ESG responsibilities: Hague Court of Appeal rejects claim for CO₂ reduction by Shell

European companies are not only faced with more and more ESG (Environmental, Social und Governance) regulations, but also court rulings on cases related to ESG-related topics, as a ruling by the Hague Court of Appeal shows. Board members and supervisory directors now should also be mindful that companies could be held accountable in court for their ESG responsibilities. The Ecovis experts explain what this means for companies.

Companies are increasingly becoming accustomed to obligations arising from the Corporate Sustainability Reporting Directive (CSRD), the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation. Nevertheless, lawsuits against companies continue to arise because they do not properly deal with ESG responsibilities.

Such claims may be brought, for example, by social organisations advocating ESG interests. A good example is the 2021 landmark decision by a Dutch court ordering Royal Dutch Shell to reduce its CO₂ emissions by 45%. Although that decision was overturned by a higher court in late 2024, it nevertheless contains a serious warning: Shell does have an obligation to take measures against dangerous climate change.

The Shell ruling and its significance for other companies

The Shell ruling caused quite a stir nationally and internationally. In this case, which was brought by the Dutch environmental organisation Milieudefensie (Defenders of the Environment), Greenpeace and others, Shell was ordered to reduce its aggregate annual volume of all CO₂ emissions into the atmosphere by 45% in 2023 compared to 2019 levels.

Following an appeal, this ruling has been overturned: the court of appeal ruled that it does not have the capacity to determine a reduction rate of 45% or any percentage. However, it also ruled that Shell does have an obligation to counter dangerous climate change. Protection against climate change should be considered a human right that can be applied indirectly in private legal relationships by giving substance to open standards, such as the social standard of care. The court notes that it is an established fact that fossil fuel consumption is largely responsible for creating the climate problem and that the responsibility to combat this problem does not lie solely with sovereign states.

We advise you on how to correctly comply with the legal framework of the ESG criteria and develop an appropriate strategy.

David Bos, Attorney at law, Partner, Kienhuis Legal – member of EOVIS International, Utrecht, Netherlands

The court is thus of the opinion that companies such as Shell, which contribute significantly to the climate problem and have it within their power to contribute to combating it, have an obligation to limit CO₂ emissions in order to counter dangerous climate change. It is expected that more such cases against companies will follow. The Dutch rulings may serve as a precedent for other jurisdictions.

Board members also targeted by prosecutors

Social organisations are also filing criminal complaints against board members, for example, for polluting the environment. The underlying goal is to encourage the directors to initiate a change in the company’s behaviour. A director will need to seek advice on the relevant legal framework and a strategy to address such developments.

Regardless of the nature and size of a company, it is useful for boards and supervisory directors to proactively consider these developments. It makes sense for companies to formulate and comply with a climate policy in a timely manner. This does not mean that all risks are eliminated. However, it shifts potential discussions to whether the measures taken can be considered sufficient.

For further information please contact:

David Bos, Attorney at law, Partner, Kienhuis Legal – member of EOVIS International, Utrecht, Netherlands
Email: david.bos@kienhuislegal.nl