CLIMATE-RELATED LIABILITIES IN A POST-COP26 LANDSCAPE: HOW SAFE ARE DIRECTORS?
In the wake of the Glasgow Climate Pact agreed at the COP26 summit held in November 2021, there has been renewed emphasis on climate-centric considerations in corporate strategy. The extent to which business (as opposed to political) leaders can currently be held accountable for translating those pledges into action is yet to be tested properly. This article will explore the framework in which directors are held liable, and the extent to which those duties reflect corporate obligations to address environmental challenges.
Changing attitudes
In recent years, there has been a clear shift in attitudes toward the role played by businesses in addressing climate policies and the extent to which major players in various sectors, particularly the energy sector, are accountable for pioneering environmental change. Several landmark cases across the globe have fostered expectations for companies to drive climate policy.
The most significant judgment, perhaps, was that issued by the Hague District Court in the Netherlands on 26 May 2021 in relation to Milieudefensie et al. v. Royal Dutch Shell plc, a case brought by a number of environmental groups and individual claimants against Royal Dutch Shell plc (RDS). The Dutch court found that RDS’s target of accelerating the transition of its business to net-zero emissions, including targets to reduce the carbon intensity of energy products by 20 percent by 2030, was insufficiently “concrete” and ordered that Shell Group’s emissions be brought broadly in line with the targets in the Paris Agreement. The judgment was revolutionary in that it was the first time the requirements of an agreement that only binds sovereign governments was imposed on the private sector.
Apr-Jun 2022 issue
McGuireWoods London LLP