The recent approval of Woodside’s North West gas shelf development to 2070 provides an exemplary test for climate governance given that the lifetime emissions of this project are estimated  at between 4 and 4.4 billion tonnes CO2 equivalent. Woodside is one of Australia’s carbon majors and is covered under a number of compliance mechanisms including  AASB S2, NGER and the safeguard mechanism. The safeguard mechanism requires Scope 1  disclosure (controlled sources) whereas NGER requires Scope 1and 2 (indirect emissions). The AASB S2 will require mandatory scope 3 emission (product utilisation)  disclosure  from 2026 from group 1 companies like Woodside. Given that 93% of Woodside’s emissions sit in Scope 3 this is highly material. However effective climate governance  moves beyond existing climate legislation as legislation necessarily lags ethics. So what are some of the criteria directors can use to manage complex decisions like these? There are three major ethical frameworks to assist complex decision-making – virtue based, utilitarian and  deontological. Virtue-based focuses on the character of the decision makers  including prudence, justice, temperance and courage. Prudence for example would require weighing up the environmental, traditional owner and intergenerational impacts carefully. Temperance would ask whether sufficient restraint has been demonstrated in the balance between short-term economic benefits against long term environmental and social harm. From this perspective the decision appears imprudent and unjust as it priorities short-term  profit and energy security needs at the expense of long-term planetary health. Deontological or duty-based frameworks would focus on the obligations Australia has to both its citizens and the International community. Extending the NWS project would appear to be a breach of that duty based on the Paris agreement (by Woodside’s own account the NWS will add 87.9 MT CO2-e per annum to Australia’s emissions – that’s 20% of our total annual emissions). The consequentialist perspective  looks art outcomes and balances the  benefits of retain jobs and energy security against the  lifetime net cost of the planetary and inter-generational damage caused by 4 billion tonnes of additional emissions. It’s worth also  questioning the assertion of increased energy security given that gas prices in WA have  tripled since 2020 according to  @The Australia Institute.

Another more applied perspective to review the decision with is  the @AICD’s ethical guidelines. This provides four lenses to frame board deliberations – general influences, collective culture, interpersonal relationships and the individual director. General influences include stakeholder impact, community standards and alignment with broader national commitments to decarbonization.  The decision appears inconsistent with these criteria. The Board’s culture and character are harder to assess without direct access but it does appear at odds with their professed value of a commitment to respecting the environment, operate responsibly and care for communities. The third lens involves board dynamics and reasoning. The degree to which this criteria was met would depend on how different stakeholders were represented in the decision including  TO’s, the environment and future generations.  The decision to proceed implies they were subaltern at best. Finally, the individual director criteria requires understanding how directors overcame their own  concerns about climate and reputational risk  and double materiality to support the decision.  The business judgement rule specifically requires directors to inform themselves about the subject matter. Given the foreseeable environmental and financial risks of acting in ways that are non-aligned with the Paris agreement plus the risk of stranded assets, erosion of social license and scope 3 exposure, I cannot see how this decision passes the test.

A final thought on leadership. Sustainability leadership has been extensively researched and  developed over the last decade and some core competencies are emerging  that appear in most models.  The first is stakeholder inclusion – the rational being the more voices that are in the room the less the risk of unethical decisions. When future generations,  the biosphere, TO’s and communities are represented, more balanced and equitable decisions happen. The second is systems thinking. A longer term perspective that sees the interconnectedness of disparate parts again promotes more adaptive and ethical conclusions and looks beyond the short term attraction of financial returns.  I see negligible evidence of either competence present in this decision placing this at the weak end of the sustainability continuum. On the day when the Australian Government released it National Climate Risk Assessment, the quality of ethical decision making in particular and climate governance more generally, has never been more important.