Shell has failed to prepare for the global net-zero goals needed to mitigate climate change, so ClientEarth is opening a lawsuit against the company’s directors.
In a first-of-its-kind case, the environmental law charity will argue that the board’s inadequate preparation for net-zero will ultimately harm Shell’s future and the prosperity of its investors. If the lawsuit is successful, this would mean Shell’s 13 directors are in breach of the UK Companies Act, which legally requires leaders to practice reasonable “care, skill, and diligence.”
The court would most likely then force Shell’s board to update their climate and net-zero strategies moving forward. Shell would also have to outline specific, transparent steps to align company operations with the 2015 Paris Climate Agreement’s goal of 1.5 degrees Celsius warming.
“Shell is seriously exposed to the risks of climate change, yet its climate plan is fundamentally flawed,” explains climate accountability lawyer Paul Benson. “In failing to properly prepare the company for the net-zero transition, Shell’s Board is increasing the company’s vulnerability to climate risk, putting the long-term value of the company in jeopardy.”
The announcement follows Shell’s notable 2021 general meeting, which saw up to 30 percent of shareholders vote against the board members and in favor of a resolution to introduce Paris Agreement-aligned targets for emissions reduction. The company is now facing growing internal and external pressure to do more in the face of worsening climate change.
ClientEarth calls for all supportive shareholders to join its internal litigation and force the Shell board members to recognize and address their lack of action so far.
Lawsuits can help hold companies like Shell to account
While Shell maintains that its existing strategy is adequate, experts suggest that it will fall well short of the emissions cuts required. (The company’s net-zero target is 2050, compared to others’ goal of 2030 ahead of the 2050 cutoff for carbon neutrality.) Instead, Shell is currently on track for a 4.4 percent overall increase in emissions by the year 2030.
“Shell’s shareholders need certainty that the company is using their capital effectively in its navigation of the global energy transition and is genuinely pursuing the climate goals that it says it is,” says Benson.
A separate landmark environmental lawsuit against Shell concluded last May. In the “People versus Shell,” a Dutch court ruled that the company is liable for its enormous contributions towards climate change and must significantly reduce its CO2 emissions. This verdict was also a first-of-its-kind, and while Shell still seeks to appeal, many still predict a wave of lawsuits in response to a major fossil fuel producer finally being held accountable.
Shell is one of the 10 most climate-polluting companies in the world and reports annual revenue of over $350 billion. In 2019, the total pay plus bonuses for CEO Ben van Beurden alone came to approximately $22.5 million. (For context, the average US salary for that year was just over $50,000, which Beurden earned 450 times over.)
ClientEarth has emphasized that its lawsuit also reflects the best interests of the company, its employees, and its shareholders. This is because the longer the board delays action on climate change the more suddenly it may have to adjust as the industry and accompanying legislation change.
Read on here to learn more about the importance of environmental law in fighting emissions.