Shell directors, including CEO Ben van Beurden, can be held personally liable for possible damage if the oil and gas group does not comply with last year’s verdict in the climate case in The Hague. That is what lawyers from Milieudefensie, an organization that is committed to combating climate change, wrote in an extensive letter to the company this Monday.
In May last year Milieudefensie won a lawsuit against Shell. The court in The Hague ordered the then British-Dutch multinational to bring its policy in line with the Paris Climate Agreement (2015). In concrete terms, this means a reduction of greenhouse gases by 45 percent by 2030. Shell has appealed this ruling, but according to the judgment this should not be a reason to postpone the reduction.
According to the letter, Shell is not carrying out the sentence. In fact, Milieudefensie concludes from the corporate strategy that the group recently published that Shell has no intention of complying with the judgment. The company itself gives the impression in all its expressions that this is the case.
Major financial risks
The letter is not officially intended to force Shell to implement the judgment, the lawyers, Roger Cox and Mieke Reij, write. With this letter, Milieudefensie makes an urgent appeal to CEO Ben van Beurden, the board of directors and the entire management of the company, which has become fully British since this year, to change course and to ‘no longer give incomplete and incorrect information to stakeholders. inform about the consequences of Shell’s current energy strategy”.
Cox and Reij point out that the letter is also of great importance to Shell’s shareholders. That is one of the reasons for sending the letter now, in a month when large companies account for their policies to shareholders at their annual meetings. The lawyers warn that investments may not be recouped if Shell is forced by the global climate agreements to stop activities that contain a lot of CO2 cause. In addition, they point out that large institutional investors, such as pension funds, also have their own responsibility to enforce climate policy at the companies in which they invest.
In the letter, the lawyers write that the court ruled in May that „the policy, strategy and ambitions of [Shell] fail to meet the reduction obligations” that the company has under the Paris Agreement. According to Milieudefensie, this is still the case.
‘Huge progress’
Last week Shell published its Energy Transition Progress Report 2021ahead of the shareholders’ meeting to be held in London in a month’s time. In an explanation CEO Van Beurden writes that the report “shows enormous progress to be a net-zero energy company by 2050”. Shell wants to reduce greenhouse gas emissions from its own operations by 50 percent by 2030 and also reduce the carbon intensity, i.e. emissions per unit of product, by 20 percent by 2024.
According to Milieudefensie, there is a lack of a concrete reduction policy for the products that Shell sells, such as petrol. These so-called ‘scope 3 emissions’ are responsible for 95 percent of Shell’s emissions. The fact that Shell wants to reduce carbon intensity says little about climate policy, according to Milieudefensie. Even with a lower carbon intensity, Shell can still produce a higher CO2have emissions. Analysts at Global Climate Insights and Carbon Tracker, who conduct research on fossil fuel companies, are also not confident in carbon intensity as a measure of greenhouse gas reduction.
Also read: Oil companies want to be clean by 2050. But what about 2030?
The fact that Shell recommends a resolution of the activist investor Follow This, which will be voted on at the shareholders’ meeting on 24 May, points out that the board and management still do not take climate policy seriously, according to Milieudefensie. The resolution calls on the Shell board to formulate concrete goals for the short, medium and long term that are in line with the Paris Climate Agreement. Shell says the resolution is “unrealistic”.
Personal liability
Milieudefensie’s letter contains an eighteen-page appendix in which the lawyers discuss possible legal consequences for Shell’s management. In principle, directors are reasonably protected against personal liability, the lawyers write. But that protection does have limits, they say.
An important question is whether directors with their policies deliberately expose the company itself, company stakeholders (such as shareholders) or others (such as citizens confronted with the consequences of climate change) to possible damage. Recent reports from the IPCC, the scientific panel of the United Nations, once again show how serious the consequences of climate change are now and will become in the future. There is only a very limited number of years to avoid the worst consequences.
Directors who knowingly ignore these facts when formulating the company’s strategy should therefore not be surprised if they are called to account for this, according to Milieudefensie’s lawyers.