Opinion | 'Directors can still easily ignore the climate', the Financial Times
By: Sophie Kuijpers
As appeared in De Financiële Dagblad.
Milieudefensie points out Shell board members to their duty of care by letter. But strong lobby kept the board's duty of care out of the renewed Corporate Governance Code. The resistance in back rooms stands in the way of an open legal debate, writes lawyer Sophie Kuijpers.
Monday morning, the board members of Shell found a letter from Milieudefensie in their digital mailbox, warning them of personal liability if they continue to ignore the "climate verdict" in their board actions. According to Milieudefensie, Shell is not adhering to the court's ruling last year that the company must drastically reduce its CO2 emissions. The possibility of personal liability for board members is a unique step in Dutch liability law.
What is especially interesting about the letter is the legal attachment of over 17 pages. The lawyers of Milieudefensie argue in this attachment that current law provides enough basis for personal board liability. They argue that given the great dangers of climate change and related legal, scientific, and political developments, the required special circumstances for personal liability are present. It is an impressive argument, the goal of which is to encourage Shell to bring its strategy in line with the goals of the Paris Agreement.
The big question is: will Ben van Beurden actually have to pay from his personal bank account for not following last year's ruling? Is our law flexible enough for societal developments, as Milieudefensie claims?
Social momentum
Milieudefensie faces a challenge. Although there may be social momentum, our law does not obligate board members to explicitly and always consider the environment or society in their decision-making. Yes, current enterprise law is "socializing": the guideline for board actions has been long-term value creation for several years. However, despite the many "soft law, best practices," and our stakeholder model (in which all those involved count and not just the shareholders), it is entirely possible to ignore the climate as a company, and especially as a board member. A so-called societal duty of care, where socially responsible actions become part of the task assignment of board members, has not yet found its way into our law, despite earnest attempts.
As previously argued in the Financial Times, the absence of a societal duty of care is at least noteworthy now that the European Commission sees value in it. As part of the Corporate Sustainability Due Diligence (CSDD) directive, the EU has introduced a duty of care for boards. All member states are expected to translate this into their legislation.
But in the Netherlands, it remains silent for the time being. The Monitoring Committee on Corporate Governance Code has considered incorporating a societal duty of care into its text proposal for updating the Code, the handbook for listed companies. This could have given Milieudefensie's letter much more legal power. The VEUO seemed to have also realized this: the association of and for listed companies successfully lobbiedd against this proposal last year. The renewed Code will now lag behind European developments in this regard.
Where these developments were discussed in depth was at the prestigious Van der Heijden congress earlier this month. Dutch smartest legal minds spent two days pondering "sustainable enterprise law." The socialization of law has been shown to happen, but is it sustainable and future-proof?
Should the Netherlands hasten? What was striking at the congress was the number of nodding legal experts. The unspoken and possible resistance did not get a stage. It would have been really interesting if the VEUO had given a legal explanation for their resistance to the societal duty of care. Now that opposition remains behind closed doors.
The boardrooms continue to prove to be primarily a place of resistance to innovation, entrenched patterns, and outdated leadership. Not only at Shell, but also among certain legal experts who advocate for these interests just as strongly.
Will Milieudefensie's letter change that? In any case, it will bring more clarity on whether current societal developments are sufficient for personal board liability, or whether an explicit duty of care is needed. In either case, it would be interesting if opponents of that societal duty of care would also make themselves heard at the next legal congress.
As published in the Financial Times.