‘BHP and Rio should be embarrassed’: Fortescue sets ‘bold’ new carbon target for customers

Mining giant Fortescue has set an ambitious target to curb the massive carbon footprint of its customers for iron ore across the world’s emissions-intensive steel sector.

Australia’s third-biggest miner on Tuesday released the details of a commitment to neutralise greenhouse gas emissions in its international value chain by 2040 including decarbonising its fleet of iron ore carriers and developing clean hydrogen to replace coal in Asian steel mills’ blast furnaces.

Fortescue Metals Group founder and chairman Andrew Forrest. Credit:Trevor Collens

Fortescue, whose chairman and biggest shareholder is Andrew “Twiggy” Forrest, has already committed to a 2030 target for “net zero” emissions across its operations – removing as much carbon dioxide from the atmosphere as it emits – but has until now resisted pressure to take responsibility for the greenhouse gases released from the end use of its raw materials, known as “Scope 3 emissions”.

Its new Scope 3 target is underpinned by large investments in manufacturing “green” hydrogen via a process powered by renewable energy. Fortescue’s clean-energy venture, Fortescue Future Industries, is seeking to make a significant push into the nascent clean hydrogen sector and is targeting 15 million tonnes of green hydrogen production a year by 2040.

“Fortescue has commenced its transition from a pure-play iron ore producer to a green renewables and resources company,” Fortescue chief executive Elizabeth Gaines said.

“This Scope 3 target is consistent with this transition.”

Scope 3 initiatives set by other Australian mining heavyweights have so far fallen short of some investors’ expectations because they focus on investing in new technology to drive down customers’ emissions “intensity” – the amount of carbon emitted for each of steel produced – rather than targeting absolute emissions cuts.

At midday, Fortescue shares had fallen 2.7 per cent to touch a 15-month low of $14.01.

The Australasian Centre for Corporate Responsibility, a shareholder activist group, described Fortescue’s target as a “bold and welcome commitment”.

“Fortescue’s bold target overshadows the lack of ambition by BHP and Rio Tinto, whose absence of firm targets for steel-making is looking increasingly lacklustre,” the group’s climate director Dan Gocher said.

“BHP and Rio Tinto should be embarrassed by being outdone by a company they once referred to as a ‘junior miner’. It’s time for BHP and Rio Tinto to set binding targets for their Scope 3 emissions, rather than simply funding research and working with their customers.”

BHP, the nation’s top mining company, is facing the risk of a backlash over the strength of its climate change strategy and pressure to do more as investors prepare to cast their votes ahead of its annual general meetings in Australia and Britain in coming weeks.

Influential proxy advisor CGI Glass Lewis, which guides institutional investors on how to vote, has recommended rejecting BHP’s climate plans citing “room for improvement” in its Scope 3 targets.

“While the company has the laudable goal of pursuing a long-term goal of net-zero Scope 3 emissions, it appears to have somewhat limited targets,” the firm said.

Hydrogen, which burns cleanly and emits only water, is touted as an important growth technology as the transition to cleaner energy gathers pace due to its potential to decarbonise parts of the economy that cannot be easily electrified. The steel-making industry – which mixes iron ore and coking coal in blast furnaces heated to more than 1000 degrees to churn out molten pig iron– is a significant contributor to global warming, accounting for 8 per cent of the world’s emissions.

However, green hydrogen is not yet commonly used in the industry as significant barriers to its uptake remain, the biggest being the prohibitively high cost of produce it compared with hydrogen made from fossil fuels.

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