Publication
28 Nov 2024 ·
International
Shell judgment – impact for companies and COP29
3 min read
COP29 has emphasised the need for private sector engagement in achieving the climate targets in the Paris Agreement, with a particular focus on actionable climate transition plans and measurable emission reductions. The Shell judgment demonstrates the necessity for businesses to align with national and international legal frameworks, reflecting COP29’s emphasis on stricter corporate sustainability measures.. By integrating legal requirements into global dialogue, COP29 has solidified the role of legal mechanisms in ensuring corporate responsibility for climate action, thereby bridging policy discussions with enforceable accountability frameworks.
What is the impact of the famous Dutch Shell judgment of 12 November 2024 on companies?
1. Climate change is scientifically proven
The starting point of the judgment is the acknowledgment of the scientific consensus about the nature and consequences of our changing climate. This is based on several research studies and reports, especially those of the Intergovernmental Panel on Climate Change (“IPCC”) of the United Nations.
2. Climate change as fundamental human right
In line with the Swiss Klimaseniorinnen Judgment of the European Court of Human Rights of 9 April 2024, the court confirmed that protection against climate change is a fundamental human right.
This principle is rooted in Articles 2 and 8 of the European Convention on Human Rights (ECHR), which protects the right to life and the right to respect for private and family life, respectively. The court referred to the Urgenda judgment and other international case-law to underscore that states have a positive obligation to protect their citizens from the adverse effects of climate change. This obligation extends to companies like Shell, which have a significant impact on global emissions.
3. Companies’ human rights responsibilities in climate change
The court confirmed the indirect horizontal effect of human rights, which allows fundamental rights to influence civil law relationships. This means that companies must consider human rights when conducting their business. The court highlighted the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises, both of which Shell has endorsed. These guidelines emphasise that companies should not infringe on human rights and must address the adverse impact of their practices.
4. New legislations – strict responsibilities
The court confirmed how important it is that companies comply with EU climate legislation, including the EU Emissions Trading System (EU ETS), the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD).
These regulations impose obligations on larger companies to reduce their greenhouse gas emissions (scope 1-3), make a solid climate transition plan and align their business models with the goals of the Paris Agreement.
However, the court noted that these regulations do not impose specific reduction targets on individual companies, leaving room for interpretation and additional obligations under the social standard of care.
5. Climate Transition Plans must be implemented and executed
The court acknowledged the importance of engagement of a company to a climate transition plan in line with the Paris Climate Agreement and proof of execution hereof (in handling the claims regarding reduction of scope 1-3 emission). This judgment says that companies can be held accountable if their climate transition plan is not in line with legislation such as CSDDD or the Paris Climate Agreement.
To learn more about CSDDD and check your companies’ level of compliance with the directive, check CMS’s CSDDD Navigator and contact our team.
