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- BlueScope avoids over-promising on unproven technology, instead spreading capital risk through joint ventures and a diversified portfolio of pathways.
- Surging data centre demand, grid bottlenecks and geopolitical shocks are turning power security into an urgent, top-tier governance risk.
- The real benchmark of climate governance comes down to two irreversible moments: strategy day and CEO selection.
Boards are being asked to make long-term bets on energy and climate at a time when the economics, technology and policy settings can shift faster than their investment cycles.
That was the reality confronting directors at the AICD Climate Governance Forum in Melbourne, where the discussion ranged from BlueScope’s decarbonisation options and Australia’s energy security to mandatory climate disclosures and the decisions that may be hardest to unwind.
For BlueScope chair Jane McAloon AM FAICD, the goal isn’t waiting for a clear picture, but making decisions today, which leave room to manoeuvre tomorrow.
Decarbonisation strategy: Why boards should keep their options open
BlueScope is keeping its options open on how to decarbonise its steelmaking, rather than betting its future on a technology that’s yet to prove itself commercially, McAloon told attendees.
“Energy, trade, technology, capital and policy are not stable variables. Each one moves the other,” she said. “Governance is not waiting for certainty. It’s making sound decisions before certainty arrives.”
Boards are making decisions with consequences stretching decades ahead, while visibility can be limited much closer to the present.
Rather than relying on a single forecast, McAloon advised directors to test against a range of plausible futures by asking: What must be true? What would cause us to stop? What options are we preserving?
For BlueScope, the stakes are particularly high, she said. Being an emission-intensive industry, steelmaking is one of the harder sectors to decarbonise, while the company faces global competition, including subsidised imports.
McAloon said BlueScope will not promise a decarbonised future it cannot yet deliver, focusing instead on finding practical pathways to cut emissions while remaining “lean, modern and profitable”.
“You cannot commit to a technology that doesn’t exist, at a cost you cannot afford, on a timeline your shareholders cannot fund,” she said. “The board’s job is to hold ambition, reality and value in the same room at the same time.”
BlueScope’s current approach is to maintain a portfolio of options, with five factors shaping the choices ahead – technology evolution, firmed renewable energy, hydrogen or carbon capture (with gas in the interim), raw materials, and public policy.
None of those decisions can be made in isolation, she said. A new technology requires affordable energy, raw materials dictate the steelmaking process, and policy can change investment economics overnight.
For boards facing transition projects that are too large or uncertain to carry alone, McAloon said partnerships could help spread the risk.
“Ask: Are we carrying this risk alone – and should we be?”
She pointed to BlueScope’s electric arc furnace investment in New Zealand and the Neosmelt project – a collaboration with BHP, Rio Tinto, Woodside Energy and Mitsui – as examples of sharing capital, operational and technical risk.
Energy security is now a governance risk
For McAloon, energy security and competitiveness are not simply procurement issues. They are questions for the board.
“A theoretical abundance of renewable energy is not the same thing as competitively delivered power at the factory gate,” she said. “If energy appears in your board papers only once a year, you’re governing for the world as it was.”
Also speaking at the forum, Amandine Denis-Ryan, CEO Australia at the Institute for Energy Economics and Financial Analysis), highlighted the global pivot towards clean energy, which now attracts twice the investment of fossil fuels due to its cost advantages. Renewables have surpassed coal in the global electricity mix, driven by their maturity and cost-effectiveness.
The transition, however, is running into geopolitical tensions, policy uncertainty, high interest rates and the urgent need for investment in power grids. As such, the risks are increasingly operational for boards.
“Energy security risks and climate impacts can cause very significant disruptions in your operations, value chains and supply chains,” Denis-Ryan told attendees. “Price volatility and policy uncertainty can also really materially affect profits.”
She advised boards to work backwards from their end state when planning their energy needs, while building enough flexibility to cope with changes.
“Think about what your electrification pathway is when you look at how much electricity you actually need,” she advised. “Then plan for uncertainty. Make sure your pathways are resilient to potential changes in the external environment and build in optionality wherever you can.”
Speaking alongside Denis-Ryan, Timothy Nelson, Chief Economist at Nelson Advisory, who chaired the independent review of the National Electricity Market, said energy was no longer simply a procurement function, with fuel security concerns amid geopolitical instability, electricity market transformation and unprecedented demand growth from electrification and data centres turning it into a strategic issue.
“Make sure there’s enough energy literacy within the room so that people can ask the right questions,” he said.
But as McAloon pointed out, the stakes extend beyond individual companies. She labelled manufacturing as a critical part of Australia’s sovereign capability and warned that deindustrialisation happens incrementally as projects are deferred, maintenance drops and investment moves offshore.
“If we let manufacturing go and decline, by stealth, we deindustrialise.”
She also rejects the idea that shareholder value and climate stewardship are competing priorities.
“Value is not the opposite of stewardship. It is the condition for it.”
Make climate disclosure work harder
Mandatory climate disclosures were another focus of the forum, with Dr Mahesh Prakash, Senior Principal Research Scientist at CSIRO, urging directors to use climate reporting for operational and strategic gains rather than viewing it as another regulatory requirement.
“It’s important to actually think about climate risk assessment as consistent with any other risk assessments you would do in your organisation,” he said.
Earlier in the day, McAloon told directors that mandatory climate reporting is the best opportunity boards have had to make their strategy and trade-offs explicit.
The question is whether those disclosures ultimately change decisions in the boardroom.
The climate decisions that are hardest to reverse
The evolving responsibilities of Australian boards in addressing climate and sustainability challenges were also the focus of the final panel, moderated by AICD chair Naomi Edwards FAICD.
The panelists – Diane Smith-Gander AO FAICD, Chancellor at the University of Western Australia, David Moffatt FAICD, Chair of Ventia Services Group, and Louise Davidson AM, CEO at the Australian Council of Superannuation Investors – agreed that the true test of whether a board has climate governance right comes at two critical moments: strategy day and CEO selection.
“If the strategy day runs through and there isn’t a separate climate stream, but it’s just integrated into the whole, you’re fine,” said Smith-Gander.
“Then if you get a moment where you recruit and appoint a CEO who doesn’t understand climate risks and opportunities, you know you don’t have your governance right.”
Directors also heard that boards need to consider how reversible their strategic decisions are, particularly regarding climate and nature.
Some decisions, like losing domestic refining capability, take an extremely long time to reverse, the panelists explained. This reversibility lens should help boards identify which decisions require extra scrutiny and longer-term thinking.
“If a decision is going to be super-hard to reverse or retrofit, think about the conversation earlier today – about the fact that we have no oil-refining capability and capacity left in this country and how long it takes to change that decision,” said Moffatt.
Inaction can be more costly than action
The panelists also challenged the focus on transition costs without equal attention to the cost of inaction.
“The cost of inaction is huge,” said Davidson. “2030 is only four years away. You can see a lot of significant events occurring from a climate impact perspective. We’ve got to start talking and thinking about the cost of not acting in a timely manner.”
To wrap up the day, Smith-Gander urged boards not to become consumed by trying to compensate for uncertainty in government policy.
“The board has to stick to its knitting, as it were, and be very, very disciplined – and actually know when to stop talking about it, as well,” she said. “So, if you’re doing all of that, you’re going to be continuing to drive your organisation for its best interest in the right way.
“Some of the policy stuff is frustrating, yes, but it becomes a bit of noise that the chair in particular has to help the board and management get away from.”
Ultimately, directors heard that the challenge is no longer about perfectly predicting the future, but ensuring today’s decisions preserve strategic options for tomorrow.
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