Yes, they used a large green stick for reference, but also the actor was around.
In an interview with The Art of VFX, Jamie Beard, animation supervisor on the movie from Weta Digital (company behind all CGI shots), explains how they did the interaction between Sophie (Ruby Barnhill) and The BFG (Mark Rylance).
Can you tell us more about the various interactions between Sophie and The BFG?
We had many different methods for Sophie and the BFG to
interact, most impressive of which were the full scale BFG rigs used
when Sophie stands on his shoulder or sits in his hand. These could be
operated or driven by animation to give a sense of movement. But
despite these large scale aides it was always important that Mark
Rylance and Ruby Barnhill were never performing to a ball on a stick.
Thus, despite the technology available, the most effective setup was
simply mimicking the eyelines (as if they were different scales) and
performing very close together as if in a normal scene. That made sure
we got an intimate performance.
Source: THE BFG: Jamie Beard - Animation Supervisor - Weta Digital, Oct 6, 2016. Consulted Jan 22, 2017.
In the same interview, Beard tells how they made the combination of live action and CGI (scale) so believable.
Can you explain in detail about the Performance Capture System?
On the
BFG, scale was the biggest challenge compared with the way we normally
shoot motion capture. Ideally everything you are capturing is in the
same scale, but on this occasion we needed several motion capture
stages to represent the different scales of the BFG, the larger giants
and Sophie herself. So we constructed a range of sets and motion
capture stages to exact scales. For example, we would first capture
Mark Rylance as the BFG with the set built to his scale. Then we would
move to a much larger scale set to complete the live action portion
with Sophie so that she appeared under-sized in a land of giants. The
best part here is that when filming the live action portions, the
completed motion capture of Mark was simultaneously composited into
the cameraman’s monitor. This meant that not only could Steven see
Ruby standing there, but also the virtual BFG he shot earlier in the
day. This way he was able to compose the shot with both scales. This
was a very important step in making our work invisible so that Steven
and his crew could operate as if shooting a traditional film.
Source: THE BFG: Jamie Beard - Animation Supervisor - Weta Digital, Oct 6, 2016. Consulted Jan 22, 2017.
This image set of the set of The BFG confirms above techniques. Actor Rylance stands near 'the BFG' for his lines and Barnhill is seen on the right.
Photos are provided by The Art of VFX and courtesy of Storyteller Distribution Co., LLC. All rights reserved.