In a landmark decision published yesterday, the District Court of the Hague has ordered Royal Dutch Shell to reduce its net CO2 emissions by 45% compared to 2019 levels, with the reduction to be achieved by the end of 2030 at the latest. The case was brought against Shell by environmental groups Milieudefensie (Friends of the Earth Netherlands), ActionAid and others, and was supported by more than 17,000 Dutch citizens. The judgment marks the first time that a corporation has been held to be responsible for reducing its net emissions in line with targets introduced by the Paris Agreement.

The required reduction applies to the emissions produced by Shell’s own operations (Scope 1 emissions) as well as the emissions produced by the operations of its suppliers (Scope 2 emissions) and its customers (Scope 3 emissions). In respect of Shell’s Scope 1 emissions, this is a “result obligation”, meaning the result in question must be achieved; while in respect of its suppliers’ and customers’ Scope 2 and 3 emissions, this is an “effort obligation”, meaning Shell must use best endeavours to achieve the result in question. Furthermore, Shell is being required to make this reduction across the group’s global operations.

The Court found that Shell is subject to an unwritten standard of care based on the applicable Dutch Civil Code, which the Court interpreted in line with “the best available science on dangerous climate change and how to manage it, and the widespread international consensus that human rights offer protection against the impacts of dangerous climate change and that companies must respect human rights”. The Court referred specifically to the 2019 Urgenda decision establishing that Articles 2 and 8 ECHR offer protection against the effects of climate change; and the UN Guiding Principles on Business and Human Rights.

Notably, when assessing the admissibility of the claim, the Court determined it could not allow the claim in respect of future generations, or of developing countries, but only in respect of the interest of Dutch residents and inhabitants of the Wadden region.

The Court considered that although Shell is not currently in breach of its obligation to reduce its CO2 emissions, its policies are intangible, undefined and conditional; and that there is accordingly a risk that Shell will breach the obligation. Therefore, the Court made an Order to implement the reduction, which is immediately effective, regardless of any appeal.

This case is the latest development in the increasing trend of climate change litigation around the world against major corporations responsible for a high amount of CO2 emissions. Most claimants in climate cases against energy companies to date have typically been seeking damages to compensate for the current and future impacts of climate change (in particular in the current spate of litigation brought by States and municipalities against oil majors in the USA). Milieudefensie, instead, are seeking a change in corporate behaviour. The decision of the Dutch Court may encourage current and future efforts by environmental and public interest groups around the world to bring similar lawsuits.

For further reference on these trends, see Clyde & Co’s report Stepping up good governance to seize opportunities and reduce exposure, which explores climate change risks and liabilities faced by organisations around the world; and the report Clyde & Co co-authored with the Geneva Association and the London School of Economics Climate Change Litigation – Insights into the evolving global landscape.