Court Ruling Could Curb Climate Litigation Against Private Companies

The Hague Court of Appeal has overturned a previous judgment requiring Shell to reduce its emissions by 45% by 2030, including emissions generated indirectly by end users of its products. Our Planning & Environment team examines how this decision marks a setback for climate activists aiming to hold private companies accountable for emission reduction obligations.

The Hague District Court previously ordered Shell[1] to reduce the annual volume of CO₂ emissions from its business activities and the end users of its oil and gas products by 45% relative to 2019 levels by the end of 2030.

The case was taken by Milieudefensie, a Dutch environmental group, and the decision represented a landmark victory for environmental activists. It built on the earlier Urgenda[2] decision which established that the human rights protections under Articles 2 and 8 of the European Convention on Human Rights required the Dutch government to protect its citizens from the threat of climate change.

The 2021 Shell decision was a key part of the increasing trend of climate litigation, which we previously reported on. Importantly, it extended the scope of this trend to include actions taken directly against private companies. It was a landmark decision because it was the first time a private company was ordered by a court to comply with the Paris Agreement, and determined that a private company had a duty to mitigate its emissions.

However, Shell successfully appealed the 2021 decision with the Hague Court of Appeal delivering its judgment on 12 November 2024.[3]

Grounds of appeal

Shell sought to appeal the decision on ten separate grounds. In particular, its appeal centred on the argument that corporate emission reduction targets were not for the courts to determine but instead were a legislative matter. In the absence of a percentage reduction target being imposed under legislation, Shell argued that the District Court erred in its decision to bind the company to a 45% reduction standard, or indeed to any other percentage.

Emission reduction targets

The Court of Appeal found that Shell has an obligation to reduce its emissions, based both on legislation and an “unwritten social standard of care”. However, the Court concluded that it is not for the courts to determine and impose specific reduction obligations on private companies.

In reaching this conclusion, the Court considered the various scientific analyses, sector targets and EU regulations applicable to Shell. The Court pointed to the lack of consensus on the rate of reduction to be achieved by private companies. The Court stated that “the available figures do not provide the court with sufficient support to oblige Shell to reduce its CO2 emissions by a certain percentage in 2030”.

Scope 3 emissions

A significant portion of the judgment was devoted to a consideration of Shell’s obligations regarding its scope 3 emissions.

Significantly, the 2021 judgment determined that Shell’s emission reduction obligations applied to its entire company portfolio, including its scope 1, 2 and 3 emissions.

Scope 1 emissions are the direct emissions produced and generated by a company in carrying out its activities. Scope 2 emissions are generated indirectly and relate to emissions generated upstream through Shell’s supply chain. Scope 3 emissions are generated indirectly downstream by the end users of its energy products. The extent of a company’s obligations regarding indirect emissions and impacts, in particular scope 3 emissions, has been a topic of some debate in recent decisions. These included the Kilkenny Cheese case that we previously reported on and the decision of the UK Supreme Court in the Finch[4] case.

In this case, the Hague Court of Appeal concluded that “Shell may have obligations to reduce its scope 3 emissions” but that this did not mean that the Court could impose a binding target.

The Court of Appeal commented that it would be particularly complicated and difficult to enforce any scope 3 emission reduction targets imposed on private companies. This is due to the nature of scope 3 emissions, being generated by end users of the company’s products.

In addition, the Court found that it could not be established that an obligation on Shell to reduce its scope 3 emissions by a certain percentage is effective. On that basis, the Court noted that

“Milieudefensie et al. have no interest in their scope 3 claim”

Consequences for private companies

The Hague Court of Appeal restated the need for private companies to ensure their climate plans are consistent with the Paris Agreement’s climate targets. However, the decision handed down suggests that in the absence of specific sectoral or legislative targets, it is for each company to determine how it will comply with these goals.

For environmental activists, the decision will be seen as a setback. Groups such as Milieudefensie will likely find it difficult to enforce specific emission reduction targets against private companies where specific targets have not been prescribed by legislation.

It remains open for Milieudefensie to appeal the decision to the Dutch Supreme Court.

For more information and expert advice on related matters impacting your organisation’s ESG goals, contact a member of our Planning & Environment team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Case number C/09/571932 / HA ZA 19-379, The Hague District Court, 26 June 2021

[2] Decision 19/00135, Supreme Court of the Netherlands, 20 December 2019

[3] Case number 200.302.332/01, The Hague Court of Appeal, 12 November 2024

[4] R (on the application of Finch on behalf of Weald Action Group) (Appellant) v Surrey County Council and others (Respondent) [2024] UKSC 20