Business, human rights, law and climate change
In May 2021, a court decided that Shell, the multinational oil and gas company, has a duty of care in relation to climate change. The Dutch court held that Shell is obliged to reduce the CO2 emissions of its entire group’s activities by net 45% by the end of 2030 relative to its 2019 emissions. This was a ground-breaking decision, which builds on a decade of developments in both climate change science and in business responsibilities for human rights impacts in law.
In reaching this conclusion, the court relied on a major UN document called the UN Guiding Principles on Business and Human Rights 2011 (UNGPs), which has since been confirmed by other international documents, in which it is set out that companies do have a responsibility to respect human rights. This responsibility is one on all companies, no matter their size or location, and concerns all human rights. The relevant human rights include human rights impacted by environmental damage and climate change. This is because, as the UN has noted, climate change threatens or violates human rights such as the rights to life, health, food, water and sanitation, a healthy environment, an adequate standard of living, housing, property, self-determination, development and culture.
This decision – and recognition that companies bear responsibility for the human consequences of their impact on the climate – is important, because it creates a valuable tool that governments can use to drive changes in corporate behaviour and reduce emissions.
My research has explored the concept and practice of human rights due diligence (HRDD), which is a core part of the UNGPs in relation to the corporate responsibility for human rights. HRDD is a process through which companies can identify, prevent, mitigate and account for their actual and potential adverse human rights impacts. These are the impacts which companies cause, contribute to, or are directly linked to by their business relationships (e.g. a supply chain). Under HRDD, the company is, unusually, not initially focussed on its own risk but rather on the risks to employees, consumers, local communities and others who might be affected by the activities which a company undertakes, such as extraction, manufacturing, recruitment, IT and retail.
It is also an ongoing process – not a one-off action – and companies should undertake full consultations with potentially affected people and communities before they begin or continue their operations. If HRDD is undertaken effectively it should both prevent human rights impacts – including those of environmental damage and climate change – and provide mitigation and remediation when these impacts occur. It can then be linked with effective judicial and other enforcement mechanisms to enable remediation for victims.
This process of HRDD has been brought into legislation by some countries. For example, the French government passed the Duty of Vigilance Act in 2017, which imposes a general mandatory due diligence requirement for human rights and environmental impacts on all companies with more than 5,000 employees (or 10,000 employees worldwide). This requires that these companies establish a vigilance plan setting out how they identify and prevent impacts on human rights, including in those companies it controls (e.g. subsidiaries) and those with which it has a commercial relationship. The legislation provides for the ability of NGOs and others to bring claims that the vigilance plans are inadequate and it does provide for civil liability where the company breaches its own vigilance obligations. There is now similar legislation in Germany, the Netherlands and Norway. The EU is committed to introduce legislation later this year to extend across all EU Member States and to companies operating in the EU (including those based in the UK), with a text already adopted by the European Parliament. The UK’s Modern Slavery Act was a forerunner of these developments, though it is limited to a few human rights and has no effective enforcement process. There are also a series of cases before courts around the world, including in the UK, which have held that companies do have a duty of care for the human rights and environmental impacts of their subsidiaries, no matter where they are located.
Interestingly, there is strong support from a wide range of companies for such mandatory HRDD legislation. In a major report for the European Commission, which I co-authored, a large survey of companies showed that a large majority (75%) of company respondents wanted a harmonized HRDD legislation across the EU. It also showed that there were some additional costs to business but no detriment to innovation or competitiveness. Unusually, this report was directly influential in the European Commission deciding to introduce legislation in this area. The findings of the report are consistent with other empirical work with companies and statements by many companies in support of a proposed legislation in different countries, including in a UK Parliamentary report. This support by companies seems to be mainly because companies do want clarity in their reputational, legal, operational and financial risks, many companies acknowledge their social and environmental purposes and responsibilities, and investors are increasingly considering environmental, social and governance (ESG) issues as central to their decision-making.
"This is an opportunity to incentivise companies to act to prevent and reduce their activities which impact on climate change, and to provide effective sanctions if they do not."
Therefore, while much of the focus of climate change action will be on what governments can do, it is also an opportunity to incentivise companies to act to prevent and reduce their activities which impact on climate change and to provide effective sanctions if they do not. There should also be pressure on companies themselves to act now and not wait for such legislation. These actions should be based on the existing responsibilities which companies do have in this area, as shown by the decision against Shell.
Robert McCorquodale is Professor of International Law and Human Rights at the University of Nottingham. He is also a practicing barrister and has been involved in cases concerning corporate accountability for human rights impacts.
Securing net zero aviation
Chiara Macchi, ‘The Climate Change Dimension of Business and Human Rights: The Gradual Consolidation of a Concept of ‘Climate Due Diligence’ (2021) Business and Human Rights Journal Vol 6, 93-119
Christina Voigt, ‘The Climate Change Dimension of Human Rights Obligations’ (May 3, 2021). SSRN: https://ssrn.com/abstract=3839012
Rebecca Henderson, ‘Climate in the Boardroom: Struggling to Reconcile Business as Usual & the End of the World as We Know It’ (2020) Daedalus Vol 149, 118-124
Robert McCorquodale, Lise Smit, Stuart Neely and Robin Brooks, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges of Business Enterprises’ (2017) Business and Human Rights Journal
Surya Deva and David Birchall, Research Handbook on Business and Human Rights (2020, Edward Elgar)