Rio Tinto and BHP shareholders push for measurable Scope 3 emissions targets

IEEFA warns that Rio Tinto and BHP — neither of which has a measurable Scope 3 greenhouse gas emissions reduction target — will face escalating investor pressure as the global steel technology transition accelerates and the hard-to-abate defence for inaction becomes less credible. The report, released in October 2023, examines the Scope 3 ambitions of five major mining companies that supply raw materials to the steel industry.

All five companies reviewed — Rio Tinto, BHP, Fortescue, Vale and Anglo American — have committed to net-zero emissions by 2050 and have measurable near-term Scope 1 and 2 targets. However, BHP and Rio Tinto exclude Scope 3 from their measurable reduction targets. Vale's 2035 target to reduce Scope 3 emissions by 15% was assessed against a 2018 base year — before the Brumadinho dam disaster reduced production — meaning Vale had effectively reached the 2035 target by 2022, a result IEEFA describes as demonstrating the target's lack of ambition. Fortescue stands alone with a net-zero Scope 3 target by 2040. The Iron Bridge magnetite project, shipping ore with more than 67% iron content meeting direct reduction-grade specification, supports Fortescue's pathway to achieving that target.

Investor pressure to address Scope 3 emissions is broadening beyond climate activists to mainstream institutional investors. In July 2023, COP28 President Sultan Al Jaber stated companies must act on all three emission scopes. Companies including TotalEnergies, Woodside, Glencore, ExxonMobil and Chevron have already faced investor resolutions on Scope 3. Climate Action 100+, representing more than US$68 trillion in assets under management, published a Net Zero Standard for Diversified Mining in August 2023 specifying 1.5-degree-aligned Scope 3 targets for metallurgical coal and iron ore. H2 Green Steel's September 2023 €1.5 billion equity raise for the world's first commercial-scale green hydrogen steelmaking plant signals that non-coal DRI technology is now attracting industrial-scale funding.

IEEFA identifies specific reasons both BHP and Rio Tinto are running out of justifications for their Scope 3 inaction. Rio Tinto's own modelling shows iron ore-related Scope 3 emissions could fall 44% by 2035 if the steel industry transitions to DRI-based production using its high-grade Simandou ore, while its June 2023 China Baowu agreement advances work on Pilbara iron ore use in hydrogen-based steelmaking. BHP has joined Rio Tinto and Fortescue in investigating DRI steelmaking with Pilbara ore, yet maintains backing for CCS in steelmaking — a technology IEEFA argues is being left behind by non-coal alternatives. Investors are expected to demand measurable targets alongside commitments to manage down — rather than divest — metallurgical coal mine portfolios.

Key figure — 44% — Rio Tinto's own projection for potential reduction in iron ore-related Scope 3 emissions by 2035 as steel technology transitions to DRI production