Opinion: This is how law leads non-state actors to decarbonise

By Laura Clarke, CEO of ClientEarth | April 27, 2023

There is a profound shift happening in the corporate world. The transition to a low-carbon economy is well and truly underway. However, progress can and must be accelerated.

That is where the law can make a huge difference. It can guide and persuade corporate leaders to move from a ‘business as usual’ fossil fuel mindset to a low-carbon one, quickly and definitively.

Law has the power to kick the low-carbon transition into hyperdrive, for the benefit of people, the planet, shareholders and corporations themselves.

Here are some examples of how the law can lead non-state actors to decarbonise – and fast.

Rewiring the economy 

In April 2021, ClientEarth brought legal action challenging EU monetary policy. In particular, we sought to stop the Belgian National Bank from directing finance to polluting businesses under a European Central Bank bond-buying scheme known as the Corporate Sector Purchase Programme (CSPP).

Our lawyers argued that the ECB’s decision to establish the programme breached European environmental and human rights laws, as it ignored the negative impact on the environment.

Following our lawsuit, the ECB accepted its legal obligations to consider the climate in quantitative easing reforms. This was powerful evidence of how the law can shift the modus operandi in key areas of the economy and deliver the systemic change we need.

Changing the conversation 

The law is not only there to govern actions but also words. And that is hugely important. Greenwashing – exaggerating or misrepresenting a company or product’s environmental credentials – has huge repercussions for decarbonisation.

Greenwashing gives companies social licence to continue operating in a way that is bad for the planet, people and all their stakeholders, including their shareholders and employees. The road to a low-carbon economy is paved with opportunities, but companies can put the brakes on decarbonisation with marketing that gives an inaccurate picture of the environmental impact of their work or products.

ClientEarth has been involved in several legal actions over the past few years, which have called out what we see as greenwashing. We have challenged advertising by BP that suggested the company was rapidly moving its business to low-carbon energy when, at that time, 96% of its spending was on oil and gas. BP subsequently withdrew the advertising.

We are involved in a case which claims that the advertising of Dutch airline KLM misleads customers by telling them that they are making flying sustainable, whilst planning air traffic growth and fighting moves to limit air traffic to safer levels.

And we are part of legal action which alleges that TotalEnergies’ advertising is misleading consumers by telling them the company is on track to become carbon neutral by 2050, despite continuing to promote and sell more fossil fuels.

The law provides the framework to judge whether these claims are valid. It ensures that corporate actions and words align, driving decarbonisation.

Holding businesses to account

When businesses are not meeting their legal obligations, the law can also be used to hold them to account and to oblige Directors to act in the long-term interest of their company when it comes to the climate, enhancing decarbonisation.

In a world-first case this year, ClientEarth filed a lawsuit against the Board of Directors of Shell plc for failing to manage the material and foreseeable financial risks posed to the company by climate change.

The risks of their inaction include:

• losing customers as society and the economy moves away from fossil fuels;
• losing money, as the billions of pounds of investment that is ploughed into new, unnecessary oil and gas infrastructure is wasted;
• restricting the company’s access to credit (e.g. loans) as banks become increasingly cautious about lending to these industries; and
• becoming increasingly exposed to regulation to tackle the climate crisis, including carbon taxes, net zero targets, and even bans on fossil fuel exploration, development or production (for example, as introduced in France, Denmark and Spain).

For the oil and gas industry, climate change and the accompanying energy transition is an existential crisis. For shareholders, it, therefore, poses huge financial risks.

This explains the unprecedented support we received for our claim against Shell’s Board of Directors. To date, it has been backed by a group of large institutional investors holding more than 12 million shares in Shell and more than half a trillion US dollars (£450 billion) in total assets under management.

Converging interests

The law helps hold state and non-state actors to account when they fail to deliver on commitments designed to effect lasting change. But the change we want to see will also come from providing support and advising governments and businesses who are doing everything they can to secure a viable future for all life on earth.

At ClientEarth, we have helped guide corporations in their understanding of what the law requires of them. Providing this clarity helps them act in the interest of the planet, deliver value to shareholders and ensure their long-term financial viability.

We need to come together and form stronger alliances with policy makers and businesses so they lead the way in the fight against climate change.

The law is not a panacea, and it cannot be used in isolation. But if used thoughtfully, it can turbocharge the race to net zero that we need to win for the sake of all companies and the planet they do business on.

Laura Clarke OBE is the CEO of ClientEarth, an environmental charity that uses the power of the law to protect all life on Earth. The organisation fosters constructive engagement and dialogue with governments, businesses, and regulators, so they can take action on the pressing climate and biodiversity crisis.

Having spent over twenty years in various governmental, public policy, and diplomatic roles – including serving as the British High Commissioner to New Zealand – Laura has extensive experience working on issues related to climate, environment, and sustainability. Despite the daunting nature of these challenges, she maintains an unwavering sense of optimism and believes defeatism has no place as we tackle climate change.

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