Sustainability of Mining Industries Analysis 2022

Running Head: Sustainability of Mining Industries
Sustainability of Mining Industries
Name of the Student
Name of the University
Author Note

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Sustainability of Mining Industries
Table of Content
s
Part A- Critical Analysis................................................................................................2
Introduction...............................................................................................................2
Body..........................................................................................................................2
Conclusion................................................................................................................5
Part B Strategic Initiative..............................................................................................6
Cost Behaviour Patterns...........................................................................................6
Balanced Scorecard..................................................................................................7
Development of proposed strategy...........................................................................8
References...................................................................................................................9
Appendix.....................................................................................................................10

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Sustainability of Mining Industries
Part A- Critical Analysis
Introduction
BHP which was formerly known as BHP Billiton was founded in 1885 is a
trading entity of BHP Group Limited. It is an Anglo- Australian multinational company
dealing with metals, mining and petroleum headquartered in Melbourne, Australia.
BHP has been ranked as the world’s largest mining company as per the market
capitalisation by the year 2017. According to the sustainability report of BHP (BHP
Sustainability Report, 2019), the data provided by them are transparent and
voluntarily provided as per the standards, guidelines and recommendations of
sustainability informed by the external sources. The International Council on Mining
and Metals (ICMM) and the Global Reporting Initiative Standards (GRI) are followed
while preparing the sustainability report. The strategy of BHP is to create the long
term value and high returns with the best of their capabilities, assets and
commodities with the purpose of bringing together the people and resources for
building a better world along with the values of sustainability, integrity, respect,
performance, simplicity and accountability.
Body
The sustainability has been considered as one of the major core values of
BHP. They believe in supporting the communities in which they operate being
environmentally responsible. Therefore, BHP considers health and safety as the
topmost priority. The environmental challenges that BHP faces are considered
complex and unprecedented. It is important to reduce the impacts on the water
resources and the biodiversity with a collective and concerted action and also to curb
the carbon emissions. The responsibilities and actions are taken by BHP for
reducing the emission of greenhouse gas (GHG) and they have succeeded to
maintain the commitment of five year target of emission of greenhouse gas at or
below the levels of FY2017. During the financial year 2019, the emission of
operational greenhouse gas was 3 percent below the targeted baseline. The BHP
group uses the value communities as the parameter for the purpose of measuring
the achievement of environmental and economic sustainability. The success of BHP
depends on the health and prosperous of the global communities. Here also the BHP
has succeeded to maintain the five-year community targets which help in the
maintenance of sustainable development challenges. During the financial year 2019,
the amount of voluntary social investment of BHP amounted to US$ 93.5 million
which was amounted to US$ 77.1 million in the F.Y 2018.It includes US$ 55.7 million
in the direct projects of community development and donations. The group is
committed to not lose sight of the importance to deliver the meaningful gains for the
stakeholders as they are aiming for the long-term value.
There are number of companies in the metal and mining sectors of Australia
which disclose the information of environmental sustainability in the sustainability
reports, annual reports and other web pages of corporate internet (Lee, 2017). It has
been found that the size of the metal and mining companies which are included in
the Australian Securities and Exchange (ASX) influence the quantity as well as the
quality of corporate environmental disclosure. The market capitalization correlates
the quantity and the quality of environmental disclosure positively and significantly
(Lokuwaduge & Heenetigala, 2017). These mining companies are associated with
the extraction of minerals from earth and it consists of opportunities, risks and
challenges to sustainable development. The normative framework of mining is

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Sustainability of Mining Industries
structured with international laws which include human rights standards and laws,
treaties of international investment and other treaties and conventions of
environment. The customary rules which are practised within the country and the
domestic legal framework in mining which consists of laws, constitutions, policies
and regulations are needed to be coherent with the international laws and norms
(Heenetigala, et al., 2015). Generally, the mining contracts are signed with large
investors which are considered as another key element of the normative framework.
In order to examine the quality and depth of environmental as well as social
performance, Rio Tinto has been chosen as the competitor company for BHP and a
comparison is drawn between the two. According to the sustainability report of Rio
Tinto (Rio Tinto Sustainability Report, 2019), the resources that they mine for
producing the minerals often occurs at remote locations with sensitive environment.
They are committed for understanding these environments and try to mitigate the
impacts of the operations on them during the lifecycle of the operations. This also
includes the safeguarding of the lives and livelihood of the local communities who
rely on them. Therefore, for this purpose Rio Tinto has implemented strict
international practices and standards with local and international regulations. Their
environmental standards require to involve the local communities for the purpose of
monitoring the activities and also to share performance with the stakeholders
regularly. They play a positive role in the society where they operate as they plan for
a long term business plan by engaging with the communities in such a way that it
respects their rights, culture, dignity and their way of living. On the other hand, Rio
Tinto has been considered as the first mining company in Australia which is engaged
in forming agreements with indigenous landowners.
A materiality assessment is being conducted by BHP Group each year for the
purpose of identifying the sustainability issues specially those issues which are
critical to the business as well as the stakeholders. The group is also engaged with
the assessment of the impact of their activities on environment, society and the
economy. In order to identify the key issues of concern of the business a wide range
of internal and external sources have been used for consulting with the stakeholders
with the help of investor round tables, surveys and advisory groups have been
reviewed by the group. On the other hand, the sustainability committee helps in the
review of the assessment and thus helps by providing feedback on the key issues.
Therefore, it helps in tracking of the existing issues and identification of the new ones
and the materiality assessment helps in informing of the sustainability strategies and
helps to provide a clear understanding related to the coverage of the key topics
which are in accordance with the Global Reporting Initiative (GRI) principles. The
critical issues which include the climate change, water, dams, tailings have the ability
to impact on the safety, environment as well as the community along with the ability
to operate and grow. During the F.Y 2019, the issue of trust inside the group has
been assessed as a material concern and it helps them to build trust with all the
stakeholders of BHP. Thus, the material issues include the sustainability approach of
the group, health and safety, environment, climate change, society, water, people,
business conduct as well as business ethics and the economic contribution report
(BHP Sustainability Report, 2019).

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Sustainability of Mining Industries
Figure: Material Sustainability Issues of BHP
Source: BHP Sustainability Report, 2019
The Global Reporting Initiative is considered as an independent international
organization which helps in the reporting of corporate sustainability since 1997. It
helps in the understanding and communicating of impact of business on climate
change, corruption and human rights which are the critical sustainability issues. GRI
also helps the organizations and the stakeholders to take better decisions by
providing widely accepted and trusted standards of sustainability reporting (Vigneau,
Humphreys & Moon, 2015). The GRI has been prepared based on the multi-
stakeholder principle in which the participation and expertise of the diverse
stakeholders is ensured for the development of its standards. Therefore, the mission
of the Global Reporting Initiative is based on the empowerment of the decisions
everywhere with the help of its standards and the network of multi-stakeholder with a
mission to develop more sustainable economy in the world (Belkhir, Bernard &
Abdelgadir, 2017). The guidelines of the GRI sustainability reporting are developed
with the help of a process which includes global multi-stakeholder with the
representatives of labour, business, financial markets, civil society, along with the

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Sustainability of Mining Industries
auditors and other experts. The guidelines of GRI are presented in two parts. The
first part has been termed as reporting principles and standard disclosures and the
second part is called the implementation manual. The first part contains the reporting
principles and the standard disclosures as the name suggests along with the criteria
which are to be applied for preparing sustainability report as per the guidelines by
the organizations whereas, the second part consists of the explanations related to
the application and preparation of the reporting principles (Lokuwaduge &
Heenetigala, 2017).
Conclusion
It can be concluded from the above discussion that sustainability report of any
organization is important as it ensures whether the organizations consider their
impacts on the issues of sustainability or not and it also helps them to be transparent
about their risks and opportunities. The paper discusses about the sustainability
reporting of BHP Group in accordance with the guidelines of GRI and how its
operations impact the environment and society as a whole. It also deals with the
comparison between BHP and one of its competitors which is Rio Tinto Group. The
key challenges which have been faced by the BHP Group is also mentioned here
and lastly the paper has discussed about the GRI reporting standards and how it is
important and beneficial for the investors and the stakeholders of an organization.

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Sustainability of Mining Industries
Part B Strategic Initiative
MEMORANDUM
DATE: 13.1.2020
TO: All Employees
FROM: Sales and Production Team, Construction Pty.
SUBJECT: Strategic Initiative to develop new mining equipment
The purpose of writing this memo is to inform about a new strategic initiative that has
been undertaken for the purpose of purchasing a new range of mining equipment.
This initiative has been undertaken to keep pace with the increased demand of
mining. Therefore, the sales and the production team have decided to acquire a new
mining equipment and the team has also developed a high-level cost analysis.
On the behalf of the Construction Pty, it has been decided that it is necessary to
purchase a new range of mining equipment. Recently, there has been a
considerable increase in the demand and for addressing this increased demand in a
timely manner the number of existing equipment are not sufficient. The purchase of
this new equipment will help increase the sales volume which will ultimately help to
increase the profitability of the business.
This strategic initiative of the purchase of new equipment has certain advantages like
there will be less costs involved related to repairs and depreciation since it is a new
machinery and it will only involve the cost of investment therefore there will be
reduction in the cost analysis.
Thus, the purchase of the new range of equipment is highly recommended as this
will bring new avenues for the organization.
Thanks & Regards
Cost Behaviour Patterns
The cost behaviour patterns of a business are referred to the change or
stability in the business and its operating expenses during different events (Guo, Yiu
& González, 2015). These patterns are subject to change especially during the
period of varying production levels or the volume of sales. There are different types
of cost behaviour patterns and these patterns are fixed, variable and mixed
expenses (Ivanisevic, et al., 2016).
Fixed Costs- The fixed costs refers to those which will take place irrespective of the
production level and the sales volume of the business. The fixed costs include
insurance, rent and loan payments and other costs like depreciation on fixed assets,
taxes related to property and other non-consumption services. There are certain
fixed costs which are subject to change as per the activities of the business. The
management has the authority to change the discretionary fixed cost (Cheung,
2016).
Variable Costs- The variable cost either increases or decreases depending on the
production volume of the organization. Therefore, the variable cost is a corporate
expense that is subject to change in proportion with respect to the production output.
There is a positive relationship between the variable costs and production hence, as

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Sustainability of Mining Industries
production increases variable cost increase and there is a decrease in the variable
cost when there is decrease in the production (Cheung, 2016).
Mixed Costs- Mixed costs are those costs which share the characteristics of both
fixed costs and variable costs. During the times of low levels of activity when the
businesses do not exceed the flat levels of rate the costs are supposed to be fixed.
On the other hand, at times when the production or the levels of sales are high the
consumption are supposed to get increased exceeding the flat rate level and thus
the total cost is likely to vary (Cheung, 2016).
There lie several benefits of cost pattern which serves a number of purposes
of a business organization. It helps the management to prepare budget accordingly,
it helps in the reduction of costs and maximisation of profit (Ivanisevic, et al.,
2016).The cost behaviour pattern of an organization also helps the management and
the financial planners to achieve the estimated production and the sales goals.
Balanced Scorecard
Perspective Objective Measures Reason
Financial 1. Increase in
profit by 10%
1. Cost savings
by 5%
2. Increase in
production
1. The
implementation
of new
equipment will
help in
increasing the
production
since it can
produce more
number of
products.
2. The profit
percentage will
be increased
since with the
increase in
sales volume
and it will incur
less costs
since the
equipment is
new and
efficient.

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Sustainability of Mining Industries
Customer 1. Increasing
satisfaction
of customers
1. Ensuring the
quality of the
products
2. Ensuring on
time delivery
of the
products
1. The quality of
the product will
be developed
since the new
equipment is
enhanced and
more updated
2. 2. This will
help in on-time
delivery of the
products since
the production
of defective
products will
be reduced
and as a result
it will help to
retain the
existing
customers and
attract new
customers
Internal
Business
Processes
1. Improvement
of process
and service
delivery
1. Providing
training to
the
employees
2. Improvemen
t of
production
processes
1. The quality of
the product will
be enhanced
since the
employees
have been
provided with
proper training
in terms of use
of the new
equipment
2. The utilization
of resources
have been
maximised
with the
implementation
of new
strategies
associated
with the
introduction of
the new
equipment.
Learning and
Growth
1. Developing
the technical
skills of the
employees
1. Conducting
survey of
employee
satisfaction
1. Achievement
of cultural
growth and
development

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Sustainability of Mining Industries
by improving
employee
engagement
and
satisfaction
2. Formation of
new workforce
with new skills
and efficiency
Source: Created by Author
Development of proposed strategy
The calculation has been performed for analysing the breakeven analysis and
the feasibility of the forecasted sales. The calculation includes three products which
are pickaxe, chisels and pans. The total variable costs per unit of these three
products are $123.65 and contribution margin per unit is $81.35. In order to achieve
the targeted profit of $350,000 it has to sell 9146 units of the three products with the
product mix of 1:1:1 whereas, the breakeven number of units include 4,843 unit of
product sales. According to the question, the forecasted profit has been calculated
as $4,748,500 and to achieve this forecasted profit it has to make a sale of 190,000
units of these products.

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Sustainability of Mining Industries
References
Belkhir, L., Bernard, S., & Abdelgadir, S. (2017). Does GRI reporting impact
environmental sustainability? A cross-industry analysis of CO2 emissions
performance between GRI-reporting and non-reporting
companies. Management of Environmental Quality: An International
Journal, 28(2), 138-155.
BHP Sustainability Report 2019. (2020). Retrieved 13 January 2020, from
https://www.bhp.com/investor-centre/sustainability-report-2019/
Cheung, S. N. (2016). Economic organization and transaction costs. The new
palgrave dictionary of economics, 1-5.
Guo, B. H., Yiu, T. W., & González, V. A. (2015). Identifying behaviour patterns of
construction safety using system archetypes. Accident Analysis &
Prevention, 80, 125-141.
Heenetigala, K., De Silva Lokuwaduge, C. S., Armstrong, A. F., & Ediriweera, A.
(2015). Independent Assurance of Sustainability Reports of Mining Sector
Companies in Australia. In 12th International Conference on Business
Management (ICBM).
Ivanisevic, A., Katic, I., Buchmeister, B., & Leber, M. (2016). Business plan feedback
for cost effective business processes. Adv. Prod. Eng. Manag, 11, 173-182.
Lee, K. H. (2017). Does size matter? Evaluating corporate environmental disclosure
in the Australian mining and metal industry: A combined approach of quantity
and quality measurement. Business Strategy and the Environment, 26(2),
209-223.
Lokuwaduge, C. S. D. S., & Heenetigala, K. (2017). Integrating environmental, social
and governance (ESG) disclosure for a sustainable development: An
Australian study. Business Strategy and the Environment, 26(4), 438-450.
Rio Tinto Sustainability Report 2019, (2020). Retrieved 13 January 2020, from
https://www.riotinto.com/en/sustainability
Vigneau, L., Humphreys, M., & Moon, J. (2015). How do firms comply with
international sustainability standards? Processes and consequences of
adopting the global reporting initiative. Journal of Business Ethics, 131(2),
469-486.

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Sustainability of Mining Industries
Appendix
Calculation of breakeven and forecasted sales:
Product Pickaxe Chisels Pans Total
Price per unit
$
70.00
$
50.00
$
85.00
$
205.00
Labour costs
$
11.90
$
11.00
$
21.25
$
44.15
Materials costs
$
24.50
$
15.00
$
29.75
$
69.25
Variable overhead
$
3.50
$
2.50
$
4.25
$
10.25
Total variable costs per unit
$
39.90
$
28.50
$
55.25
$
123.65
Contribution margin per unit
$
30.10
$
21.50
$
29.75
$
81.35
Equipment depreciation
$
75,000
Rent
$
170,000
Marketing
$
85,000
Other
$
64,000
Total annual fixed costs
$
394,000
Target profit
$
350,000
* Assumed an even product mix of 1:1:1
Product Pickaxe Chisels Pans Total
Breakeven number of equipment 1,614 1,614 1,614 4,843
Number of units to be sold to earn target
profit 3,049 3,049 3,049 9,146
Forecasted sales in units 75,000 65,000 50,000 190,000
Contribution margin 2,257,500 1,397,500 1,487,500 5,142,500
Less: Total fixed costs
$
394,000
Forecasted profit $4,748,500

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Sustainability of Mining Industries
Pickaxe Chisels Pans Total
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
BEP Vs Forecasted Sales
Breakeven number of equipment Number of units to be sold to earn target profit
Forecasted sales in units