Business & Human Rights in the Era of Climate Justice – a new regulatory landscape?

Business & Human Rights in the Era of Climate Justice – a new regulatory landscape?

When the District Court in The Hague held that Shell had a duty of care to take action in preventing dangerous climate change in 2021 this was hailed as a “tipping point” in climate litigation. It was the first time that a court incorporated the UN Guiding Principles on Business & Human Rights (“UNGPs”) into the duty of care under domestic law.1

Fast forward to 2024, following months of intense negotiations, the EU Council and Parliament introduced the Corporate Sustainability Due Diligence Directive (“CSDDD”) creating expansive human rights due diligence obligations for companies in Europe and mandating that they develop and implement a climate transition plan.

The incorporation of human rights considerations into key legislative instruments of the EU Green Deal, such as the CSDDD, has expanded the ability for corporates to be held accountable for the human rights impacts of climate change.

Climate change and human rights

The connection between the adverse effects of climate change and human rights is well established, having been recognised in the Cancun and Paris Agreements,2 and more recently by judicial decisions in the European Court of Human Rights and Indian Supreme Court.3

The responsibility to protect human rights, however, has historically applied to states through various international treaties such as the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights.4 Corporate responsibility, on the other hand, has been managed by non-binding soft law instruments such as the UNGPs and the OECD Guidelines for Multinational Enterprises (“OECD Guidelines”).5

A new era for business and human rights in Europe?

Over time, these soft law instruments and their concepts have found their way into regulation and government guidance. Notably, the EU has reflected these in its requirements on sustainability reporting and mandatory human rights due diligence.

Sustainability reporting

The Corporate Sustainability Reporting Directive (“CSRD”) mandates that companies within its scope must assess and disclose material environmental, social and governance impacts, risks and opportunities in their operations and value chains. These disclosures are to be made in accordance with detailed European Sustainability Reporting Standards (“ESRS”), which cover topics such as climate change, biodiversity, workers, and affected communities. The reporting must be conducted on a 'double materiality' basis, which evaluates both the financial impacts on a company but also a company’s external sustainability impacts.

Under the CSRD and its accompanying ESRS’ companies must disclose their alignment with established frameworks like the UNGPs and the OECD Guidelines, and their procedures to monitor adherence to such frameworks.6

Mandatory human rights due diligence

The CSDDD set a new bar for mandatory human rights due diligence by establishing a comprehensive EU-wide regime that requires companies to undertake diligence on adverse human rights and environmental impacts in their own operations and chains of activities. This sits alongside existing and upcoming product-specific regimes covering conflict minerals, deforestationprone commodities, critical raw materials, and batteries. Prior to the CSDDD, individual member states had also introduced their own due diligence regimes such as France’s Duty of Vigilance and Germany’s Supply Chain Due Diligence Act.

The significance of the CSDDD cannot be overstated. Rooted in the principles of the UNGPs, the CSDDD mandates that companies take appropriate actions to mitigate these impacts wherever they occur, including within their chains of activities. These obligations are backed by a penalty regime for failure to comply as well as civil liability for damages due to intentional or negligent failure to comply with due diligence obligations.

It will have extra-territorial effect by applying to companies that generate over €450 million net turnover in the EU, regardless of the country in which they are registered, in effect, creating a condition of access to the EU market. UK companies with significant operations in the EU will therefore likely fall in scope. Furthermore, the impacts of the CSDDD will be amplified as its requirements get cascaded down global supply chains as companies look to comply.

The climate nexus

A confluence of factors has set the ground for an intersection between business and human rights and climate change.

There are many examples of rights-based arguments in climate litigation, including the case against Shell mentioned above.8 The additional due diligence requirements and civil liability regime under the CSDDD has set the stage for further rights-based arguments in relation to climate, see for example, the cases filed in France under the Duty of Vigilance over alleged failures to account for the adverse human rights impacts of climate change.9

The connection between climate change and human rights is less clear from a disclosure perspective as the CSRD draws a clear distinction between climate change-related impacts and human rights. The only intersection drawn between climate change and human rights within the CSRD is in the context of the transition to a climate-neutral economy.10

However, as companies start to assess their material impacts, risks and opportunities, these regimes have opened up the space to ask the question – when is a climate change impact, a human rights impact? 

Jon Tan

Associate – Linklaters

1 The Hague District Court, Milieudefensie and Others v. Royal Dutch Shell PLC and Others, case number C/09/571932, Judgment of 26 May 2021

2 UNFCCC, The Cancun Agreements, Decision 1/CP.16 (2010); UNFCCC, Paris Agreement (2015).

3 Verein Klimaseniorinnen Schweiz and Others c. Switzerland (2024), 53600/20; MK Ranjitsinh et al. v. Union of India et al. (2024), INSC 280

4 UN, Universal Declaration of Human Rights (1948); UN, International Covenant on Civil and Political Rights (1966).

5 UN, Guiding Principles on Business and Human Rights (2011) (https://www.ohchr.org/sites/default/files/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf); 

   OECD, Guidelines for Multinational Enterprises (2023) (https://www.oecd.org/en/publications/2023/06/oecd-guidelines-for-multinational-enterprises-on-responsible-business-

   conduct_a0b49990.html)

6 See, for example, ESRS S3 paragraphs 16 and 17 

8 Savaresi, A., & Setzer, J. (2022). A first global mapping of rights-based climate litigation reveals a need to explore just transition cases in more depth. Grantham Institute; Setzer, 

  J., & Higham, C. (2024). Global Trends in Climate Change Litigation: 2024 Snapshot. London: Grantham Research Institute on Climate Change and the Environment, London 

  School of Economics and Political Science.

9 Notre Affaire à Tous Les Amis de la Terre, and Oxfam France v. BNP Paribas (Notre Affaire à Tous Les Amis de la Terre, and Oxfam France v. BNP Paribas - Climate Change 

   Litigation (climatecasechart.com)); Notre Affaire à Tous and Others v. Total (Notre Affaire à Tous and Others v. Total - Climate Change Litigation (climatecasechart.com))

10 ESRS E1 Paragraph 9