ESG Matters: Enforcing corporate responsibility through impact litigation

A second letter followed on 20 March 2023, asserting that none of the addressee companies’ climate plans would be Paris-aligned. Milieudefensie aims to publish its update on the corporate climate policies of the 29 addressee corporates in July 2023, and has already announced a new climate case against a Dutch corporation. Furthermore, Milieudefensie activists attended general shareholder meetings of the addressee companies, repeatedly asking whether the board will commit to reducing the company’s CO2-emissions by 45% per 2030.

Milieudefensie's strategy – pincer movement
The apparent objective of Milieudefensie is to elicit ambitious corporate climate commitments based on the aforementioned judgment, under threat of litigation against 'laggards' (policy litigation). An understandable approach, since the broad duty of care as accepted by the District Court may well be overturned in the ongoing appeal proceedings. At the same time, climate policies to which a company commits are subject to scrutiny and questioning whether the company can deliver on them. Milieudefensie therefore seems to aim at creating a ‘pincer’ of two litigation risks in the run-up to 2030. Whilst the strategy of Milieudefensie obviously triggers media-attention, its effectiveness is questionable. As committing to reduction targets without having a realistic operational trajectory to meet them may fuel greenwashing litigation, corporations generally seem to avoid making unwarranted commitments in response to the open letters.

The role of the legislative power – implementing the Urgenda judgment
In our view, proper legislation should be established instead of policy litigation. Taking due account of European legislative proposals, the Dutch government should speed up its decision-making processes and prioritise ambitious but feasible trajectories, especially in the energy, industrial, chemical, agricultural, transport and financial sectors. This would give corporations guidance and legal certainty to build their policies on. Courts should not even have to question whether they have any legitimation in dealing with the fundamental distributive questions of climate litigation as envisaged by Milieudefensie. They may well give guidance on proper climate governance and develop new standards for management and supervisory boards, properly accommodating the board’s duty to weigh conflicting interests in the multifaceted transition. However, policy issues should principally be decided by the legislative power.

The role of companies
Boards should continue to set ambitious yet balanced climate risk mitigation pathways. Corporations would do well to be increasingly vocal about what an ambitious 'do your part' means, taking into account the myriad of possibilities as well as operational, technological and societal constraints. CEO's who fail to engage in meaningful discussions with stakeholders about what their organisations can and cannot do, are likely to face serious scrutiny by NGO's, supervisory authorities and other stakeholders. Although we have serious questions regarding Milieudefensie's strategy, corporations must be prepared for further steps. Milieudefensie is due to publish its update on the corporate climate policies of the addressee corporates and is expected to launch its second climate case against a Dutch corporation shortly.

What it means for you:

• Review the corporate climate policy and goals and regularly assess feasibility, considering alignment with the company's strategy in order to be fully transparent and accountable.
• Develop and implement policy on meaningful stakeholder engagement.
• Follow a diligent decision-making process when setting, re-assessing and developing corporate climate or stakeholder engagement policies. With this, weigh all relevant aspects considering stakeholder's views on the company's climate vision.
• Be vocal about decisions made and to reflect on what arguments were put forward, which stakeholders were engaged in what way and what alternatives were considered.