Governance

HSEC Governance

HSEC Governance

Refer to the following sections for further details on our approach to HSEC Governance:

Structure and responsibilities

At every level of the organisation, our line managers are responsible for HSEC matters. Although they are supported by functional personnel who provide specialist advice and support in managing all aspects of HSEC, ultimate responsibility rests with the general and senior management teams. Executive remuneration is also directly linked to the financial and non-financial performance of the Company. Non-financial performance indicators include health, safety, environment and community targets.

HSEC organisation structure

Image of HSEC organisation structure

As shown in the diagram, the Company’s peak HSE governance body is the HSE Committee, which is a subcommittee of the Board. Current membership of the Committee comprises two executive Directors; a non-executive Director (who is Committee Chair); the Vice President Health, Safety and Environment (HSE); and recognised international experts in the fields of health, safety and the environment. The non-executive Director member is proposed by the Chair of the BHP Billiton Board and approved by the Directors. See HSE Committee of the Board membership for profiles of HSE Committee members. The current reporting period saw a slight change in membership of the HSE Committee, with Colin Bloomfield leaving the role of Vice President HSE to take up the role of President of our Illawarra Coal business. Tony Lennox has replaced Colin as our Vice President HSE. Tony brings with him a wealth of operational knowledge. Additionally, Ben Alberts left and was replaced by Jim Galvin, bringing expertise in mining engineering and risk management.

For further detail on how the HSE Committee functions, see their Terms of Reference (www.bhpbilliton.com/bbContentRepository/AboutUs/Governance/HSETermsofReference.pdf).

HSEC standards across the Company are coordinated and monitored through the BHP Billiton Executive Committee, with HSEC issues included in the agenda for each meeting. This Committee includes the heads of the CSGs, legal, marketing and human resources. The peak functional group is the HSEC Forum, comprising Corporate representatives and HSEC functional heads from each of the CSGs. The Forum is involved in setting direction for the HSEC function, identifying priority issues, monitoring HSEC performance and building consensus for the way forward. Development of HSEC practices and the response to issues of Company-wide significance are managed through specialist networks.

Our HSEC audit program is a critical component of the HSEC governance program, which has been specifically designed to ensure that our Charter, HSEC Policy and HSEC Management Standards are being effectively implemented across the Group.

HSE Committee of the Board Membership

Download HSE Committee of the Board Membership (PDF 56KB)

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Policy, standards and systems

The BHP Billiton Charter

Central to our business is our Company Charter (PDF 40KB), which states our ‘overriding commitment to health, safety, environmental responsibility and sustainable development’. Honesty and transparency are core to this commitment and, importantly, the Charter also recognises that ‘to prosper and achieve real growth we must … earn the trust of employees, customers, suppliers, communities and shareholders by being forthright in our communications and consistently delivering on commitments’.

Working Responsibly at BHP Billiton: Our Health, Safety, Environment and Community Policy

Supporting these principles is Working Responsibly at BHP Billiton: Our Health, Safety, Environment and Community Policy (PDF 40KB) (HSEC Policy), providing the framework for our commitment to sustainable development and our aspiration towards Zero Harm.

Knowing that much of our success as a global company depends on how effectively we work with our employees, contractors and the communities in which we operate, we see the HSEC Policy as being central to our future success. While our Policy broadly aligns with a number of international conventions such as the United Nations Universal Declaration of Human Rights, it also requires that we meet and, where appropriate, exceed legal and other requirements. As such, the Policy recognises that where governments implement international conventions, such as those of the International Labour Organisation, we will comply. The Policy underpins our management systems worldwide and sets the foundation from which we operate. Wherever we operate, HSEC aspects are addressed in our decision-making processes, alongside other business considerations. The HSEC Policy has been designed to support the principles contained in our Charter. This means that, while we strive to deliver strong financial returns to shareholders, we fully recognise and deliver on our wider responsibilities to our stakeholders – good HSEC is good business.

See our Policy Guide (see www.bhpbilliton.com/bbContentRepository/Policies/HSECPolicyGuide.pdf) for a more detailed explanation on the rationale behind our Policy values.

Refer to the following sections for further details on our standards and systems.

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Hierarchy of systems and documents

The BHP Billiton Charter (PDF 40KB), HSEC Policy (PDF 40KB) and HSEC Management Standards (PDF 284KB) are mandatory at all our sites and operations, under a hierarchical management system where systems and documents must meet and support the requirements of those of higher levels, as shown in the diagram below.

Image of Hierarchy of systems and documents

We are aiming for some of our management systems to be certified. For example, we have achieved our target for ISO 14001 certification of our environmental management systems at all of our major operating sites. Additionally, some of our sites are now working towards certification of their safety management systems to OHSAS 18001. A number of our sites are also certified to the ISO 9000 standards for quality management.

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HSEC Management Standards

The 15 HSEC Management Standards are well established, providing a strong basis for continual improvement in performance. The Standards, listed below, were developed to ensure consistent interpretation and implementation of the HSEC Policy. They form the basis for the development and application of HSEC management systems at all levels in the Company.

Summarised HSEC Management Standards (PDF 32KB)

The objectives of the HSEC Management Standards are to:

The scope of the Standards covers all operational aspects and activities that have the potential to affect, positively or negatively, the health and safety of people, the environment or the community. They cover the entire life cycle of our assets, from exploration through to construction, commissioning, operation, decommissioning, closure and rehabilitation.

Our occupational accident and disease reporting processes are designed to comply with the relevant laws in the regions where we operate. All sites are also required to have consultation and communication processes, comprising management and worker representation, to address HSEC issues.

All aspects of performance are incorporated in the Management Standards, including accountabilities; risk assessment and management; business planning and target setting for improvement; communication, training and awareness; and performance monitoring, auditing, and management review.

The requirements of the Standards apply to all BHP Billiton sites and operations throughout the world. These include facilities that are owned or operated by us, development projects and major activities by contractors on our sites or under our management.

Where we have no operational responsibility but have an equity stake or significant BHP Billiton assets are involved, the Standards are made available to the operator so that comparable HSEC standards can be applied.

In addition, the Standards require operations to evaluate the social and environmental performance of our contractors and suppliers, including such issues as human rights records and previous environmental incidents.

Through Management Standard 12 on Product Stewardship, we also cover the consumption end of our material life cycle. Material safety data sheets (MSDSs) are available for our products, identifying potential health, safety and environmental aspects associated with their use. Please contact the Company if you would like a copy of an MSDS for any of our products.

Our HSEC Management Standards include a requirement for an auditing process to check that our Charter, HSEC Policy and Standards are being applied and to verify performance. The audits are designed to address the degree of implementation of our HSEC management systems and their effectiveness in meeting the Group’s needs and those of the business being audited. During any year, those sites not scheduled for a Corporate HSEC audit must complete a self-assessment against the Standards and prepare performance improvement plans to progress to full conformance with the Standards. Conformance against the HSEC Management Standards is reported in the Audit and self-assessment section.

To ensure that our HSEC (including human rights) management requirements are embedded into significant investment decisions, we have established an investment process that covers a range of investment types and establishes the policy by which all investments are to be reviewed and authorised. The process also outlines key participants and includes the incorporation of independent peer reviews.

The Standards are reviewed at least every three years and, if required, revised and reissued.

View our full HSEC Management Standards (see www.bhpbilliton.com/bbContentRepository/Policies/ HSECManagementStandardsIssue2.pdf) and their associated performance requirements.

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Risk management

Supporting the risk basis of the Management Standards is our Enterprise-Wide Risk Management (EWRM) strategy, which is embedding risk management processes into all our critical business systems, allowing us to adopt a precautionary approach to business management. When critical decisions are being made, managers are required to look beyond the obvious risks and recognise all sources of uncertainty, including issues related to health, safety, environment and community.

The embedding of risk management processes is taking place at all levels of the organisation, so that risks associated with changes or investments can be systematically identified and managed in a comprehensive and integrated way. Particularly, EWRM requires managers to understand the risks associated with the activities under their control and to manage them accordingly; and this acts to stimulate and reinforce accountability. The context of all our risk management activities is always the achievement of our business plan and strategic objectives. Because there is a continuous focus on the events and issues that might affect how and when those strategic objectives are achieved, we are building resilience into our business at all levels.

To steer the implementation, an advanced EWRM framework has been developed, comprising policy, standards and guidelines that set exacting standards for management. The HSEC Risk Management Guidelines are consistent with this framework. Each asset and business has gone through an objective process of risk assessment and has evaluated its current risk management approach and systems against a standard. The risk assessments have highlighted where further control action is required, and this is now being taken. Where gaps in the system of risk management were identified, a risk management plan has been prepared and is being implemented.

Corporate governance requirements are satisfied by the assessment of progress in risk management plans and in improvements in risk control, which is reported to business-level risk management and audit committees that in turn report to the Risk Management and Audit Committee of the Board. For further details on the Risk Management and Audit Committee of the Board, refer to the Corporate Governance section on our Company website (see www.bhpbilliton.com/bb/ aboutUs/governance.jsp).

To coordinate all risk management activities, risk management ‘champions’ have been appointed at each operational location or function. They work as a community of practice, sharing information about initiatives and best practice.

A central element of the EWRM strategy is leveraging risk management information. The Company-adopted system assigns risks, controls and actions to accountable managers and enables management to track and report progress on all risk control activity. This system is also being used to ‘roll-up’ risk issues so that the Company can see all its major residual risks, along with opportunities for greater value creation through strategic risk management. The system is being used specifically to roll-up HSEC risks to obtain such a Company-wide perspective.

The ultimate aim of the Company’s EWRM strategy is to embed risk management in all we do so that it truly becomes everyone’s responsibility.

View our Enterprise-Wide Risk Management Policy (see www.bhpbilliton.com/bbContentRepository/AboutUs/Governance/EWRMPolicyStatement.pdf).

See our BHP Billiton HSEC Consequence Severity Table (PDF 40KB) which is part of the tool kit utilised in determining the level of significance of actual or potential HSEC incidents and risk.

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Investment processes

New investments are essential for the Company to deliver on its strategic and financial objectives and to shape the organisation to best respond to the changing external environment.

This requires new types of investments, relationships and innovative value-chain solutions.

In pursuing the best investment opportunities, stringent performance measures have been established to drive operational and capital efficiency. Prior to committing to an investment, we will assess the investment risk and develop strategies and capabilities to ensure an optimal outcome. The consideration of a plausible range of outcomes – both upside and downside – is central to our understanding of the investment risks.

Our investment system is based on a common approach across the organisation, using consistent processes, terminology, standards, tools and techniques. The system structure is sufficiently flexible to allow individual CSGs to deal with their specific circumstances and dovetail into the specific requirements of our investment process.

Any investment proposal must be supported by a detailed risk assessment and management strategy before it will be approved. During the execution phase of a project, it must be shown that all risks, including HSEC risks, are being controlled. When a project is in the operation phase, it must be shown that the operation is being managed in conformance with Company policies and standards, including the HSEC Management Standards.

Independent Peer Reviews are integral to the assessment and approval of investments. They are undertaken by a cross-functional team of experts, independent of the investment proponents and generally from within the Company, who review the investment prior to the required tollgates. They provide assurance that investment opportunities are robust and have undergone independent, rigorous and consistent reviews. These reviews are essential, not only for satisfying our governance requirements, but also for providing the opportunity to add further value by drawing on the experience of the Independent Peer Review team.

The Investment Review Committee (IRC) operates under powers delegated by the Office of the Chief Executive. The role of the IRC is to oversee the management approval processes for major investments. Those processes are designed to ensure that investments are aligned to the Group’s agreed strategies and values; that risks are identified and evaluated; that investments are fully optimised to produce the maximum shareholder value within an acceptable risk framework; and that appropriate risk management strategies are pursued. The IRC oversees investment processes across the organisation and coordinates the Independent Peer Review and endorsement of major investments.

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Business conduct

The BHP Billiton Guide to Business Conduct (see www.bhpbilliton.com/bb/peopleAndEmployment/globalBusinessConductGuide.jsp) is founded on our Charter. The Charter states that the Company cares as much about how results are obtained as it does about delivering good results. How the Company achieves results is important because:

The Guide to Business Conduct applies to all our workforce regardless of their specific job or location. It provides employees and contractors with direction and advice on carrying out business and interacting with governments, communities and business partners. This includes clear guidelines on general workplace behaviour as well as our policies, standards and guidelines on a wide range of ethical issues including conflict of interest, financial inducements and bribery, insider trading and political contributions.

The Guide and its principles are cascaded through the organisation, with managers and supervisors held accountable for not only their actions but also the actions of their staff. This starts at the most senior level of the Company, with the CEO requesting annual confirmation from his direct reports that they and their direct reports have read the Guide and have discussed its contents.

Internal performance requirements regarding business conduct are included in our HSEC Management Standards. Distribution of the Guide to employees and contractors, as well as presentation and discussion of its principles, is monitored and reported through the Company’s HSEC audit program. In addition to the English version, the Guide is available in seven other languages commonly used at our sites around the world.

The Board approved several changes to the Guide in April 2004. These changes include revisions to reflect changes to the BHP Billiton policy on the public release of Company information, extension of the guidance on insider trading to trade in the securities of non-BHP Billiton companies, and questions and answers on putting policy into practice.

Resolution of business conduct issues is encouraged at the local level. If this is not possible, the issue can be raised with regional points of contact or telephone helplines based in southern Africa (Johannesburg), Europe (London), Australasia (Melbourne) and North and South America (Tintaya, Peru). A confidential email address is also increasingly used. For issues related to fraud or bribery, the fraud hotline is contacted. Employees can escalate issues to the Global Ethics Panel. For further details, see Global Ethics Panel.

Global Ethics Panel

The Global Ethics Panel comprises business representatives and corporate representatives from relevant functional areas (i.e., Group Audit Services, Human Resources and Legal) and two external representatives. John Fast, Chief Legal Counsel and Head of External Affairs, holds the position of Chairman. Our external representatives are Dr Simon Longstaff, Executive Director, St James Ethics Centre, and Graham Evans (now retired), former chairman of the Global Ethics Panel and former Head of External Affairs at BHP Billiton.

In addition to providing a high-level point of contact for employees, the Global Ethics Panel reviews on a quarterly basis all business conduct cases that have been raised through the helpline or email system. It also assesses emerging policy issues and recommends to the Board appropriate changes to the Guide.

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Audit

Our HSEC Management Standards include a requirement for an auditing process to check that our Charter, HSEC Policy and HSEC Management Standards are being applied and to verify performance. The audits are designed to address the degree of implementation of our HSEC management systems and their effectiveness in meeting the Group’s needs and those of the business being audited. Recommendations for improvement are made as required.

The HSEC Audit Protocol is based on the HSEC Management Standards and systems and performance management principles. The audit program is a triennial peer review process, with audit teams drawn from the HSEC function, operations personnel and external sources. It provides an objective view of site activities and systems and assists site managers through the identification of gaps in HSEC management programs. These gaps are addressed through monitored Performance Improvement Programs. The process provides assurance to the Group and the Board that the HSEC Management Standards are being implemented and identifies leading practices that can be shared across the Company.

The audit process is proving invaluable in accelerating the rate of improvement in all aspects of HSEC management through the identification and communication of leading practices.

The review of the operation of the Company’s internal control systems, including the HSEC auditing process, is one of the roles of the Risk Management and Audit Committee, which is a committee of the Board. The Committee’s responsibilities also include overseeing the appointment of the Vice President Risk Assessment and Assurance, who is responsible for the Company’s risk assessment, internal audit and insurance activities, and evaluating his or her performance. For further details on the Risk Management and Audit Committee of the Board refer to the Corporate Governance section on our Company website (see www.bhpbilliton.com/bb/aboutUs/governance.jsp).

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