We accept the scientific consensus as assessed by the Intergovernmental Panel on Climate Change (IPCC) and support the Paris Agreement goal of limiting global temperature rise to well below 2°C above pre-industrial levels.
Climate change is a complex and challenging issue impacting governments, businesses and communities all over the world. Successful mitigation and adaptation to climate change impacts requires a collaborative approach to ensure we succeed as a global community in protecting our environment for future generations, while maintaining economic stability and sustainable growth.
As a values-based business, we acknowledge our responsibility to engage with, and accelerate the transition towards, a net zero emissions global economy. We are committed to taking a leadership position on climate change and believe this will drive shareholder value over the longer term, while meeting the expectations of our internal and external stakeholders.
Our Board has overall responsibility for the oversight of climate-related matters and our dedicated Climate Change Committee provides advice to the Audit and Risk Management Committee and the Board.
Climate Change Strategy
Our Climate Change Strategy focuses on implementing innovative and practical emissions reduction initiatives to maximise opportunities and proactively mitigate and manage climate-related risks in a transitioning economy.
Metric and targets
This year, we revised our long-term emissions reduction goal to achieve net zero operational emissions by 2040. This goal is core to our Climate Change Strategy and is underpinned by a pathway to decarbonisation, including the reduction of Scope 1 and 2 emissions from Existing Operations by 26 per cent from 2020 levels, by 2030.
The transition to a low carbon economy presents both opportunities and risks and we are implementing measures to mitigate and manage these risks and optimise opportunities.
The evaluation of climate change risks and opportunities is integrated into our company wide risk management process.
Fortescue’s Risk Management Framework (FRMF) ensures a consistent approach to the recognition, measurement and evaluation of all risks and opportunities, including those related to climate change.
We undertook a climate change focused risk assessment in June 2020.
Stationary power generation at our sites makes up approximately 30 per cent of our operational emissions. This includes the power we generate (Scope 1), as well as the power we purchase from third party producers (Scope 2).
To ensure our operations are supplied with cost effective, secure and reliable power, our Energy Strategy includes investment in renewable and low emissions energy sources.
To date, we have committed to directly invest over US$700 million to reduce emissions from power generation and we will continue to investigate opportunities to increase the use of renewables at our Pilbara operations, including through additional solar generation.
Along with the US$100 million being invested by Alinta Energy to provide solar/gas generated power to the Chichester Hub, the total investment exceeds US$800 million. We are also investigating green hydrogen as a fuel source for future power generation.
Approximately 50 per cent of our operational emissions are generated by our mining fleet. These vehicles currently use diesel as a fuel source and consume around 400 to 450 million litres of diesel per year.
Decarbonising the mining fleet is one of the biggest challenges facing our industry. While electric light vehicles are readily available for the passenger and domestic market, there are currently no economic or technologically viable, large-scale vehicles available for the mining industry.
We believe we can drive industry innovation and technology development to support the decarbonisation of our mining fleet.
Scope 3 emissions are those emissions that fall within a company’s value chain but are outside its operational control. At Fortescue, our major Scope 3 emissions are generated in crude steel manufacturing and shipping.
Estimating Scope 3 emissions
Our approach to evaluating, categorising and estimating Scope 3 emissions is informed by the international Greenhouse Gas Protocol's Corporate Value Chain (Scope 3) Accounting and Reporting Standard. In accordance with this standard, we have estimated Scope 3 emissions relating to our business for FY20.
Scope 3 emissions from crude steel manufacturing and shipping combined were estimated to be 244.5 million tonnes of CO2-e in FY20 and the emissions estimation methodologies for these major sources are detailed in our emissions estimation methodology which is provided here.
Reducing Scope 3 emissions
The steel making process generates significant greenhouse gas (GHG) emissions and we will continue to actively engage with our customers and suppliers to encourage and facilitate the reduction of emissions in their value chain.
During FY20, we investigated the potential impacts of emerging emissions reduction frameworks, including the Chinese Emissions Trading Scheme, on our downstream partners. This research will inform our engagement with customers to build their resilience to transitional risks and also informs our understanding of customer expectations in a global economy transitioning towards net zero emissions.
Specifically, we are engaging with our customers on opportunities to reduce their emissions from iron and steel making in the following areas:
We also believe that ambitious emission reductions in our direct operations will allow us to offer lower emissions iron ore products to our supply chain partners to build competitive advantages.
In FY20, the shipping of our products from the Pilbara to our customers around the world accounted for approximately 3.5 million tonnes of CO2-e emissions.
The International Maritime Organisation (IMO) is responsible for developing regulations applicable to the shipping industry and has adopted a strategy to reduce GHG emissions consistent with the Paris Agreement. This strategy envisages a reduction in carbon intensity of international shipping, reducing CO2 -e emissions per transport work, as an average across international shipping by at least 40 per cent by 2030, pursuing efforts towards 70 per cent by 2050 from 2008 levels.
We support the IMO targets and are working closely with our shipping partners and other relevant industry participants to develop and implement strategies that will deliver on these targets.