BHP Billiton's Sustainability Report Analysis

This assignment requires a comparison of BHP Billiton's sustainability reports from 2015 and 2016, with a particular focus on the impact of the Samarco dam failure in 2015. Students must analyze BHP Billiton's actions and responses to the disaster, applying theories of stakeholder theory and legitimacy to evaluate their performance. The analysis should draw upon the provided reports and additional sources cited within the document.

Financial Reporting ACCT2006

SECTION 2
Comparison of sustainability reports
BHP Billiton is one among the leading producers of iron ore, copper and uranium, and
metallurgical coal. The year 2015 and 2016 were faced with volatile economic conditions,
however, the company has remained committed to sustainably. In both the years’
sustainability report, the performance of the company is measured in the areas of health and
safety, community engagement and environmental responsibility against the tragedy at
Samarco. The sustainability report of BHP for the year 2016 includes the operations on
Samarco – our non-operated joint venture held between Vale S.A. and BHP Billiton Brasil
Ltda (BHP Billiton Annual report 2016, 2017).
In November 2015, on the date 5th, the Fundão dam was failed which was Samarco
primary tailings dam. From the failing of this dam, a lot of mine tailings such as water and
mud waste was released that has affected nearby communities including Bento Rodrigues,
Paracatu and Gesteira , even other communities named the Rio Doce was also affected. Prior
to this incident, BHO Billiton was focused towards minimising the environmental impacts of
our operations, however, Samarco failure leads to affect its environmental performance (BHP
Billiton Annual report 2015, 2017). After the issue, the company has faced an ethical
dilemma and major stakeholders were affected due to the incident. The Stakeholder Theory
of Freeman is applied here, according to which company is responsible workforce,
customers, employees, communities, shareholders, and suppliers and it must create value for
different stakeholders (Phillips, 2003). As per the data of 2016 sustainability report, BHP
Billiton was more focused towards creating value not profitability. The immediate response
of business was the welfare of the Samarco workforce as well as welfare of affected
communities.
To show its social responsibility, Company started offering temporary
accommodation, food and water aid to the people from different communities. The company
has provided financial support to the affected farmers as a Brazilian minimum wage + 20%.
The company started working towards forest restoration and water production, education,
communication, recovery of water quality and biodiversity conservation as these areas were
highly affected. The sustainable operations of BHP are focused towards Samarco as it has
started enhancing dam management. The actions taken by Company after the issue indicates
towards Legitimacy Theory, as it indicates that business has taken desirable, proper, or
appropriate actions within a socially constructed system (Jay, Blumenberg and Wallace,

2015).BHP Billiton has now become a permanent member in Belo Horizonte and is
continuing its support Samarco’s remediation, even a team of 35 technical experts and senior
management is employed to offer 24*7 support to communities and nearby areas (BHP
Billiton Annual report 2016, 2017).
Summary information from other sources
A case study of BHP Billiton’s non-operated joint venture operation in Brazil
(Samarco) is covered by various informational sources as it had affected the entire industry.
In accordance with the article of Financial Times; BHP Billiton had developed joint venture
with the objective to operate mines which are not working well subsequently the disaster
occurred at the project of Brazilian iron ore which had left 28 people dead or missing in the
current month (BHP Billiton Puts Joint Ventures Under Review After Dam Breach, 2017).
Further; Anglo-Australian miner has ownership of 50% of Samarco, which the Brazilian
operator of the mine at the place where a tailings dam explodes by sending discarded
tumbling through a nearby town due to which 600 people were homeless.
By considering the entire case management of BHP had set store in order to become a
safe and effective operator of their mines (BHP Facing Fresh Pressure Over Deadly Dam
Burst, 2017). In accordance with the study of; "There is repetitive, persistent negligence on
the part of a business owned by Vale and BHP. Due to this factor; BHP had to face
restoration bill in the billions of dollars supported by lawsuits and litigation for upcoming
years.
According to the article of Ben Knight; operations of Samarco are proposed to be
paralysed for years due to the incident and there are several jobs are at stake. Further;
cleaning of occurred mess will take more than one decade (Samarco Update – Company
Announcement - FT.Com, 2017). On the other hand; there are no estimations given on the
part of BHP regarding rehabilitation costs or insurance arrangements as they are reviewing
their large mining dams succeeding the case of Samarco failure to prevent the same disaster
in the future.
The company had announced the loss of $6.4 billion due to the collision of dam collapse and
a slump in commodity prices. Further problems associated with the case of Samarco is
continuously increasing as per the investigation held by Brazil’s federal police because of the
issue of drainage and increasing height of the dam was not properly monitored and there is
increasing charges against the people involved in the strategic management. As per the report

of Phillips (2017), Samarco had already penalised for 250m reals further it is also possible
that they are going to make an entire region for further waste deposit.

REFERENCES
"BHP Billiton Annual report 2016". 2017. Retrieved 12 October 2017, from
http://www.bhp.com/~/media/bhp/documents/investors/annual-reports/2016/
bhpbillitonsustainabilityreport2016.pdf
"BHP Billiton Puts Joint Ventures Under Review After Dam Breach". 2017. Financial Times.
https://www.ft.com/content/c8a25988-8c71-11e5-a549-b89a1dfede9b?mhq5j=e7.
"BHP Billiton: Annual report 2015". 2017. Retrieved 12 October 2017, from
http://www.bhp.com/investor-centre/-/media/bhp/documents/investors/annual-
reports/2015/bhpbillitonsustainabilityreport2015_interactive.pdf
"BHP Facing Fresh Pressure Over Deadly Dam Burst". 2017. ABC News.
http://www.abc.net.au/news/2016-02-29/bhp-samarco-dam-collapse-brazil-linked-to-
ramping-up-production/7201022.
"Samarco Update – Company Announcement - FT.Com". 2017. Markets.Ft.Com.
https://markets.ft.com/data/announce/full?dockey=1323-12946392-
1RT808PFDDS1KF8MMLIKUGNJ99&mhq5j=e7.
Jay, Martin., Blumenberg, Hans., & Wallace, Robert. 2015. The Legitimacy of the Modern
Age. History And Theory, 24(2), 183.
Phillips, Dom. 2017. "Samarco Dam Collapse: One Year On From Brazil's Worst
Environmental Disaster". The Guardian. https://www.theguardian.com/sustainable-
business/2016/oct/15/samarco-dam-collapse-brazil-worst-environmental-disaster-bhp-
billiton-vale-mining#img-1.
Phillips, Robert. 2013. Stakeholder theory and organizational ethics. San Francisco: Berrett-
Koehler.