Procurement Analysis and Sustainable Sourcing Strategies of BHP

Introduction

BHP is one of the largest mining company in Australia, which operates across various domains such as iron, copper, coal, potash, and nickel. The company operates in Australia, Chile, Canada and other parts of the world and has a huge number of employees, contractors and suppliers (BHP, 2025). The success of the company heavily relies on its smart and strategic procurement and supply chain decisions and operations, which ensures performance, cost-effectiveness, sustainability and profitability. The company is working towards its net-zero carbon emission approach which aims to make the completely eliminate the negative impact of the company’s procurement and supply chain on the environment by the year 2050.

This report critically analyses the current procurement and supply chain strategies, operations, and approaches at BHP, with the help of the triple bottom line framework. Moreover, this report also analyses the local vs. global outsourcing viability for the company to achieve its net-zero carbon emission goal by 2050 through a smart decision. For this, the report presents a decision making matrix for the company, which compares the viability of global vs local outsourcing for BHP. With the help of this analysis, the report aims to provide a hypothetical scenario for BHP, and provides opportunity for the company to maintain competitiveness and sustainability in the future by making a smart decision.

Critical Analysis of BHP’s Procurement strategy and practice:

The mining industry in Australia is facing current environmental challenges which include GHG emissions, ecotoxicty, human toxicity impacts etc (Calderon et al., 2020). This section critically analyses the procurement strategy and practice of BHP Australia, through the lens of triple bottom line framework. This framework is being opted by corporations as a part of their corporate social responsibility, and environmental, social and governance (Farzinnia & Boon, 2024). This model analyses the supply chain and procurement practices across three dimensions (people, planet, profit), that have been discussed below:

People:

According to BHP (2025), BHP has 91,304 number of employees and contractors in total, which the company strategically uses to reduce operation costs, risks and to obtain a long term value. The company has set values for the culture. According to the report, the company has developed its own Inclusion and diversity policies, Indigenous Cultural Respect Framework, LGBTQ+ inclusive strategies, family and domestic violence assistance programs, work health safety policies and fair pay policies. Moreover, the company has set minimum requirements for the suppliers who are involved in the procurement processes, which includes strict compliance against human trafficking policies, forced labour, anti-discrimination policies, and fair treatment of employees (BHP, 2022). This shows that the company puts deep efforts to ensure sustainable practices for the people involved in procurement chain for BHP.

Planet:

BHP employs frameworks and methods to monitor the environmental impacts throughout its procurement model, and take measures against the negative impacts on environment to save the planet from degradation and harmful emissions. According to BHP (n.d.a), the company has developed a group level biodiversity strategy which provides strategic priorities and clear directions to ensure environmental sustainability. The company is working towards its 2030 Healthy Environment goal, to put 30% positive impact through its conservation, restoration and regenerative practices. BHP has also established monitoring and review practices which are responsible in managing and mitigating environment related risks, such as through its Group-wide Risk Framework. The environmental risk mitigation strategy of the company is divided into four steps, i.e. avoid, minimise, rehabilitation, compensate.

Profit:

From the aspects of finance and profit, the procurement model of BHP creates a balance between cost effectiveness and supply chain operations. The adoption of AI technology for procurement-related decisions is another positive step of the company to balance the supply and demand and ensure profitability. It has been reported by BHP (2024), that the use of AI at BHP has resulted in a reduction of power and water consumption, such as saving more than 3 gigalitres of water and 118 gigawatt hours of energy since 2022 due to AI-adoption. This shows how the adoption and use of smart technology in its supply chain and procurement processes results in profitability for the company.

Considering the insights from the guest lecture, which highly emphasised on responsible sourcing, transparent reporting, and adherence to sustainability, it could be said that organisations must emit sustainable practices, focus on the circular economy principles and also opt for technological advancement to pose a better impact on profitability, society, people and environment. The lecture highly emphasised the significance of transparent and responsible sourcing which also leverages organisations for a long-term value generation. It could be said that by following and implementing these principles into practice, organisations like BHP can not only strengthen their organisational environment and reputation, but can also add positive contributions to the society as a socially responsible corporate. This will also align with the United Nations sustainability development goals, as mentioned in the guest lecture, such as goal 8, 10, 11, 12, 15, 16, and 17. Altogether, in terms of the guest lecture, it could be said that the practices of BHP aligns with responsible sourcing, however, it needs to focus more on transparency reporting mechanism.

Therefore, it could be said that the overall analysis positions BHP as strong in terms of responsible procurement, and sustainable supply chain practices. However, one gap that has been identified is that the company relies on supplier-self reporting of the sustainability practices, which might lead to inconsistent data reporting or reporting false information (Lu & Tomlin, 2022). Therefore, BHP is recommended to involve in upfront auditing step to ensure that social responsibility is met from the very beginning of the process.

BHP local vs global sourcing in the context of carbon-neutral commitment using decision matrix:

The approach of BHP towards achieving net-zero emissions of its operations by 2050, would require the company to make smart choices for sourcing equipment, material and services locally and globally in a way that it balances the environmental impact, geopolitical risk and cost effectiveness. The table below is a decision matrix which is based on a hypothetical decision, considering the carbon-neutral commitment of the company.

The decision matrix shows that global sourcing offers greater cost effectiveness, because outsourcing services in supply chain and procurement costs less in developing or low-income countries due to a lower labour cost (Leung et al., 2021). Moreover, it can also be seen that global sourcing is more viable in terms of innovation. This is because organisations look for cross border R&D sourcing due to advanced research and development opportunities which contributes to innovation and enhances competitiveness (Duan et al., 2021). However, it can also be seen that local sourcing is more viable in terms of environmental impact, because local sourcing would require less transportation which means less fuel and lesser carbon emissions. Moreover, local sourcing will also be beneficial due to less geopolitical risks such as trade policies or relationship with foreign countries. This is because unpredictable consequences of global sourcing such as international conflicts or imposition of trade restrictions can impact the stability of supply and can impact the business operations as well (Smyrnov et al., 2025). In addition, local sourcing can also be seen optimal in terms of supply chain transparency as reliance on international suppliers might result in reporting of false information which can challenge ethics and sustainability (Lu & Tomlin, 2022). The matrix reveals a score of 16 for global, a score of 19 for local, which shows that local outsourcing will be the best approach for BHP to achieve its goal of net zero carbon emission by 2050. This decision will reduce supply chain transparency risk and will also mitigate risks associated with geopolitical instability and environmental consequences. However, this decision might be cost ineffective for BHP, as the labour cost in Australia is high. Moreover, this decision might also lead to less innovative outputs as R&D is stronger in countries such as USA, UK etc.

Conclusion:

To conclude, it could be said that this analysis reveals that the company has a strong position in terms of ethical, sustainable and responsible procurement and supply chain management. The triple bottom line analysis revealed the approaches of the company towards sustainability for the people, planet and the profitability as well. However, one gap that has been identified from the triple bottom line analysis is the dependence of the organisation on supplier self-reporting for supply chain transparency. This practice should be changed at BHP and upfront auditing and management of supply chain transparency should be ensured by the company.

Moreover, the analysis of the local vs global outsourcing also shows that the company should go for local outsourcing as it provides more benefits to the organisation than global outsourcing, to achieve its mission of net-zero emission by 2050. The company might have to compromise on cost-effectiveness and innovation, but the company will benefit in terms of mitigation of geopolitical risks, environmental consequences and supply chain transparency.

References:

BHP. (2022). Minimum requirements for suppliers. https://www.bhp.com/-/media/project/bhp1ip/bhp-com-en/documents/suppliers/211116_minimum-requirements-suppliers.pdf

BHP. (2024). Artificial intelligence is unearthing a smarter future. https://www.bhp.com/news/bhp-insights/2024/08/artificial-intelligence-is-unearthing-a-smarter-future

BHP. (2025). Annual Report: Bringing people and resources together to build a better world. https://www.bhp.com/investors/annual-reporting

BHP. (n.d.a). Nature and environmental performance. BHP website. https://www.bhp.com/sustainability/environment

Calderon, J. L., Bazilian, M., Sovacool, B., & Greene, S. (2020). Responsible or reckless? A critical review of the environmental and climate assessments of mineral supply chains. Environmental Research Letters, 15(10), 103009. DOI 10.1088/1748-9326/ab9f8c

Duan, Y., Liu, H., Deng, Z., & Tao, P. (2021). The impact of cross-border R&D sourcing on the innovation quality of MNCs, from the perspective of business model innovation. Sustainability, 13(8), 4579. https://doi.org/10.3390/su13084579

Farzinnia, A., & Boon, C. (2024). An Analytical Approach to (Meta) Relational Models Theory, and its Application to Triple Bottom Line (Profit, People, Planet)--Towards Social Relations Portfolio Management. arXiv preprint arXiv:2402.18764.
https://doi.org/10.48550/arXiv.2402.18764

Leung, W. F., D'Cruz, P., & Noronha, E. (2021). Freelancing globally: Upworkers in China and India, neo-liberalisation and the new international putting-out system of labour (NIPL). In Work and labour relations in global platform capitalism (pp. 134-156). Edward Elgar Publishing. https://doi.org/10.4337/9781802205138.00015

Lu, T., & Tomlin, B. (2022). Sourcing from a self-reporting supplier: Strategic communication of social responsibility in a supply chain. Manufacturing & Service Operations Management, 24(2), 902-920. https://doi.org/10.1287/msom.2021.0978

Smyrnov, I., Mylnychuk, T., Tokarchuk, O., Berezivskyi, Y., & Gron, O. (2025). The impact of geopolitical risks on global supply chains. Journal of Information Systems Engineering and Management,10, 582-589. https://repository.hneu.edu.ua/handle/123456789/36619