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Salzburg Global Fellow Harshitha Kasarla reflects on the significance of three climate landmark litigation developments that have changed the rules of the game
The past few years have witnessed an increase in climate litigation. A quick comparison of the number of climate-change-related cases filed over the years illustrates this well. Over 800 cases were filed between 1986 and 2014, while over 1,200 cases were filed from 2014 to 2022 alone.
Courts are fast turning into champions against climate change, but three landmark climate litigation developments in 2021-22, namely the 1) Milieudefensie v. Royal Dutch Shell case, 2) the European Union (EU) Proposal on Corporate Sustainability Due Diligence, and 3) the Philippines National Inquiry on Climate Change, are ushering in a new regime of corporate climate litigation, which has promise to rapidly change the existing balance in the fight against climate litigation.
Historically, most climate change cases have been filed against states rather than corporations. However, studies show that a mere 100 companies in the world are responsible for over 70% of the world’s greenhouse gas emissions since 1988. This discrepancy exists because all human rights recognized by international law or domestic law (including the right to a clean environment) were traditionally only enforceable against states.
However, in view of the increasing power and role of corporations, the law is gradually expanding to recognize corporations as bearers of duties under international law and domestic law. Consequently, climate litigation against companies is on the rise. This enables companies, which are some of the world’s largest polluters, to be held accountable for climate change.
On November 26 2021, the District Court of Hague, Netherlands, enforced an unprecedented duty of care on corporate entities for climate change mitigation. It held that Royal Dutch Shell, a multi-national company, must reduce its greenhouse gas (GHG) emissions by 45% by 2030. This judgment is revolutionary for applying global objectives of climate change to corporate actors for the first time and for holding that Royal Dutch Shell, as a “major player” in the fossil fuel industry, has an “elevated responsibility” to mitigate climate change.
While applauded for its novel application of the legal responsibility of corporate actors for climate change, the judgment has attracted criticism that it inconsistently determines the content of this duty of care. The judgment holds that Royal Dutch Shell must reduce 45% of its GHG emissions by 2030 without outlining the legal and scientific basis for arriving at specific numbers.
In arriving at its judgment, the Court relied on various non-binding instruments, including the United Nations (UN) Guiding Principles on Business and Human Rights and reports of the Intergovernmental Panel on Climate Change to make this determination, despite the fact that none of these reports specify parameters to determine particular carbon contributions or numbers for corporations or any other entity.
Overall, the judgment marks a revolutionary path toward holding corporates liable for their contributions to climate change but draws attention to the potholes that we are to encounter in the rocky terrain of corporate climate litigation. Imposing a new duty of care on corporations raises a number of unanswered questions, which include the size, nature, geographical presence, and business processes of various corporations, their corresponding impact on climate change, and the extent of their legal liability.
The Proposal for a Directive on Corporate Sustainability and Due Diligence that was adopted by the European Union on February 22 2022 promises to address the lacunae highlighted by the Royal Dutch Shell case to a large extent.
The Directive imposes strict duties of corporate due diligence to identify, mitigate and prevent environmental impact. It is the first regulation that promises to provide an extensive framework for corporate due diligence. It classifies companies on the basis of their size, employees, presence in the EU, and value chains to determine their duty of care.
For example, specific large companies (i.e., Group 1 companies which have over 500 employees and 150 million net turnover worldwide) are liable to ensure that their business model and strategy are compatible with limiting global warming to 1.5 degrees Celsius in accordance with the Paris Agreement. It also clarifies that this responsibility extends to all operations of the company, including its subsidiaries and its value chains.
The Directive may reduce the legal uncertainty surrounding corporate environmental due diligence by providing one of the first regulatory frameworks that categorizes a standard of care for large, medium, and small companies with varying carbon footprints.
Another important development that heralds corporate climate liability has been the release of the final report of the Commission on Human Rights of the Philippines (on May 6 2022) after a seven-year-long inquiry into the liability of the world’s biggest fossil fuel corporations (carbon majors) for climate change. The case was initiated by a petition filed by Greenpeace Southeast Asia and numerous other Filipino individuals seeking an investigation of various carbon majors in the aftermath of severe typhoons in the Philippines.
The report holds 47 carbon majors responsible for over 21.44% of global carbon emissions. It holds them accountable for human rights due diligence and failure to address environmental and human rights abuse from their business operations. The report dispels the argument of lack of jurisdiction that was raised by many carbon majors with operations outside the Philippines. This has far-reaching implications for it suggests that carbon majors could be prosecuted for their violations all over the world.
The above-detailed developments are each unprecedented in attributing primary and direct responsibility to a corporation for mitigating and compensating for climate change. They are significant steps towards holding corporations, which wield more power and produce more GHG emissions than many governments in the world, liable for climate change mitigation.
While region-specific, these developments resonate globally by providing new standards for corporate climate liability. I believe that they are especially transnational for relying on international law norms and soft law instruments like the UN Guiding Principles on Business and Human Rights, which can be incorporated by any country across the world. Their importance also lies in their function as signals for corporations that are devising a future business strategy that incorporates climate due diligence into their strategy and operations.
Climate change is called the greatest human rights crisis facing the 21st century, and it is ironic that we allow some of its greatest contributors to run riot without supervision or regulation. These measures are urgent and necessary and must be applauded for changing the rules of the game.