Climate Litigation and Risk Mitigation
The risk of climate-related litigation for companies is increasing worldwide, and is very real, as demonstrated by the Dutch Milieudefensie/Shell decision (Shell decision). Although there is no bulletproof formula to immunize companies from such claims, there are ways to mitigate climate litigation risks. What are the key takeaways from the Shell decision?
While the number of climate litigation cases in Europe is still far less than in the US and Australia, we see a clear increase. In the EU, cases are mostly brought against governments, the most famous case to date being the Dutch Urgenda ruling. However, companies are also now facing a broad variety of climate-related litigation cases, and the Shell decision fits right into this trend.
The Shell decision is getting worldwide attention for at least three reasons. First, it is the very first time that a court ordered a corporate to make emissions cuts consistent with those pledged by the States under the 2015 Paris Climate Agreement. In this respect, the Shell decision is very different from the well-known Dutch Urgenda ruling, which was addressed against the Dutch government.
Second, the Court’s decision not only concerns the Shell group’s emission activities, but the emissions of Shell’s entire value chain, from suppliers to its end-users.
Third, although the case is, in essence, based on a classic tort claim, human rights are at the heart of it. Even though the plaintiffs cannot invoke human rights provisions against Shell directly, their claim under article 6:162 of the Dutch civil code (unlawful act) means that the Court has to decide whether Shell violates its Dutch law unwritten duty of care (part of the Dutch concept of tort). The scope of that unwritten duty of care has to be determined on a case-by-case basis, accounting for all relevant circumstances of the case. In determining what Shell’s duty of care entails, the Court applies (amongst other things) the UN Development Goals on Business and Human Rights, and these goals do refer to the human rights.
A further analysis of the Shell decision is available here.
Mitigating climate risks requires a case-by-case assessment, and there is no one-size-fits-all approach available. There are, however, various takeaways from the Shell decision, including the following.
- Committing and pledging to meet climate goals in line with the Paris Agreement, is not a matter of Public Relations or marketing, but a legal matter.
- Simply committing to these goals, may not be enough. Companies need a solid and credible plan on how to get to their committed targets. This may include being specific on actions, identifying interim steps, and outlining processes for measuring and reporting on progress.
- Controlling emissions within the entire value chain may require engaging with stakeholders. Preparation is key here.
- Consider seeking help, for instance in having the company’s progress monitored and validated by an external organisation.
- Pro-actively assess the company’s legal position, by a.o. identifying whether similar duties of care (like the Dutch duty of care) apply under the legal systems of the countries in which the company operates. Be aware of statements made and policies published, as these may shape and define the company’s duty of care. And maintain legal privilege, where needed.