Editor’s Note: This article is part of a four-piece symposium that examines Kishanthi Parella’s work, “Enforcing International Law Against Corporations: A Stakeholder Management Approach,” featured in Volume 65(2) of the HILJ Print Journal.
*Carol Liao
Introduction
Climate change is an intractable, “wicked” problem, in that it resists definition and conventional solutions. Its global effects are systemic and interconnected, acting as a risk multiplier with political, economic, and social ramifications that have the ability to destabilize civilizations. Interwoven in the wicked problem of climate change is the difficulty of curtailing unsustainable and irresponsible corporate behavior, which is hastening the warming of our world. Concern over the drastically changing climate is nothing new, but pressure on corporate actors to proactively address climate change has never been more vital in holding the increase in global average temperatures to “well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C” as set out by the Paris Agreement. Given the transnational harms and importance of international collaboration across jurisdictions and industries, meaningful corporate accountability is needed to reduce greenhouse gas (GHG) emissions in the transition away from fossil fuels toward renewable energy systems, and help resolve the seemingly unresolvable question of climate change.
Kishanthi Parella’s formidable work, Enforcing International Law Against Corporations: A Stakeholder Management Approach, points out that international law can guide corporate managers on how to meet demands for more responsible business practices and address the complex reality of climate change, yet many crises occur because corporations fail to follow international law. As Parella notes, the problem lies in enforcement—the international legal order lacks adequate mechanisms to ensure compliance. It is in that vein, and in the application of Parella’s stakeholder management approach to international law, where one can consider how to incentivize corporations to align their behavior to conform to stakeholder expectations and address gaps in their international legal obligations.
This Article explores Parella’s stakeholder management framework specifically in the context of climate change. First, I provide a very brief history of major developments in climate change–related international legal instruments. Then, I apply Parella’s framework to shifting legalities in corporate climate accountability, reflecting upon how international legal obligations are channeled into mechanisms with localized teeth via various stakeholders. Specifically, I consider the “tidal wave” of climate-related litigation against the backdrop of international legal obligations. Using Parella’s typology of enforcement, I highlight how direct enforcement by stakeholder litigants against states and corporate actors, driven by international law and norms, incentivizes further predicative enforcement (creating conditions for another stakeholder to enforce), facilitative enforcement (limiting actions that could disrupt another stakeholder’s ability to enforce), direct enforcement, and amplified enforcement by other stakeholders. These behaviors induce an interactive process that aims to institutionalize climate governance norms while also pulling jurisdictions toward globalized standards of corporate regulation. I conclude with a comment on the urgency of further advancing corporate accountability across jurisdictions.
I. International Legal Frameworks to Address Climate Change
A web of international legal frameworks to tackle climate change has emerged over time—with progress and integration developing in fits and spurts. The Intergovernmental Panel on Climate Change (IPCC) was first established in 1988 by the United Nations (UN) General Assembly, tasked with researching the science of climate change and creating assessment reports detailing its effects and risks. In 1992, the United Nations Conference on Environment and Development built upon the two-decades-old Declaration of the United Nations Conference on the Human Environment to draft the Rio Declaration and 27 Principles (known as the Rio Principles) meant to guide the behavior of nations toward more environmentally sustainable patterns of development. Notable in these principles were Principle 1—stating that “[h]uman beings are . . . entitled to a healthy and productive life in harmony with nature”—and Principle 15, a precautionary principle which held that “[w]here there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.” A key achievement stemming from the conference was the establishment of the UN Framework Convention on Climate Change (UNFCCC) and later, the Kyoto Protocol.
The implementation of the UNFCCC as a treaty is monitored by the Conference of the Parties (COP), providing a general framework with the main priority being the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” The UNFCCC is guided by principles of equity in demanding “differentiated responsibilities” based on each country’s respective capabilities. The Kyoto Protocol, adopted at COP3 in 1997, set specific emissions reduction targets for developed countries, subject to an aggregate target flowing from this principle of equity. The Kyoto Protocol was then followed by the 2010 Cancun Agreements at COP16, and the 2012 Doha Amendment at COP18, which set the goal of reducing GHG emissions by 18% compared to 1990 levels for participating countries during the Kyoto Protocol’s second commitment period of 2013-2020.
These international treaties and agreements focused on states, but in 2008, the UN endorsed the “Protect, Respect and Remedy Framework” for business and human rights, which culminated in the UN Guiding Principles on Business and Human Rights (UNGP) adopted in 2011. The UNGP outlines state responsibilities in promoting and protecting human rights, including the duty of states to enact effective laws and regulations to prevent and address business-related human rights abuses, and to ensure access to effective remedies for those whose rights have been abused. The UNGP also specifically addresses the human rights responsibilities of businesses, establishing an overarching framework under which corporations have the responsibility to respect human rights wherever they operate and regardless of their size or industry. This responsibility includes requiring companies to know their actual or potential impacts, prevent and mitigate abuses, and address adverse impacts with which they are involved.
Four years after the UNGP, the UN Sustainable Development Goals (UNSDGs) were established, providing a “shared blueprint for peace and prosperity for people and the planet” with 17 goals emphasizing the interconnected environmental, social, and economic aspects of sustainable development. Goal 13 specifically addresses climate action, mandating that countries “[t]ake urgent action to combat climate change and its impacts.”
In 2016, the Paris Agreement—a binding international treaty established under the UNFCCC framework focused on limiting global temperature increases—came into force. Under the Paris Agreement, accountability is monitored through various structures including a transparency system, a global stocktake process, and recurring five-year assessments. As the intertwining of climate change and human rights grew ever more apparent, the UN Working Group on the issue of human rights and transnational corporations and other business enterprises issued its Information Note on Climate Change and the Guiding Principles on Business and Human Rights in June 2023. Its aim was to assist states and corporate actors in integrating climate change impacts with human rights–related impacts caused by, contributed to, or linked with business activities.
II. Direct Stakeholder Enforcement Through the Lens of Climate Change Litigation
As Parella notes, international law compliance is best guaranteed by the “institutionalization of international law norms”—in other words, internalization socially, politically, and legally. But since international tools do not bind corporations directly, Parella stresses that internalization is the product of interactive processes that occur between both states and nonstate actors, at both the domestic and institutional levels in a variety of fora. Thus, to answer the question of “How do we convince corporate leaders to comply with international law when they may not be bound to do so?”—one answer is that we must convince a particular group of intermediaries (stakeholders) with influence over corporate actors.
Part and parcel of the wicked problem of climate change is that it involves many different stakeholders who have different conceptions of the problem and its ideal solutions. Parella notes that judicial processes may or may not play a central role in the interactive processes that lead to internalization by a state. In climate change, the role of the judiciary in certain jurisdictions has become a fulcrum in establishing international norms as legally binding precedent. In this sense, “[c]limate change profoundly modifies these ancient premises and rattles judges’ comfort zones,” as Justice Antonio Herman Benjamin of the National High Court of Brazil noted in 2020.
International private climate litigation in the past few decades has played a role in shaping corporate behavior with regard to climate change and international law. The relative pace at which climate and human rights litigation has arisen throughout the world is rather remarkable. Across sixty-five jurisdictions around the world including the Netherlands, the United States, the Philippines, Canada, and Switzerland, municipalities, nongovernmental organizations (NGOs), private citizens, and other stakeholders have sued—or threatened to sue—corporations, industries and governments for the environmental and social harms they have inflicted on communities. Advancements in climate attribution science have strengthened tort-based claims, and new corporate legal claims are appearing regarding misleading disclosure of climate change risks and breaches of directors’ duties to identify and manage these risks. These latter claims differ from tort-based claims aimed at redressing past harms in that corporate statutory legal obligations are forward-looking predicative enforcements, tilting the pressure on corporations to change their ongoing governance behavior in relation to climate change, human rights, and potentially other areas related to the UNSDGs.
The landmark 2019 case of Urgenda Foundation v. The State of the Netherlands [Urgenda] involved a claim brought against a state, yet it laid much of the groundwork for climate litigation against private corporate entities. Urgenda is the first case in the world where a court has held that its government has a legal duty to accelerate its response to climate change in order to protect human rights. In the case brought by the plaintiff NGO, Urgenda Foundation, the Dutch Supreme Court recognized that global warming is caused by increased GHGs emitted into the atmosphere, which can be prevented, and that events associated with climate change are foreseeable. In making this decision, the court relied on the climate scientific reports of the IPCC, UNFCCC, and targets set by the Paris Agreement, as well as principles of international environmental law and other forms of soft law. The court found that the Dutch government owed a duty of care to protect its citizens from climate change under Dutch civil law and that it is required to take action to reduce its GHG emissions by at least 25% by the end of 2020 as compared to 1990 levels.
The reasoning in Urgenda has been instructive for corporate climate litigation claims. The case provided evidentiary weight and authority to climate attribution science and to methodologies that use this climate attribution science to calculate the emissions of a particular entity and the reductions required for it to meet its obligations. The court rejected the defense put forth by the Dutch government that its GHG emissions were relatively low on a global scale, even noting that such an argument would mean many could easily evade responsibility by simply pointing to worse actors. Regardless of how small a state’s share of emissions are on a global scale, the court found that the government still has an obligation to do its part to reduce its output of GHG emissions.
Additionally, the Urgenda court employed the “reflex effect” as its interpretative standard to determine the scope of the state’s duty of care and its discretionary power—meaning a standard that considers international obligations and principles when interpreting open standards in national laws. While the international obligations imposed by the UNFCCC and the Kyoto Protocol are binding on the state, these obligations only extend to situations where other states may bring claims against the Netherlands for cross-border harm due to emissions trading. Private citizens such as the Urgenda Foundation cannot find a right of action based on such international obligations. Nevertheless, under Dutch law, international obligations contribute to standards of national law, and the state can be presumed to be following international obligations. In this way, international obligation is said to have a “reflex effect” on national law, and the court applied this analysis to provisions not directly applicable to citizens.
The reflex effect in Urgenda echoes the modes of internalization that Parella outlines in her approach, involving interactive processes between states and nonstate actors that integrate international law domestically. Courts involved in climate change litigation may and likely will employ more generous interpretations of their domestic law doctrines of duty of care. The recently decided 2024 case of Verein KlimaSeniorinnen Schweiz and Others v. Switzerland [KlimaSeniorinnen] serves as evidence of this. In KlimaSeniorinnen, an appeal from the Federal Supreme Court of Switzerland (FSC), the European Court of Human Rights (ECtHR) reversed the FSC’s decision and found that the Swiss government violated the human rights of its citizens by taking insufficient action to combat climate change. This was so because the ECtHR found that Article 8 of the European Convention of Human Rights imposed a positive obligation to put in place relevant legislative and administrative frameworks to provide effective protection of human health and life; this obligation manifested primarily as a “duty . . . to adopt, and to effectively apply in practice, regulations and measures capable of mitigating the existing and potentially irreversible, future effects of climate change.” In the case, the ECtHR repeatedly cited Urgenda, and relied on many of the same international documents, to the same effect, as the Dutch Supreme Court did in Urgenda; importantly, the duty of care reasoning in KlimaSeniorinnen is largely consonant with that of Urgenda.
Thus, Urgenda has direct and amplified enforcement effects on subsequent litigation, as well as predicative and facilitative enforcement of future corporate behavior aimed at mitigating the risk of litigation. Parella’s observations on stakeholder enforcement are significant here. Between 1986 and 2014, 834 climate-related cases were recorded, but since Urgenda and as of June 2024, there are now 2,666 climate change cases filed around the world. In 2023, 40% of cases filed outside of the US named a corporation as a defendant. Landmark cases are increasingly altering the global legal landscape, and perhaps in a continual iterative and/or responsive process between the courts and governments, to date more than 170 countries have introduced national policies and laws on climate change mitigation and adaptation.
Indeed, the case of Milieudefensie et al. v. Royal Dutch Shell plc. [Shell], initiated in 2019, extended the principles from Urgenda to corporations. The NGO Milieudefensie, along with 17,379 co-claimants and six other NGOs, brought proceedings against Shell plc along the same lines as Urgenda, alleging that Shell plc’s contributions to climate change violated its duty of care under Dutch civil law informed by climate conventions and the European Convention for Human Rights. The Paris Agreement played a relevant role in the case, even though the defendant Shell plc, as a nonstate actor, was not a signatory to the agreement. These claimants sought an order from the District Court in The Hague, obligating Shell plc to reduce its GHG emissions associated with its business activities and energy products by at least 45% by 2030, 72% by 2040, and 100% by 2050, as compared to its 2010 emissions, in accordance with the Paris Agreement. The case also specifically referenced the UNGPs and OECD Guidelines for Multinational Enterprises—arguably crystallizing those international soft laws into hard law.
In May 2021, the court ordered Shell plc to reduce carbon dioxide emissions resulting from its operations by a net 45% in 2030, relative to 2019 levels. Shell demonstrates the tort liability that corporations may face not only for emitting GHGs that cause climate change, but also for failing to proactively mitigate climate change in their business activities.
Decisions such as Urgenda and Shell demonstrate that international treaties such as the Kyoto Protocol and Paris Agreement can serve—and have served—as a basis for plaintiffs to argue that states and corporations are violating international obligations.
Similarly, customary international law may influence domestic law. For example, in the landmark ruling of Nevsun Resources Ltd. v Araya [Nevsun], the Supreme Court of Canada affirmed that customary international law forms a part of Canadian common law via the doctrine of adoption, absent conflicting legislation, and that claims alleging breaches of jus cogens (a type of customary international law) can be brought under Canadian common law. Nevsun also determined that customary international law relating to human rights breaches can be applicable to private actors such as corporations, because human rights law has a unique, human-centric nature, primarily concerns individuals, and exists beyond state-to-state relationships. As climate litigation continues to focus on its connection with human rights, and as international legal obligations begin to reflect on these integrated issues, customary international law may increasingly play a role across jurisdictions. These cases also motivate director and officer insurers to improve their monitoring of insured companies’ climate governance.
These international climate cases demonstrate the wide potential range of stakeholders that could bring claims against corporations. Governments, for instance—who are typically defendants in public climate litigation—have an interest in bringing claims against corporations for causing climate-related harms. In the United States, for example, there has been a recent wave of litigation by state and local governments against companies and corporations for climate-related harms. Recently, in City and County of Honolulu, Hawaii v. Sunoco LP [Sunoco], the Supreme Court of Hawaii decided that tort claims brought by the City and County of Honolulu against several oil and gas producers, for allegedly misleading the public about climate-related risks and environmental impact associated with using fossil fuels, could proceed to trial. The defendants are now seeking review at the Supreme Court of the United States.
Municipalities and local governments are most likely to bear the cost of infrastructure to respond to rising sea levels, increased cross-border migration, and other climate-related events and social harms. Enforcement power is dynamic, notes Parella, and “its attributes may be gained or lost.” Thus, “stakeholders can compensate for their own lack of critical attributes by allying with other stakeholders who possess the missing attributes.” Ultimately, it may cost corporations more in the long run if they are unprepared for regulatory, reputational, and litigation risks coming at them from multiple fronts.
Furthermore, the failure or withdrawal of a claim does not necessarily indicate that the claim will not impact the corporations’ operations; rather, even unsuccessful litigation can serve several functions including maintaining pressure on fossil fuel companies and other large emitters, keeping sustainability issues alive in the public mind, and sending strong messages to governments that comprehensive legislation is needed because current statutes are inadequate to address climate change, planetary boundaries, and unsustainable business.
Corporations complicit in climate change must weigh the risks of stakeholders taking future action, along with the likelihood of increased legislation in reaction to constituent upheaval in climate inaction. International private climate litigation against corporations has been much more impactful in recent years given the developing body of legal precedent, advancements in climate attribution science, and the wide range of litigation avenues available for different stakeholders to hold corporations accountable. Not only are claimants using litigation to influence the behavior of target corporations, but they are also using this opportunity to call on government regulators to set clear expectations for corporations in relation to corporate disclosure.
Parella’s astute stakeholder management approach helps reveal the processes in which international law finds itself and reverberates within corporate accountability mechanisms. As theorized by Parella, we are witnessing numerous “interactive” processes including new standards being developed in terms of carbon emissions, materiality measures, and climate-related disclosures. The convergence of sustainability standards around the world and development of the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations as a global benchmark for climate-related reporting signal the strong desire to tie corporate climate-disclosure standards to international norms. The formation of a new International Sustainability Standards Board (ISSB), which has been a years-long culmination of the work of the TCFD seeks to develop—in the public interest—a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs. The G7’s endorsement of the ISSB and a wide range of powerful stakeholders calling for greater corporate accountability have mainstreamed the international dialogue on climate governance, reflecting changing expectations and demands for new and sustaining relationships to bind our global community.
Conclusion
As Parella notes, legal risk is only part of the story. Stakeholder mechanisms convert a corporation’s violation of international law into reputational, strategic, and operational risks that incentivize corporate actors to comply with international law. Reputational risk is key, and stakeholders help create these risks. Litigation requires corporations to take responsibility for past harms, but to also proactively manage or mitigate sustainability-related risks because corporations occupy a special position of power in society and have the opportunity and capacity to improve the world’s response to this sustainability crisis. As mentioned previously, tort-based climate litigation is largely backward-looking in that claimants are primarily seeking compensation for injuries caused in the past, while corporate law–based litigation is both backward and forward-looking. Claimants using corporate legal mechanisms will not only seek to hold corporations responsible for omitting information or disclosing false or inaccurate information, but will also seek to require corporations to change their future conduct in relation to international norms on climate change.
The IPCC has provided different emissions scenarios based on the planet crossing various temperature thresholds in the future. An optimistic scenario of limiting temperature increases to the guardrails of well below 2°C and preferably 1.5°C as set out in the Paris Agreement, could contain the most catastrophic impacts of climate change. Attaining that goal will require a rapid and substantial reduction in global GHG emissions: net-zero emissions by 2050 or sooner and negative emissions thereafter. Failing that, a 2°C scenario of global warming would mean a profoundly disrupted climate, and a 4.4°C scenario would mean a vastly different world than we know now. It would be catastrophic. In the face of this wicked problem, states and nonstate actors must urgently respond to obligations under international laws to reduce their GHG emissions. Parella’s “norm entrepreneurs”—the stakeholders in this climate crisis—are all of us, with disproportionate harm facing those emitting the least. Stakeholder enforcement of international law in the context of climate change is reaching a critical juncture in history, and these next years will be especially telling.
*Dr. Carol Liao is an Associate Professor at the Peter A. Allard School of Law, and the UBC Sauder Distinguished Fellow of the Peter P. Dhillon Centre for Business Ethics, University of British Columbia. She is the Chair of the Canada Climate Law Initiative, a national research center advancing director knowledge on climate governance and fiduciary obligations, and the Co-Director of the UBC Centre for Climate Justice. An internationally respected expert in corporate law and sustainability, Carol has been recognized with the Influential Women in Business Award, BCBusiness Women of the Year Award, TELUS Community Service Award, Canada’s Clean50 Award, and was named as one of Canada’s Top 100 Most Powerful Women and Canada’s Top 25 Most Influential Lawyers. She is a lawyer qualified to practice in New York, and prior to academia was a senior associate at a leading global law firm.