In a landmark judgement, Australian Federal Court Justice Mordecai Bromberg recently established that the Commonwealth Government has a duty of care to protect Australian children from future harms related to climate change.
Accepting evidence that was uncontested by the legal team representing the Minister for the Environment, Bromberg agreed that a particular coal expansion project (the subject of an injunction sought by a group of teenage applicants) would incrementally contribute to future climate harms if approved. While stopping short of granting the injunction to prevent the Minister from approving the mine, the judge was very clear that such a decision would be open to judicial review given the facts established in the case.
Corporate Australia Take Notice
By extension, this principle could now be applied to any corporate action or inaction that causes an increase in the greenhouse gas emissions that are heating the planet at an unprecedented rate. Activists are lining up and crowd funding to apply this principle, along with principles established by favourable litigation offshore. And they’re no longer your stereotypical activists either: respected groups such as doctors, parents, farmers, engineers, lawyers, athletes and many other professional groups are engaged in a global version of “whack a mole”, fighting emissions intensive projects and exploring litigation to bring governments and corporates to account to achieve the objectives of the Paris Climate Agreement.
On the same day as the Bromberg judgement, for example, a court in The Hague ordered Royal Dutch Shell to slash its emissions by 45% by 2030 (off 2019 levels). Not just its direct scope 1 and 2 emissions, but also the scope 3 emissions associated with its supply chain and, most significantly, customers’ end use of its products.
The 45% ruling reflects the global average emissions cuts needed by 2030 to maintain a chance of limiting global heating to the safe(-ish) level of 1.5oC: for developed countries such as Australia the target is significantly higher. For example, updating the Climate Change Authority’s 2014 methodology (which recommended reductions of 40% to 60% by 2030), researchers found earlier this year that – due to minimal emissions reductions in the intervening years, and the cumulative impact of greenhouse gases in the atmosphere – Australia’s 2030 target has increased to 74% off the 2005 baseline.
As such, climate litigation must now be considered a significant corporate risk. While both the aforementioned cases are subject to appeal, the global mood is clearly shifting. Companies that are not seen to be making serious and genuine efforts to cut their emissions, across their entire value chains, are at risk of actions that could scuttle expansion plans; render parts of their business unviable; and sink asset valuations. Governments may be compelled to refuse project approvals that were until recently seen as legitimate and societally beneficial.
It’s not just fossil fuel firms that are under the microscope. Major energy users such as airlines and logistics firms; big organisations with massive supply chains such as supermarket and FMCG giants (whose size means they have the influence to transform industries); producers of emissions intensive building products and the construction giants who use them; and “big meat” agribusinesses, are just a few sectors that will increasingly feel the heat for their actions or inactions.
Next Steps for Boards
The implications for boards?
- Identify, assess and evaluate your physical and transitional climate risks.
- Understand the emissions intensity of your supply chain, assets, processes, products and services.
- Adopt Science Based emissions reduction Targets (SBT) that go beyond greenwash to encompass upstream and downstream scope 3 emissions, and establish delivery accountabilities.
- Accept that purchased offsets are a complement – not a substitute – for genuine, near term emissions reduction.
- Appreciate that achieving genuine emissions reduction may require transforming your business model or product range.
Above all, embrace climate change as an opportunity, rather than a threat. Accept that the business environment is changing, it’s gathering pace, and it’s already unstoppable. Treat climate change as a disruptor, much like digital has been for the past two decades. Avoid having a Kodak moment: neither size nor venerable history will protect your organisation from the shift to a net zero emissions economy.