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An analysis by Milieudefensie/Royal Dutch Shell

Recently, the District Court of The Hague ruled in favour of Milieudefensie: Royal Dutch Shell (hereafter: ‘RDS’) failed in its policy to prevent dangerous climate change and was ordered to achieve a 45% reduction within the Shell group (hereafter: ‘Shell’) by the end of 2030. This ruling must have hit Shell hard. After all, Shell was not acting illegally with its emissions and policy, was not the only polluter and participated in the European emission trading system. Surely, therefore, nothing could be asked of the fossil fuel supplier? But no, the court ruled that Shell was nevertheless under an obligation to conduct an adequate climate policy. The so-called ‘unwritten duty of care’ was applied to arrive at the aforementioned court order, and this was based on the insights gained from voluntary CSR standards. Although these standards are generally considered to be soft law rather than binding, they can still lead to an obligation for companies to take action in the context of climate change. This article explains this.

The role of CSR instruments

In recent years, a concrete awareness has been arising that companies’ responsibility extends beyond creating profit for shareholders and remaining within the limits of the law. Consumers are becoming increasingly aware and critical of the impact of certain business activities on the environment and society, so companies are also well advised to show the outside world that they are acting responsibly towards the planet and its people when carrying out these activities. Companies can do this with their own code of conduct, but also by seeking connection to soft-law instruments. Well-known examples of such instruments are the UN Global Compact (‘UNGC’), OECD Guidelines for Multinational Enterprises (‘OECD Guidelines’) and the UN Guiding Principles on Business and Human Rights (‘UNGP’). In fact, since 2011, the European Commission has expected the latter to be followed by companies in their responsibility to respect human rights.

The ruling in Milieudefensie/RDS clearly illustrates the role of these instruments in practice. These instruments do not create new laws nor legally binding obligations. Nevertheless, they are internationally widely supported and authoritative instruments that reflect the existing understanding of the responsibility of states and companies about human rights. It does not matter whether a company commits to these instruments for their application because the content of these instruments is generally accepted internationally. Therefore, these instruments can always be applied to fulfil the duty of care within liability law.

The duty of care in tort law

Before the interpretation of the duty of care can be discussed, its role within liability law is important. In Milieudefensie/RDS, Milieudefensie requested the court to oblige Shell to do something (the so-called ‘injunction action’ from Section 3:296 of the DCC), for which a legal duty is required. This may follow from an unlawful act (Section 6:162 DCC). An unlawful act is an infringement of a right or an act or omission in violation of a statutory duty or “with what is expected in society according to unwritten law”. The latter is known as the duty of care.

Unlawful endangerment

This unwritten norm is the ground on which the court ordered Shell to reduce its CO2 emissions. You might ask: why can such a drastic command be based on what is written in unwritten law? And what is unwritten law? This can be explained by the classic Kelderluik judgment. In this judgment, a Coca-Cola employee left a cellar hatch open when delivering soft drinks to a café in Amsterdam. A visitor to the café was unaware of the danger and fell through the trapdoor on the way to the toilet. He sustained serious injuries, including to his legs.

For this, the visitor naturally wanted to hold the café responsible. Although this situation is not prohibited by law, it is clear that leaving a hatch open in a pub where it can be assumed that visitors are not always careful is dangerous and can lead to injury. All the more so if the cellar door could also easily be barricaded with, for example, chairs or empty crates to indicate danger. These considerations were adopted and shaped according to criteria and this gave rise to the doctrine of ‘unlawful endangerment’ as an interpretation of the duty of care.

Why an unwritten norm?

The reason that an unwritten standard can therefore lead to an unlawful act is shown by the example. Not everything is explicitly regulated by law, but it is also almost impossible to do so. Many forms of unlawful acts or omissions are not laid down by law. However, situations such as the circumstances in which the cellar door was left open in the judgment mentioned above, still cause a gut feeling of unlawfulness for many people. To assess whether there is an unlawful act that does not derive from the law, the court requires a great deal of room. Moreover, it depends strongly on the concrete circumstances of the case. That is why the unwritten duty of care offers room for this. It may seem as if the judge has much too much room and can fill in the law himself, but the judge must be cautious in this. There is only an applicable unwritten duty if it is obvious and comprehensible to everyone.

The implementation of the duty of care with CSR instruments

The meaning and application of the duty of care make it clear why the court can use CSR instruments for its interpretation. After all, these offer internationally generally accepted standards, which create obvious obligations even though they are not laid down in law in a binding way. Even though there is no binding instrument for the horizontal effect of human rights, it is generally accepted that these rights also apply to companies as explained above. In order to elaborate on the nature of this obligation, the concrete standard as it follows from Milieudefensie/RDS will now be explained. This explanation will mainly focus on the UNGP as also applied by the court. However, since the content of this instrument is similar to the content of other instruments, this can also be applied to other CSR instruments that deal with the role of companies in human rights.

Human rights and the role of companies

The UNGP provides an overview of the responsibilities of states on the one hand and companies on the other. Naturally, the broadest responsibility applies to states. States must protect citizens against human rights violations committed by others within their territory. To this end, states must take a wide range of actions to prevent, investigate, punish and remedy violations. Means for this are policy, laws, regulations and legal procedures. In addition, there is an obligation on companies to respect human rights, which is separate from the obligations of the state. So if the state does not impose sufficient regulations on companies not to violate human rights, this is no excuse for the individual companies. They always have an individual responsibility.

Duty of care

What exactly does this responsibility mean? Respecting human rights means that companies should refrain from violating the human rights of others, as well as addressing negative human rights impacts. The latter means that a company must take measures to prevent, reduce and, where necessary, remedy negative impacts. This obligation applies to all companies, but the extent to which they are required to meet this responsibility may vary depending on how serious the impact of companies on human rights violations is. For example, the size of the organisation may influence the resources that the company has access to. In short, it depends on the circumstances of the case. In the case itself, RDS was assigned a heavy duty of care. It is about a global concern that is responsible for significant CO2 emissions, which entails great risks and can have serious and irreversible consequences.

Scope of the duty

An important element in the Milieudefensie/RDS case was whether the duty of care also extends to the emissions of their end-users (scope 3). In this respect, the court once again looked for interpretation in the light of generally accepted standards, as evidenced by various protocols and guidelines on climate change for non-state actors. These were analysed by Oxford University in 2020 and summarised in the Oxford Report. It does not follow from this that there is a legal obligation in absolute and uniform steps to reduce scope 3 emissions. However, it does state that there is an international recognition that companies have a responsibility with regard to these emissions. The court thus also takes this into account in the extent of the duty of care. It is important to note that the degree of responsibility depends on how much control and influence companies have over the emissions. Nevertheless, according to the court, every company has a duty to identify and assess all actual and potential negative human rights impacts of their activities or relations. In addition, a company also has the duty to prevent or mitigate the consequences if the company is in a position (or can be in a position) to stop the unlawful practices.

Conclusion

In conclusion, in Milieudefensie/Shell the court made use of CSR instruments to substantiate the unwritten duty of care required for the establishment of a wrongful act. This duty of care is interpreted based on what is generally accepted. CSR instruments such as the UNGP provide an excellent basis for this because these instruments reflect the generally accepted international obligations of companies within the framework of human rights. These instruments can therefore lead to a wrongful act if business activities within the value chain of companies lead to human rights violations. The extent to which a company is required to take action depends on the concrete circumstances of the case. These include the nature and seriousness of the violation and the degree of influence the company has or can have to stop the unlawful practices.

As described above, every company likely has a duty of care to identify and assess the actual and potential negative human rights impacts of their activities or those of their business partners. If the company has sufficient control and influence in this respect, the company must also take action to prevent or end human rights violations. In short, the concrete obligations for companies strongly depend on the facts of the underlying case. Would you like to know more about what the Milieudefensie/RDS case means for your company? Then please contact Law & More. Our lawyers are specialised in liability law and sustainability and will be happy to help you!