Opinion: The impact of a revolutionary Dutch Climate Change Judgment on companies worldwide
Last week a revolutionary climate change judgment was rendered with potentially great impact on companies worldwide, especially on their environmental footprint policy. In a judgment against Royal Dutch Shell (RDS) dated 26 May 2021, for the first time in history, a court has handed down a judgment that holds a multinational company directly responsible for climate change on the basis of a duty of care following from international treaties such as the UN Guiding Principles and Paris Climate Agreement. RDS has the obligation to reduce its group's CO2 emissions with 45% to meet their reduction goals to prevent climate change. Notwithstanding any possible appeal, with the foundation of this judgment being in international treaties, this judgment is anticipated to be a further catalyst for the current and future wave of climate change litigation against multinational companies in the Netherlands and most likely also in other jurisdictions.
This judgment does not only affect the oil and gas industry, but also other companies in their production or logistic processes. The claim foundation involved, Milieudefensie, already announced actions against Dutch companies in other sectors, such as steel producers, dairy companies and the beef industry...
According to Milieudefensie, the company needs to contribute to the prevention of dangerous climate change via the corporate policy it determines for its group and its entire value chain, on basis of a duty of care. This duty of care was substantiated with human rights articles 2 and 8 of the European Convention for the Protection of Human Rights and Fundamental Freedom (ECHR) and soft law instruments such as the UN Guiding Principles on Business and Human Rights (UNGP).
The Court ruled that RDS was responsible for its overall group policy and needs to observe a certain duty of care regarding emissions and climate change policies. The Court ruled that Milieudefensie could not invoke the human rights under the ECHR directly, but in interpreting the specific duty of care applicable in this context, the Court followed the UNGP...
Companies should be mindful of their role in the climate transition and their environmental, social and corporate governance (ESG) policy and put in place an adequate international risk assessment of CO2 emission and crisis management process in order to tackle possible class actions in an early stage. It is important that ESG commitments on behalf of a company are taken seriously at all levels of the organization, compliance is monitored and adequate risk assessments are performed.