Comment: Rising tide of climate litigation sweeps up Holcim and Danone, along with Shell

February 14 - Earlier this month ClientEarth filed a lawsuit against 11 Shell directors in the UK for failing to manage the "material and foreseeable" risks posed by climate change, backed by a group of institutional investors. The move was well timed, coming just after Shell, along with the other Western oil majors, announced record profits.

There is growing societal revulsion at excess profits raked in by oil companies thanks to soaring energy prices stemming from the war in Ukraine, while millions of consumers, particularly in recession-hit UK, are struggling to keep the lights on and their homes warm.

Shell’s chief executive Wael Sawan didn’t take the same flak from climate-minded investors as BP’s chief executive Bernard Looney, who when announcing similarly eye-watering profits also said the oil major had revised down its targets to cut emissions by 2030, the most ambitious in the sector, due to government pressure to step up production of hydrocarbons.

But then Shell never promised an absolute cut in emissions, only a cut in carbon intensity of its products, by 20% by 2030 and 45% by 2035. The fact it can do so while increasing production is the basis of ClientEarth’s lawsuit. It’s also the basis of a successful suit brought against Shell in 2021 by Dutch NGO Milieudefensie, with a Dutch court ordering the Anglo major to cut its absolute emissions by 45% by 2030, a decision that Shell is appealing.

"The (Shell) board is persisting with a transition strategy that is fundamentally flawed, leaving the company seriously exposed to the risks that climate change poses to Shell's future success – despite the board's legal duty to manage those risks," said ClientEarth's senior lawyer Paul Benson.

Shell described ClientEarth lawsuit as having no merit, and said its climate targets were ambitious and on track and that its directors had complied with their legal duties.

A group of institutional investors with around 450 billion pounds ($543 billion) in assets under management, have written letters supporting ClimateEarth's claim. Though they only own about 12 million of Shell’s 7 billion shares, it is a useful reminder that not all shareholders are jumping on the bandwagon that has seen shares in the oil and gas majors soar, including those of BP, in the wake of last week’s announcement rowing back on its decarbonisation plans.

Taking on Big Oil is one thing, but the rising sea of climate litigation is also sweeping up some far softer targets, including companies that regularly win top marks for their ambitious climate policies.

News last month that Danone is being taken to court by ClientEarth and two other environmental groups over its global plastic pollution will have caused a collective shudder in board rooms far beyond the consumer goods giant’s native France.

Danone, producer of Evian, Volvic and Activia, prides itself on being a sustainability leader in many spheres of its operations, winning top A marks for its reporting across climate, forests and water from CDP. And packaging is no exception: according to the Ellen MacArthur Foundation, Danone has done more than Coca-Cola, PepsiCo and Mars to decrease virgin plastic use in the past two years (only Unilever has outperformed it).

But under France’s 2017 duty of vigilance law, large companies are obliged to map out the environmental and social impact of their global activities and set out measures to mitigate and prevent damage on an annual basis, something a growing number of non-governmental organisations have seized on to take French companies to court.

ClientEarth and its partners Surfrider Foundation Europe and Zero Waste France are not opening criminal proceedings, but they say Danone is failing to comply with the duty of vigilance law in its plan to reduce its plastics impact because its main strategy is to increase the recyclability of its products, though only 9% of plastics ever made have been recycled.

To be compliant, they argue, the company should provide a complete assessment of its plastic footprint, not just in packaging but plastics in the products it sells, as well as logistics and promotions, and map its social and environmental impacts from production to end of life.

Danone said it was "very surprised by this accusation, which we firmly refute”.

Another sustainability leader facing legal action is Swiss cement giant Holcim, whose transparency in reporting on its Scope 3 emissions, those from the use of its products and in its value chain, is being used against it.

Early this month residents of an Indonesian island, Pulau Pari, filed a case in Zug, Holcim’s headquarters, seeking proportionate compensation for damage to their livelihoods due to repeated flooding as global warming has driven up sea levels.

The complainants cited a study by the Climate Accountability Institute, which used Holcim’s emissions reporting to CDP to calculate that it was responsible for 0.477% of global industrial emissions from 1950 to 2021.

Holcim had its net-zero emissions plans approved by the Science Based Targets initiative under its exacting Net Zero Standard last year, and its low-carbon product, EcoPact, accounts for 10% of its sales, including a recently announced deal to be used in data centres for Amazon Web Services. But the NGOs backing the islanders’ action say the company is not doing enough to cut its emissions.

There is some support for this position from a new report by Corporate Climate Responsibility Monitor, which ranked Holcim high relative to most of the other 23 companies studied for its net-zero ambition and transparency, but said its strategy only had moderate integrity because it hinges on energy intensity targets, low-quality renewable energy certificates and extensive use of carbon capture storage and usage.

A spokesman for Holcim said “We do not believe that court cases focused on single companies are an effective mechanism to tackle the global complexity of climate action”.

NGOs are right to push companies to do far more to mitigate the environmental and social implications of plastics packaging and high-emissions sectors like concrete. But the risk of going after the tall poppies, like Holcim and Danone, is that companies trying to do the right thing and voluntarily being transparent about their emissions will be punished, while the vast majority of companies carry on business as usual, under the radar.

Just how rare such transparency is was illustrated by a new report from CDP, finding that only 81 of the 18,600 plus organisations that answered its climate change questionnaire last year have credible climate transition plans.

In Europe at least, the Sustainable Finance Disclosure Regulation, which comes into force later this year, and the Corporate Sustainability Reporting Directive, which comes into force in 2024, will seek to level the playing field in forcing greater transparency and making Scope 3 reporting mandatory across the board.

Scope 3 emissions will also be included in the International Sustainability Standards Board’s comprehensive global baseline of sustainability related disclosure standards, which it is in the process of finalising.

Hopefully by the time the oil majors report their profits next year many more institutional investors will be emboldened to support the efforts of organisations such as ClientEarth to hold them to account. We have perilously little time to lose.