BHP Billiton under pressure on climate changePublished by MAC on 2013-10-03
Source: Business Spectator, Renew Economy
The climate candidate who has BHP sweating
26 September 2013
In a battle that will be a proxy for the political brawl in Canberra and elsewhere between business, climate change believers and the Abbott government, BHP Billiton, the world's biggest miner, has told shareholders to reject a noted climate change activist who has nominated himself for the company's board.
The activist - former coal company executive Ian Dunlop - has a resume that would cause any mining company here or around the world to consider him, with decades of high-level experience in the industry. But BHP chairman Jacques Nasser and the rest of the board have resorted to the tired canard that Dunlop is a "single-issue" candidate and therefore not suited to the boardroom of BHP.
Dunlop, a former Shell Coal executive, is as experienced in the area of mining and coal mining as any non-executive member of the company's board. As BHP is one of the world's biggest coal miners (and a significant producer of oil and gas) and the world's biggest coking coal exporter, Dunlop would be well suited to the boardroom.
He has decades of experience in energy resources, infrastructure and international business, including 27 years with the Royal Dutch Shell Group. He was senior executive and has director level experience in oil, gas and coal exploration and production. He is a past chairman of the Australian Coal Association in 1987-88 and the Australian Greenhouse Office experts Group on Emissions Trading (1998-2000) and was chief executive of the Australian Institute of Company Directors from 1997-2001. He is a fellow of Institute of Company Directors, the Australasian Institute of Mining and Metallurgy, the Energy Institute (UK), a member of the Society of Petroleum Engineers of AIME (US) and a member of The Club of Rome.
But in the notice of meeting for the AGM in late November in Perth, released yesterday morning, Nasser urged shareholders not to vote for Dunlop. Nasser also urged shareholders to vote for the rest of the board members up for re-election at the meeting:
"The board, assisted by the Nomination and Governance Committee, has considered Mr Dunlop's nomination in the context of the structured and rigorous planning it undertakes for non-executive director succession. A threshold requirement is for the skills and experience of any prospective board member to add to the overall skills and experience of the board and meet its future needs. In this context, the board considers that Mr Dunlop would not add to the effectiveness of the board."
The board also referred to his climate change activism, calling him a "single-issue" candidate not suited to the role. In the material supporting his nomination, Dunlop said:
"In my view, the greatest challenge the world, and BHP Billiton, now faces is global warming caused by greenhouse gas emissions from human fossil-fuel consumption. The extent and speed of warming has been badly underestimated. Current policies are leading to an average surface temperature increase in excess of 4oC, compared with the ‘official' target of less than 2oC. This is a world of 1 billion people, not 7 billion, in which business as we know it is not possible. It is nothing less than suicidal to continue investment in fossil-fuel expansion.
"The current board must take action by changing investment priorities far more extensively than the company has recently announced. I consider that my particular mix of experience and global perspective would complement existing board member skills in achieving what must become top priorities for BHP Billiton and its shareholders.'"
But in the meeting, Nasser told the board:
"A threshold requirement is for the skills and experience of any prospective board member to add to the overall skills and experience of the board and meet its future needs. In this context, the board considers that Mr Dunlop would not add to the effectiveness of the board. The board also believes that the addition of a director whose focus is primarily on a single issue will not add to the effective governance of the business. For these reasons, the board recommends shareholders vote against the appointment of Mr Dunlop. The chairman of the meeting intends to vote undirected proxies against this resolution." (BHP's emphasis)
"Mr Dunlop has advised the Group that he wishes to draw attention primarily to climate change issues. As a global organisation producing energy products and operating in an energy intensive industry, we are continuously and actively managing risks associated with climate change. We have taken a leading role in the resource sector, acknowledging nearly 20 years ago that climate science justified action.
"Our board has a depth of skills and experience in this area and the Group's performance has benefited from its guidance. The board believes that the addition of a director whose focus is primarily on a single issue will not add to the effective governance of the business. For these reasons, the board recommends you vote against the appointment of Mr Dunlop."
Dunlop's nomination will be opposed by the federal government, which seems to be heading down the route of benign neglect on this issue. But his nomination will test the growing number of investment and super funds that have an ethical approach to investment that extends beyond pure returns and profits.
This article was originally published by Crikey on September 25.
BHP Billiton has climate issues covered, doesn't it?
By Bob Burton
26 September 2013
When BHP Billiton directors jet into Perth in late November for the company's annual general meeting they will be all in furious agreement about the 23 resolutions to be put to the shareholders.
They want shareholders to grant a smidgen under US$900,000 in shares to the company's CEO, Andrew Mackenzie, and they want each other to be re-elected. Oh, and they certainly don't want shareholders to support the bid by former Australian Coal Association Chairman, Ian Dunlop, to the join the board.
It's not that Dunlop doesn't have the right pedigree to be a director: he does, and in spades.
Dunlop was Chair of the Australian Coal Association for a couple of years in the late 1980's, a member of the Australian Greenhouse Office Experts Group on Emissions Trading for a few years in the late 1990's and had a four year stint as the CEO of the Australian Institute of Company Directors to 2001. If that wasn't enough, he has worked with Royal Dutch Shell Group as a senior executive with experience in oil, gas and coal exploration and production. On top of that he is a Fellow of Australasian Institute of Mining and Metallurgy, the Energy Institute (UK) and a member of the Society of Petroleum Engineers of the American Institute of Mining Engineers.
But for Jac Nassar and the other directors of BHP Billiton, that's just not good enough.
You see, Dunlop nominated to become a director of one of the world's largest mining companies - and more importantly one of the world's largest coal exporters - precisely because he thinks the company isn't taking the issue of climate change caused by burning fossil fuels seriously enough.
In a statement in support of his candidacy, Dunlop is blunt about his motivation. He wrote:
"In my view, the greatest challenge the world, and BHP Billiton, now faces is global warming caused by greenhouse gas emissions from human fossil-fuel consumption. The extent and speed of warming has been badly underestimated. Current policies are leading to an average surface temperature increase in excess of 4°C, compared with the ‘official' target of less than 2°C. This is a world of 1 billion people, not 7 billion, in which business as we know it is not possible. It is nothing less than suicidal to continue investment in fossil-fuel expansion. "
"The current Board must take action by changing investment priorities far more extensively than the Company has recently announced. I consider that my particular mix of experience and global perspective would complement existing board member skills in achieving what must become top priorities for BHP Billiton and its shareholders."
Jac though is not having a bar of it. In his "Invitation from the Chairman" in the company's notice of meeting to shareholders, Nasser rather tersely makes it clear that Dunlop the shareholder is welcome to attend the AGM but is most certainly not going to be invited to join the board. Nasser bluntly wrote that the Board is of the view that Ian Dunlop "would not add to the effectiveness" of the Board.
Nasser wrote that:
"We have taken a leading role in the resource sector, acknowledging nearly 20 years ago that climate science justified action. In line with Our Charter of Sustainability, we have publicly advocated action on climate change policy such as carbon pricing. At the same time, we have reduced our own emissions and reported against clear performance targets. We have constantly reviewed the issue as a driver of change in the global energy mix. We see the potential for a transition to lower carbon energy sources and the management of our portfolio reflects this view. The Board believes this approach is right and positions the Group appropriately. "
In short, Nasser - who was paid $1.2 million in 2012/13 - wants shareholders and the public to believe that the company has the climate smarts on the board and the status quo really serves shareholders, the community and future generations well.
Stale policy, dinosaur actions
Back in June 2007 - when global greenhouse gas concentrations were approximately just 384 parts per million - the then BHP Billiton CEO Chip Goodyear launched the company's revised climate change policy.
While the policy started promisingly enough by acknowledging that "the risks of climate change associated with increasing greenhouse gas concentrations in the atmosphere need to be addressed through accelerated action" and that this action should be "guided" by the United Nations Intergovernmental Panel on Climate Change (IPCC), it quickly became vague. The single most specific commitment was that the company pledged to spend $300 million investigating "low emissions technologies" such as Carbon Capture and Storage.
Six years on, almost two IPCC scientific reports later and despite greenhouse gas concentrations in the atmosphere at over 397 parts per million, BHP Billiton's policy hasn't changed one iota. If "accelerated action" was needed back in 2007 then the parts per million tally implies that BHP Billiton knows that even more drastic action is needed now.
So what are BHP Billiton doing about it? What does their "accelerated action" look like?
First, it is important to recognise the scale of BHP Billiton's coal interests: in 2012/13 they produced over 110 million tonnes of coal, overwhelmingly for export, from mines in Australia, South Africa, Colombia, the US and a new project under development in Indonesia. With a tonne of coal generating approximately 2.7 tonnes of carbon dioxide, that's a smidgen under 300 million tonnes of greenhouse gas emissions a year. And BHP Billiton have billions tonnes more of coal reserves they aim to extract sooner or later.
Here's a small selection of some of their more notable activities:
- Given the recent comments of the National Mining Association in the US - which BHP Billiton is a member of - describing Carbon Capture and Storage, it seems that BHP Billiton has wasted up to $300 million on the technology. It's not that the company wasn't warned that it was likely to be a dead end - they were, but chose to press on regardless;
- they have - especially through the aggressive advocacy work of the Minerals Council of Australia - campaigned to effectively nobble both Rudd's emissions trading scheme and the Gillard government's carbon tax. It is worth noting that Dean Dalla Vale, the head of BHP Billiton's Coal division, is one of twelve members of the MCA's Board of Directors.
- While BHP Billiton's policy states that it supports a carbon price you can't help but get the impression that what they want is something like the Super Profits Resource Tax legislation they helped write which has such large loopholes it raises next to no tax;
- The Australian Coal Association - which Dalla Vale is also on the Board of Directors of - has been one of the few industry groups vociferously advocating that the Renewable Energy Target - which largely promotes solar and wind power - be abolished. One of the most recent gripes of the ACA was that the Renewable Energy Target didn't cater for CCS; and
- when the resources boom took off the BHP Billiton board got caught up in the frenzy, thinking that China in particular would just keep on burning ever increasing quantities of coal irrespective of the pollution. Even if Australia wasn't supplying vast quantities directly to China, the boom turbo-charged prices for the global coal market.
The BHP Billiton board took a big bet that the coal boom would just keep on giving and now, with gritted teeth it seems, is ploughing on spending billions more completing massive new mine expansions in Australia, Colombia and Indonesia even though the coal market has soured.
If various analysts assessments that the coal market - and thermal coal in particular - is headed for terminal decline, the BHP Billiton may well have blown billions building new mines as unloved as asbestos mine.
It is hard to believe, as Jac Nassar insists, that the current BHP Billiton has a good grip on climate policy. If he thinks it it has, perhaps he could inform us as to exactly what emissions reduction target the board thinks the world should be aiming at. What temperature increase does the BHP Billiton board think we should accept?
And how, given even BHP Billiton's own industry group proxies think that CCS is an expensive fantasy, that we have even a remote chance of reaching the target unless we rapidly cut back on burning coal and other fossil fuels.
On his long flight over to Perth in November, Nasser would be wise to rethink his opposition to Ian Dunlop's nomination.
Bob Burton is co-author with Guy Pearse and David McKnight of Big Coal: Australia's dirtiest habit (NewSouth Books, August 2013). He is also a Contributing Editor of CoalSwarm, a coal wiki and a director of The Sunrise Project, an Australian group promoting a renewable energy economy.