Big Oil’s Own Tipping Point
In 2018, the Intergovernmental Panel on Climate Change (IPCC) issued a special report stating the need to make “rapid, far-reaching and unprecedented changes in all aspects of society” in order to appropriately mitigate the effects of climate change. The IPCC stated the importance of circumventing certain climate tipping points to prevent major shifts in the climate system. However, the responses to this urgent report were widely slow and failed to address the extreme nature of the potential threats. This changed in the last week of May, when three major oil companies were impacted by the growing concern for the lack of action being taken.
MilieuDefensie vs. Royal Dutch Shell
Royal Dutch Shell was taken to court by several environmental groups, marking the first time that these groups resorted to litigation to combat a major energy firm. The plaintiffs alleged that Shell was in breach of human rights due to its continuous investment into fossil fuels. The Netherlands court determined that Shell was contributing to climate change, and was violating their duty of care towards citizens due to the known adverse effects of global warming. As a result, the court ordered the company to amend its corporate policy in order to reduce its CO2 emissions 45% by 2030, with respect to 2019 levels. While Shell had released its own plan to reduce carbon emissions, the court viewed the plan as inadequate, especially noting the conditions Shell had attached to its proposed efforts. Shell is expected to appeal the ruling, but the case reflects the growing value of the right to a healthy environment in European law.
Shareholder Activism
In the same week that the Dutch court issued this judgement, shareholders of Exxon and Chevron took their own steps to address climate change. At Exxon, a shareholder group led by a small hedge fund, Engine No. 1, managed to secure 3 seats on the board of the company. With climate change being the prime focus of this board room contest, Engine No. 1 was able to garner support to elect board members whose focus is to see that Exxon is committed to changing its business strategy to sufficiently address climate change. Chevron saw its shareholders vote to take more aggressive action to reduce carbon emissions, albeit at the protest of their board. The proposal passed with an overwhelming 61% and calls on the company to cut “Scope 3” emissions.
Shift Toward Sustainability
The impacts of the Dutch court’s judgment could potentially be felt across Europe, with a chance to set a precedent for companies to be held legally responsible for not protecting individuals against climate change. However, while the decision is likely to be widely influential, it is doubtful that it will have an effect on the United States legal framework -- nonetheless, the actions of shareholders of Exxon and Chevron have demonstrated that there is growing acceptance of the need to aggressively combat climate change and to amend business strategies. The idea that change is needed in all aspects of society to make a true difference is reaching new levels of acknowledgement, marked by the increased environmental awareness spurring these events.
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