Shareholder activist ClientEarth has started legal action against Shell’s board of directors for failing to prepare the company for a net zero future and put out a strategy that accurately reflects ambitions in the Paris Agreement.
The group, which is a shareholder in Shell, claims the directors are in breach of the UK Companies Act by not acting in a way that promotes its success.
Paul Benson, ClientEarth’s lawyer, said that the company is at risk of misleading investors if it claims its strategy is aligned with the Paris Agreement when it is not. He warns this could risk the long-term commercial viability of the company.
“Shell risks going the way of Kodak and Blockbuster. Unless the board changes course, long-term value will be eroded and eventually destroyed,” Benson said.
Shell told Upstream that its global strategy supports the Paris Agreement and that the company is transforming the business to provide low-carbon energy to its customers.
“Addressing a challenge as big as climate change requires action from all quarters. The energy supply challenges we are seeing underscore the need for effective, government-led policies to address critical needs such as energy security while decarbonising our energy system. These challenges cannot be solved by litigation,” Shell said.
Shell’s energy transition strategy has focused on reducing its Scope 1 and 2 emissions, but the company has publicly said that its Scope 3 emissions make up about 90% of all its emissions.
A Dutch court ruling in May 2021 ordered Shell to reduce its emissions by 45% by the end of 2030, compared to 2019 levels, a decision that Shell is appealing.
“We do not agree with how the court arrived at [the] 45% reduction mandate, particularly as related to our customers’ emissions (Scope 3). The court’s ruling effectively holds Shell accountable for a wider global issue — reducing consumer demand for carbon-based fuels — something we cannot do alone and that requires action from all quarters,” Shell said in a document originally published in June 2021.