Over the last 30 years nothing has been done to address human-caused climate change. Even after progress at the G20 Brisbane meeting, it is evident that conventional politics will never provide the strong leadership required to avoid severe climatic impacts. In its absence, business in its own self-interest, must act.

In 2013, as a shareholder, I nominated to join the board of BHP Billiton (BHPB), Australia’s largest mining company, on the grounds that it needed to take more urgent action to address climate change and its destructive impact on shareholder value.

BHPB to its credit, has been relatively advanced in acknowledging these issues, albeit this does not say a great deal in an industry still largely in denial. The board recommended against my appointment on the grounds that matters were well in hand. I received 4% of the shareholder vote, compared to the 50% required.

Since then, BHPB has released a new climate change policy which is setting a new standard for the industry. However, much greater change is needed.

The Intergovernmental Panel on Climate Change (IPCC) issued its bluntest warning yet in its 2014 Synthesis Report, calling for urgent action if “severe, pervasive and irreversible impacts” are to be avoided. The International Energy Agency’s 2014 World Energy Outlook warns that current and planned policies will lead to temperature increase in excess of 4C. To contain temperature below the official 2C target requires global emissions to peak within five years and then reduce rapidly.

Even then, evidence suggests that a 2C temperature increase will halt population growth in large parts of the world. A 4C increase will see substantial population decline, with escalating social conflict.

Why is this important? The prosperity of BHPB depends upon a stable and growing global economy. This is incompatible with even a 2C temperature increase. Growth now depends upon rapid transition to a low-carbon world. Stability requires urgent action, as further delay is cutting off our options to make that transition in good order.

In 2014, I have again nominated to join the BHPB Board as I believe the company is still failing to understand the enormity of the challenge that climate change poses to its business.

Its risk management approach shows no sign of real urgency. It must go beyond the conservative IPCC conclusions to encompass the implications of the positive feedback “tipping points” which are already becoming evident in the Arctic, Antarctic and elsewhere.

BHPB’s new policy implies temperature increase of around 3C, which would be extremely damaging to shareholder value. It assumes that “fossil fuels will continue to be a significant part of the energy mix for decades”, which in a world with virtually no carbon budget remaining today, is nothing less than suicidal unless emergency programmes are initiated to make solutions such as carbon capture and storage work. There is no sign of BHPB, or industry, making that commitment.

The Minerals Council of Australia, and the Business Council of Australia, both of which count BHPB as a member, continue to undermine sensible national policy development, and BHPB itself has done nothing to contest the Australian government’s blatant climate change denialism.

Most importantly, BHPB’s strategy must move away from incrementally changing business-as-usual, to focus on rapid transition to the low-carbon economy, not least to avoid losing major opportunities for shareholder value creation.

The board now recommends against my appointment on the grounds that my experience and expertise do not meet the requirements of a BHPB non-executive director. This response highlights governance issues which have lain dormant for years, as remuneration-driven short-termism has dominated corporate thinking.

I have the greatest respect for the competence of the existing board in a conventional sense. However, these are not conventional times and those self-same conventional skills are blinding the board to the great changes already taking place in the climate and energy arena.

Conventional recruitment processes ensure that directors are appointed in the existing board’s own image. While this may have been acceptable in the days of relatively predictable growth, in creating the low-carbon world we are in the midst of the greatest discontinuity, and opportunity, the world has ever seen. Company prosperity now depends upon avoiding myopic “groupthink” by complementing conventional skills with further board diversity and unconventional perspectives.

At the most fundamental level, it raises yet again the question of “what is a company for?” Is it to follow, and be shaped by, the dictates of governments and the market, optimising short-term returns? Or is it to use its undoubted influence and expertise in shaping the future?

Despite having access to the best possible scientific and risk advice, corporate leaders including BHPB, seem to take the former view. As a result, we are witnessing a fundamental failure of risk management and corporate governance, as directors, in underplaying the real risks of climate change, abrogate their fiduciary responsibility to objectively assess and manage those risks and opportunities in the interests of their companies in perpetuity. Investors, with some notable exceptions, are equally complicit for not insisting that boards of directors take far more vigorous action.

BHPB, along with like-minded progressive organisations and investors, in their own self-interest must now publicly articulate the need for, and implement, radical action.

Read more stories like this:

• BHP Billiton: climate change leader or laggard?
  
• Climate activists warn BHP Billiton shareholders of coal’s profit risk

Ian Dunlop is a former international oil, gas and coal industry executive, chair of the Australian Coal Association and CEO of the Australian Institute of Company Directors. The BHPB Limited AGM is in Adelaide on 20th November 2014.

Join the community of sustainability professionals and experts. Become a GSB member to get more stories like this direct to your inbox