, leveraging DNV's Veracity platform. This resulted in a restatement of our
	maritime emissions in the 'Downstream transportation and distribution' category in FY2021 and FY2020 to
	allow for comparability.

• The GHG Protocol Corporate Accounting and Reporting Standard, Scope 2 Guidance, Scope 3 Standard and Scope 3 Guidance are published by the World Resources
  Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), and were developed with the aim of providing a standardised approach and set of principles for companies to use in preparing GHG emissions inventories.

• 'Disclosure 305-1: Direct (Scope 1) GHG emissions', 'Disclosure 305-2: Energy indirect (Scope 2) GHG emissions', 'Disclosure 305-3: Other indirect (Scope 3)
  GHG emissions'.

BHP Scope 1, 2 and 3 GHG emissions calculations methodology 2022

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Greenhouse Gas Protocol emissions Scopes

The GHG Protocol Corporate Accounting and Reporting Standard classifies corporate GHG emissions into three 'Scopes'.

Scope 1 emissions are direct GHG emissions from operations that are owned or controlled by the reporting company (e.g. for BHP, emissions from fuel consumed by haul trucks at our mine sites).

Scope 2 emissions are indirect GHG emissions from the generation of purchased energy consumed by a company (e.g. GHG emissions from electricity BHP buys from the grid for use at our mine sites).

Scope 3 emissions are all other indirect GHG emissions (not included in Scope 2) that occur in the value chain of the reporting company (e.g. for BHP, GHG emissions from our customers burning the energy coal we sell in their power stations, or processing our iron ore to steel).

Organisational boundary

Verification

BHP develops Scope 1 and Scope 2 emissions totals based on the following organisational consolidation approaches to boundaries, consistent with the GHG Protocol Corporate Accounting and Reporting Standard definitions:

• Operational control approach: We account for 100 per cent of Scope 1 and Scope 2 emissions from operations over which BHP (including any one or more subsidiaries in the BHP group of companies) has operational control, but not for GHG emissions from operations in which BHP owns an interest but does not have operational control.
• Financial control approach: We account for Scope 1 and Scope 2 emissions based on the accounting treatment in BHP's Consolidated Financial Statements, as follows:
• • 100 per cent for operations accounted for as subsidiaries, regardless of equity interest owned
  • for operations accounted for as a joint operation, BHP's interest in the operation
  • GHG emissions are excluded for operations that are accounted for using the equity method in BHP's Financial Statements
• Equity share approach: We account for BHP's equity share of Scope 1 and Scope
  2 emissions for all operations in which BHP owns an interest.

Scope 3 emissions are the indirect GHG emissions resulting from activities in our value chain or from our investments outside of our Scope 1 and Scope 2 operational control approach emissions. We currently use the equity share approach to define the organisational boundary for the downstream portion of our Scope 3 emissions inventory. For upstream categories, however, the boundary is currently defined on a category-by-category basis due to data limitations. For more information about the boundary approach, refer to the methodology for each category.

When considering the different inventories reported under different boundary definitions, it should be noted that non-operated asset GHG emissions are also included under the Scope 1 and Scope 2 financial control and equity share emissions where relevant criteria are met as described above.

We present GHG emissions data inclusive of divestments up to the date of the divestment, unless otherwise specified.

This applies to Scope 1, Scope 2 and Scope 3 reported emissions.

EY was engaged by BHP to provide reasonable assurance over Scope 1 and Scope 2 emissions and progress against climate change targets as reported in the BHP Annual Report 2022 and the ESG Standards and Databook 2022.

EY provided limited assurance over Scope 3 emissions reported in the BHP Annual Report 2022 and the ESG Standards and Databook 2022.

For more information refer to 7.19 'Independent limited assurance report' of the BHP Annual Report 2022 available at bhp.com.

4 BHP Scope 1, 2 and 3 GHG emissions calculations methodology 2022

Energy consumption

Definition

Energy consumed in activities under BHP's operational control (petajoules).

Calculation boundary

We account for 100 per cent of energy consumed at operations over which BHP has operational control, but not for energy consumption at operations in which BHP owns an interest but does not have operational control. This includes all fuels and electricity consumed in the operation of vehicles and machinery, onsite heat, steam or electricity generation activities, as a chemical or process feedstock, or any other purpose.

This aligns with the organisational boundary used to report operational GHG emissions, as defined in the 'Organisational boundary' section of this document.

Calculation methodology

BHP's operated assets record energy consumption quantities by fuel type (e.g. diesel, natural gas) throughout the year, using sources such as supplier invoices, metering, stockpile changes and other industry standard practices. All fuel quantities are converted to energy-based units using energy content factors specific to each fuel (e.g. gigajoules per kilolitre for diesel), sourced from appropriate references. Electricity quantities are not required to be converted, as consumption is recorded in energy-based units by definition. These quantities are recorded in BHP's internal system and subject to review and approval processes prior to finalisation.

Operated assets already reporting under mandatory local regulatory programs are required to use the same energy content factors for reporting fuels under BHP's operational control boundary. This ensures a single energy consumption inventory is maintained for consistency and efficiency. Local regulatory programs are applicable to the majority of BHP's operated assets, as listed in the Scope 1 emissions - operated assets section of this document.

In the absence of mandatory local regulations, Australia's National Greenhouse and Energy Reporting (NGER) (Measurement) Determination 2008 has been set as the default source for factors and methodologies for consistency.

Scope 1 emissions - operated assets

Definition

GHG emissions released from activities under BHP's operational control (million tonnes carbon dioxide-equivalent(MtCO2-e)).

Calculation boundary

We account for GHG emissions arising from our activities under three organisational boundaries - operational control, financial control and equity share, as described in the Organisational boundary section of this document.

For BHP's operated assets included in each of these organisational boundaries, we account for all carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur hexafluoride (SF6), nitrogen trifluoride (NF3) and hydrofluorocarbon (HFC) emissions i.e. all relevant GHG emissions listed under the United Nations Framework Convention on Climate Change and the Kyoto Protocol (perfluorocarbon emissions, largely associated with the aluminium sector, are excluded as they are not considered relevant to our activities). All GHGs are expressed in CO2-e quantities based on global warming potentials (GWP) sourced from the Intergovernmental Panel on Climate Change (IPCC) (refer to the Glossary for a definition of GWP factors). BHP currently uses GWP from the IPCC Assessment Report 5 (AR5) across all operated assets.

Scope 1 emissions are calculated for all relevant sources including:

• combustion of fossil fuels for energy
• use of fossil fuels as a feedstock to a chemical process producing GHGs as a by-product (e.g. the process to produce nickel matte at our
  Kalgoorlie smelter)
• fugitive release of GHGs from extraction of natural resources, such as methane drainage from coal mines or oil production facilities

BHP Scope 1, 2 and 3 GHG emissions calculations methodology 2022

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