Presentation at a zoom conference on September 10, 2020, organised by BIICL
It is almost commonly accepted that the world is heading towards catastrophe if the increase of global temperature cannot be kept well below 2 C; if reasonably achievable, below 1.5 C. From there onwards the unity fades away.
Few major players are keen to translate this commonly adopted goal into concrete steps to be taken by States, enterprises and other key players. The most recent draft of an international instrument – the second revised draft of the Ecuador initiative – is not any different. Art. 6 about prevention requires states to “regulate effectively the activities of all business enterprises …. [to] respect all internationally human rights and … mitigate human rights abuses throughout their operations.”
In the realm of climate change this approach requires concretisation because human rights do not point to concrete reduction and other obligations of States and enterprises. I am by no means suggesting that the great many laudable initiatives geared at averting global catastrophe are unimportant. They deserve our respect and support. Many of them have had a noticeable impact.
In many discussions with people at the wheel I have learned, and statistics show that many – happily not all – key players prefer to wash their hands in ignorance. That is a risky game. It harms their self-interest of enterprises and, more importantly, that of society at large (including future generations).
It is important to concretise the discussion:
- without pertinent knowledge of one’s concrete obligations it is impossible to comply; and
- to assess whether a specific entity did comply;
- meaningful disclosure is impossible without knowledge of the disclosing entity’s obligations. [Admittedly, if enterprise X has curbed its GHG emissions by Y % that enables us to compare its reduction percentage with that of others (competitors). However, it does not shed any light on the question whether Y % suffices from a legal angle];
- non-compliance may give rise to liability for damages; liability is in the air; central banks and many others have sounded the alarm. Our group strongly believes that emphasis should be put on prevention.
An international group of experts has tried to map the core obligations of States (the Oslo Principles, OP) and Enterprises (the Principles on Climate Obligations of Enterprises, EP). The OP were launched in 2015; the EP early 2018. Since, a lot has happened: alarming IPCC reports, new research by other climate experts, and further depletion of the already limited carbon budget, to mention just the “highlights”. Our expert group believes that the EP no longer suffice. Hence, we have been working on an update which will be published by the end of this year. Hereinafter I will focus on the update compared to the current EP.
The primary reductions to be achieved by enterprises are more stringent. As a rule, the reduction obligations of enterprises are linked to the reductions to be achieved by the States in which they operate. The reductions by States are based on the global carbon budget per capita. The lion’s share of the reductions must be achieved by enterprises in affluent countries.
It would be against the odds if all – arguably even most – States and enterprises are going to curb their GHG emissions to the extent required to keep climate change below fatal thresholds. In addition climate science is in the dark when tipping points will passed. That could be anywhere between right now and by the time global temperature has increased by 2 C. That means that we should not confine ourselves to the direct emissions of enterprises.
The update puts much more emphasis on suppliers, products and services, in line with the strongly emerging view that enterprises bear at least some responsibility for scope 2 and scope 3 emissions. A focus on products and services and major retailers entails the advantage that, indirectly, the emissions of natural persons will be taken into account.
We have introduced obligations of buyers of fossil fuels. That, we think, is the more promising approach to get rid of fossil fuels compared to a sole focus on “big oil”, if not for other reasons because “big oil’s” obligations cannot be enforced against companies that put most fossil fuels on the market.
Governance is an important feature. The update introduces a series of principles to the effect that the board of enterprises has to take appropriate steps to cope with the challenges of climate change; both for the enterprise and the world at large. Insufficient measures will jeopardise both.
Seeing the apathy of the greater part of the corporate world we must explore strategies to bring them to their senses. Accountants, credit rating agencies, insurers and attorneys have to play a role to stem the tide.
Accountants cannot do a proper job if they don’t have a clue what the obligations of the enterprises they have to audit are. Without a keen understanding of these obligations they cannot assess the inherent liability and reputational risks of non-compliance with the enterprise’s obligations.
Next to investors, accountants, credit rating agencies, insurers and attorneys cannot escape researching the legal obligations of their clients, their rated or insured enterprises. They do not only have fiduciary obligations towards their clients, but also to those who – as they know or should know – rely on their opinions and reports.
Our update aims to provide guidance about key obligations of the enumerated entities. Our Principles are not “law”, but an interpretation of the law as it stands or will likely develop. Just mentioned entities may arrive at the conclusion that in their assessment “the law” is different in one or more respects. It would, however, be irresponsible towards their clients, society and themselves to assume that in the absence of pertinent black letter law enterprises do not have (enforceable) obligations. In the short run some courts may adopt such a view to the detriment of the climate, the environment, living species and the global economy. The “nicety” of climate change as a global issue is that enterprises can often be sued before courts in multiple countries. Betting on a global judiciary that will abstain from rendering useful judgments is a very risky game.
Human rights law plays an important role as a legal underpinning of our Principles. A series of special rapporteurs, including David Boyd, have issued impressive reports with many references to other human rights sources. Their reports leave no room for doubt about the importance of human rights as a legal basis. Case law in the realm of climate change increasingly relies on human rights.
Next to human rights law we borrow from as many legal sources as possible: environmental, liability, company law, and soft law such as codes of conduct, governance, Principles, and all kinds of Declarations. A few Principles are quite aspirational as we openly admit in the commentary; we hope that the law will develop into that direction.
In the widely acclaimed Urgenda judgment the Dutch Supreme Court introduced the concept of minimum obligations. That concept, borrowed from human rights law, offers an interesting alternative for those who believe that fully-fledged obligations are a bridge too far. In the context of obligations of enterprises we pay attention to this useful feature. As the name “minimum” already indicates: this approach, however useful it is, is not the panacea to avert global catastrophe. It “only” is a step into the right direction which, in our wicked world, is already quite something.
Authoritative reports, such as David Boyd’s brilliant Safe Climate refer to the EP. Our website is visited daily by people from around the globe (from all European, almost all Asian, Latin American, and many African countries, the US, Canada, Australia and New Zealand). Some international law firms explicitly refer to our Principles on their websites and otherwise.
The choice between (hugely) insufficient measures or compliance with legal obligations like our Principles is not between the devil and the deep blue sea. For now, compliance is possible and affordable as recent reports illustrate. The alternative is the devil and the deep blue sea. It is astounding how many people seem believe that is an attractive option.
 This is a slightly elaborated version of my oral presentation. Many thanks to my associate reporter Bastiaan Kock for his, as always, very useful suggestions which are incorporated.
 Hoge Raad 20 December 2019, ECLI:NL:2019:HR:2007 (for an English translation).
 See f.i. Simon Dietz, Alex Bowen, Baran Doda et al., The Economics of 1.5 C Climate Change, Annual Reviews Environmental Resources, 2018 43, https://www.annualreviews.org/doi/abs/10.1146/annurev-environ-102017-025817 and Ruth DeFries, Ottmar Edenhofer, Alex Halliday et al., The missing economic risks in assessments of climate change impacts, Policy insight, September 2019, https://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2019/09/The-missing-economic-risks-in-assessments-of-climate-change-impacts-1.pdf.