Advancing Corporate Climate Accountability Post the Inter-American Court Advisory Opinion on Human Rights and the Climate Emergency

Introduction

There is much to analyse in the landmark Advisory Opinion on Human Rights and the Climate Emergency delivered by the Inter-American Court of Human Rights last week. The establishment of a new right to stable a climate and recognition of a jus cogens obligation not to generate irreversible damage to the climate and the environment are likely to be of significant interest. One aspect of the Opinion that deserves particular attention is the Court’s approach to corporate climate accountability. Although Latin American and Caribbean states bear relatively little historical responsibility for climate change, a number of prominent fossil fuel companies (both state-owned and private) have expanded investments in the region, while many primarily Western companies have been accused of greenwashing their activities using poorly monitored carbon credit schemes  in critical carbon sinks like the Amazon. It is in this context that the Advisory Opinion approach to corporate climate accountability should be viewed as an overall useful development of the intersection between business and human rights and corporate climate accountability.

Business and Human Rights Before the Inter-American Court

The Inter-American Court had previously elaborated some basic business and human rights principles in Miskito Divers v. Honduras. It highlighted the UN Guiding Principles on Business and Human Rights (UNGPs) and noted that:

“states have a duty to prevent human rights violations by private companies, and therefore must adopt legislative and other measures to prevent such violations, and to investigate, punish and provide reparation when they occur” [48]

while encouraging companies to adopt:

“preventive measures to protect the human rights of their workers, as well as measures aimed at preventing their activities from having a negative impact on the communities in which they operate or on the environment.” [51]

The Court then applied this understanding in a local environmental context in La Oroya v Peru, where it held inter alia that the state must ensure that mining companies are held responsible for the consequences of environmental damage caused by their operations, and that the state should:

“take the necessary steps to ensure that the approved environmental management instruments applicable to mining projects incorporate, as an explicit commitment, the protection of human rights.” [352]

However, due to the lack of climate cases before the Court prior to the Advisory Opinion, the Court had never directly considered the extent to which these recommendations would extend more broadly to climate activities.

The Advisory Opinion’s Approach to Corporate Climate Accountability

The Advisory Opinion provides the most comprehensive answer to this question by an international court so far. First, the Court established that “companies are called upon to play a fundamental role in addressing the climate emergency” [345] and endorsed the United Nations Working Group on Business and Human Rights statements that “not only States, but also companies “have obligations and responsibilities with regard to climate change and [its] impacts […] on human rights” [346] In turn, it noted that addressing the climate emergency “is an obligation that must be fulfilled by the companies and regulated by the states.” [345] This establishes a shift toward an approach whereby companies have, in the Court’s view, an obligation to take climate action, which is concretised and articulated through appropriate state regulation. However, the Court also seems to imply that this obligation is grounded largely in state domestic law, noting that “it is therefore the duty of States to establish these [corporate] obligations in the domestic regulatory framework and to ensure their proper implementation.” [346]. This creates some uncertainty, as, on the one hand, the Court seems to assert that companies have an obligation to address climate change, but on the other hand, this obligation seems to derive largely “by virtue of this [state] regulation.” [345] By contrast, in corporate climate litigation cases like Milieudefensie v. Shell, the Dutch Court of Appeal held that corporations have an independent obligation to address climate change, even if this obligation is not explicitly provided for in public regulation.

The Court then provided a path forward for the concretisation of the relevant corporate obligations by recommending that states (i) call upon all companies domiciled or operating in their territory and jurisdiction to take effective measures to combat climate change and related human rights impacts (ii) enact legislation obliging companies to conduct human rights and climate change due diligence along the entire value chain; (iii) require companies, state-owned and private, to disclose in an accessible manner the greenhouse gas emissions of their value chain; (iv) require companies to take measures to reduce such emissions, and to address their contribution to climate and climate mitigation goals, throughout their operations, and (v) adopt a set of standards to discourage greenwashing and undue influence by companies in the political and regulatory sphere in this area, and support the actions of human rights defenders. In turn, the Court emphasises that States must adopt the necessary normative, regulatory and administrative measures to ensure that companies establish and implement effective due diligence standards. [347] This opens the door for synergies between (a) the existing understanding of due diligence derived from the UNGPs and (b) the “enhanced due diligence standards” for climate action the Court recommends for states [231-237] (i.e. that these measures can be introduced as part of the broader package of measures associated with undertaking enhanced due diligence). The emphasis on disclosing emissions across the value chain, as well as recognition of the need to combat greenwashing could also present further opportunities to build on some existing global and regional efforts to address these issues, which have led at times to greater scrutiny of downstream emissions, and challenges to greenwashing in the Amazon.

The Court’s approach to corporate responsibility also suggests that a higher burden should be imposed on ‘carbon majors’ and other large greenhouse gas emitters with regard to climate action. The Court states that:

“taking into account the differentiated responsibility of some companies on account of their current and accumulated GHG emissions, the State should ensure a more demanding supervision and oversight of the activities they carry out.” [353]

These “differentiated climate action obligations” [350] could include stricter duties with regard to “business operating conditions, tax burdens, contributions to just transition plans and strategies, investment in education, adaptation measures or addressing loss and damage, among others.” [350] This broadly reflects some previous work seen in quasi-judicial processes like the Philippines Carbon Majors Inquiry, which sought to enhance obligations on these carbon majors to take greater responsibility for climate action, relying partially on accumulated emissions as the scientific basis for these obligations. The Court’s approach here suggests a stronger normative foundation to impose greater obligations on the carbon majors, which may raise some interesting questions about whether these obligations could be translated into strategic litigation claims against certain carbon majors, and, if so, the extent to which domestic courts would take account of these ‘differentiated responsibilities’ in determining the case.

Another particularly interesting aspect of the Opinion from a litigation perspective is the Court’s recommendation that state regulation considers:

“the role played by the different components of economic conglomerates and transnational corporations, so that States can attribute legal responsibilities to parent companies, or companies that exercise control over others, according to the greenhouse gas emissions generated by their subsidiaries or by the companies they control.” [350]

This support for attributing responsibility to parent companies could prove useful in advancing efforts to focus on holding parent companies accountable via transnational litigation. This approach has gained particular traction in the UK (albeit not in a climate context), where the ruling in Vedanta v. Lungowe held that, in certain circumstances, parent companies headquartered in the UK may be subject to liability for the actions of their subsidiaries. This case has sparked a number of similar lawsuits (see e.g. here and here), and the regulatory shifts that may be driven by this Opinion could support Global North-South dialogue between lawyers to consider the possibilities for developing substantive Global South law and using it as a means of of pursuing transnational corporate litigation in states with better enforcement capacity.

Areas for Further Development

The Advisory Opinion is undoubtedly ambitious in scope and seeks to concretise obligations on both state and non-state actors to strengthen corporate climate action. The (unsurprising) emphasis on state regulation as a means through which to concretise corporate obligations could raise issues of enforcement, particularly with regard to any enactment of due diligence standards. We have already seen, for example, that even powerful states and bodies with better enforcement capacity have struggled to introduce effective due diligence legislation, as illustrated by the EU’s recent struggles to implement the Corporate Sustainability Due Diligence Directive. Furthering the Court’s recommendation on parent company responsibility could address some of these concerns by reallocating enforcement capacity to wealthier states, but this will still require significant cooperation to support any transnational enforcement.

Conclusion

The Advisory Opinion covers a vast swathe of issues, with corporate climate accountability forming a key element to its conclusions regarding the need for states to take the lead in addressing climate change, and for corporations to play their part by (at the very least) abiding by the sweeping set of regulations the Court recommends are enacted. To build on the Court’s recommendations, the focus of both states and activists should be a targeted approach to corporate climate accountability, which could focus on fossil fuel and mining companies, ensuring that they set relevant targets, supplement these targets with tangible efforts including ongoing human rights due diligence, and where necessary, that the victims of these industries have effective (and if needed transnational) legal tools available to assert their demands for climate justice.