Climate change litigation has become an increasingly popular method of holding governments and companies to account over their efforts to reduce the impact of global warming.
Many countries have, ostensibly, made progress in terms of creating legislation and policy intended to bring their emissions in line with the end goal of net zero greenhouse gas emissions by 2050. However, the flurry of cases around the world – and a couple of particularly significant cases in the UK – indicate that vague promises are no longer acceptable. Instead, climate and environmental strategies require concrete, quantifiable strategies which can demonstrably reduce or mitigate against the crisis.
We are going to look at the latest case law and most recently filed claims to consider what this may mean for the broader application of recent environmental policy and legislation and see what lessons they offer to companies wishing to burnish their green credentials.
In a world weary of greenwashing, there may be increasing consequences, in both the public and private sector, for vague and unachievable ESG claims.
Case law developments
R (on the application of Friends of the Earth Ltd and others) v Secretary of State for Business, Energy and Industrial Strategy [2022] EWHC 1841 (Admin).
In the UK, the aim to achieve net zero greenhouse gas emissions by 2050 was made legally binding by the Climate Change Act 2008.
In line with its duties under section 14, in October 2021, the government laid before parliament its report. In response to the report, in January 2022, environmental charity ClientEarth submitted an application for judicial review to the High Court and later teamed up with NGOs Friends of the Earth and the Good Law Project for the High Court to hear their collective claims.
The claimants argued that the government’s net zero strategy failed to comply with sections 13 and 14 of the 2008 Act, and also failed to adhere to its duties under section 3 of the Human Rights Act 1998. The claim was successful in part: while the argument under the 1998 Act was unsuccessful, the argument that the government had breached its duties under the 2008 Act was successful.
Although the 2008 Act created legally binding carbon budgets, the government’s report failed to effectively show how its policies would reduce emissions sufficiently to reach those budgets. In essence, the government had failed to provide sufficient information, or depth of information.
Beyond setting out figures for reductions at the national and sector levels, there were no indications as to how individual policies would contribute to emission reduction.
The court looked at whether the government took into account material considerations, in this instance specific quantification which would need to be provided to a minister in order for them to make a rational decision. This information would also detail how, through the net zero strategy policies, the government would be able to achieve the emissions budget. These details allow both parliament and the public to scrutinise the government’s plans and evaluate its likelihood of success.
The failure to do this meant that the government did not fulfil its responsibilities under section 13. The lack of detail in relation to how the government would be able to achieve its carbon budget also amounted to a failure to discharge its reporting obligations under section 14.
The government now has eight months in which to produce a strategy for emission reduction, which must be sufficiently quantified to demonstrate how the required reductions will actually be achieved. In line with its section 14 obligation, the revised strategy will be scrutinised by parliament, and it is suggested that it will also be heading for additional scrutiny from the Climate Change Committee.
Fossielvrij NL (Reclame Fossielvrij / ClientEarth) v KLM (2022, pending).
In July, ClientEarth filed a lawsuit in the Netherlands against KLM in relation to the airline’s claims that it was making flying sustainable.
The claimants – campaigners Fossielvrij NL – argue that KLM’s advertising is misleading and that its actions of promoting air traffic growth are incompatible with their claims of sustainable flying.
The claim revolves around KLM’s Fly Responsibly campaign and CO2ZERO offset product, which they argue gives the impression to customers that, by flying with KLM, they will not be contributing to the climate crisis.
Although this case is in the Netherlands brought under Dutch implementation of the EU’s Unfair Commercial Practices Directive and therefore not directly relevant to companies operating in the UK, the equivalent retained Consumer Protection from Unfair Trading Regulations 2008/1277 could provide similar recourse.
The case is also indicative of a growing appetite for campaigners to use non-climate specific legislation to scrutinise companies’ offsetting claims and point out more obvious cases of greenwashing.
ClientEarth v Board of directors of Shell (2022, pending).
In an interesting use of company law, ClientEarth is taking Shell’s board of directors to court for breaching its legal duties by failing to properly manage climate risk.
Section 172 of the Companies Act 2006 creates a “Duty to promote the success of the company:
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to— (a) the likely consequences of any decision in the long term…”.
Section 174 creates a “duty to exercise reasonable care, skill and diligence”.
The thrust of ClientEarth’s claim is based on the board’s failure to create a climate strategy which works towards keeping global temperature rise below 1.5°C by 2050, aligning with the Paris Agreement.
It argues that this lack of strategy means that Shell’s board is insufficiently prepared for the net zero transition, putting Shell in an exposed position and therefore not acting in the best interest of the company and its employees. This claim will take the form of shareholder litigation, or derivative action, where a shareholder alleges that the board has breached its duty under the 2006 Act – basically representing the company against the board.
Although the result of this action is pending, the use of company law in this way should prompt companies to consider their own plans for the climate change transition and how well they are fulfilling their duties.
How significant are these cases?
While Friends of the Earth was in no way a judgment on policy, it did lay out some interesting principles in terms of the legal requirement to take into account the material considerations.
As the science and recording of environmental variables gets increasingly sophisticated, there could be a growing pressure on decision-makers to adduce their workings.
For the private sector, it may have been in the past that a nod towards ESG, with some well-intentioned pledges, was enough to reassure customers and shareholders. However, in the current climate, vague commitments about emission reductions and environmental action are likely to provoke scrutiny.
Increasingly, companies may be asked awkward questions about how – exactly, in a strategic, quantifiable way – they intend to achieve their green goals.
Although COP 26 may have provided less ambitious legislative progress towards net zero than many had hoped for – with, ostensibly, little more coming through from COP 27 – the recent wave of case law suggests there are avenues both within existing climate legislation, and outside of it, to keep governments and companies on track with 2050 targets.
These decisions also potentially have wider significance in that they are likely to encourage others looking for avenues to challenge authorities and organisations on their planning around climate change and/or environmental policies.
While we will wait and see what further action is taken and what further clarification the government gives us, at present there are a number of entities in the property world which need to stay on top of these updates, including local authorities and developers.
In early 2019, readers may recall a flurry of authorities declaring a “climate emergency” in order to press the government into legislative change. By declaring a climate emergency, councils formally acknowledged that they needed to act on the causes and impacts of climate change.
While nutrient neutrality constraints have been in the press more recently as an example of further hurdles restricting the ability for local authorities to provide new housing, we are yet to see whether “climate emergency” declarations will be the basis of any challenges brought against the creation of further development.
Those that have declared a “climate emergency” may potentially be at risk of action if they have failed to consider and implement any policies which remedy or improve the natural environment.
This in turn has the potential to impact developers who may find a rise in challenges as a result of the constraints a “climate emergency” has on the constituency they intend to build within.
Chloe Harrison is a planning and environment solicitor and Robert Litherland is a paralegal in the property team at Brabners
