By : Smruti Tripathy
Abstract:
The climate crisis has intensified the need for corporate accountability, given that a small number of fossil fuel companies have disproportionately contributed to global emissions. While multinational corporations (MNCs) continue to profit, their actions violate fundamental human rights, leaving vulnerable communities to bear the consequences. The challenge lies in regulating corporate conduct across borders, as MNCs strategically operate in jurisdictions with lax environmental policies.
Despite the UN Guiding Principles on Business and Human Rights providing a foundational framework, their lack of enforceability remains a key criticism. Efforts to create a binding international treaty have faced resistance, with the Open-ended Intergovernmental Working Group (OEIGWG) struggling to gain consensus. While recent treaty drafts propose stricter regulations, debates persist over their scope and implementation. As global temperatures rise, policymakers remain caught between voluntary guidelines and enforceable regulations. Without decisive action, the current state of “call to concrete action” risks being an ineffective response to the escalating climate crisis. A legally binding framework is urgently needed to hold corporations accountable and ensure meaningful climate action.
Introduction:
The harsh reality of climate change is that just 100 fossil fuel companies have been responsible for 71% of global industrial greenhouse gas emissions since 1988 when human-induced climate change was first recognized. Nearly one-third of historical emissions stem from publicly listed investor-owned companies, while state-owned companies account for 59%. Corporate players have been responsible for more than half of all industrial emissions since the beginning of the industrial revolution. As the climate deteriorates, it is critical to realise that the actions of multinational corporations (MNCs) go beyond mere profit-driven business practices. Their actions directly violate fundamental human rights, yet the inability to hold these companies accountable perpetuates a cycle of injustice in which the most vulnerable communities bear the brunt of corporate negligence while the companies continue to profit. It is difficult to regulate adverse corporate impacts of MNCs as their setup is cross-border in nature and pinning liability down is extremely difficult. Due to this global reach, MNCs can choose where to operate their pollution producing activities, while obtaining and benefitting from subsidies agreements with governments.
Mechanism for Accountability:
Two primary mechanisms are being used to bridge this gap of accountability. First, there is a surge of climate change litigation in which applicants have relied on corporate human rights obligations, like the case of Milieudefensie et al v. Royal Dutch Shell plc. The District Court of The Hague ruled that Shell must reduce its emissions, citing its duty of care under tort law and its refusal to take proportional action against climate change violated the unwritten standard of care in Article 6:162 of the Dutch Civil Code. It relied on the UN Guiding Principles on Business and Human Rights (UNGPs), asserting that companies must avoid contributing to human rights harms and mitigate risks linked to their operations. The Court imposed a binding reduction obligation, holding Shell accountable not only for its own emissions, but also for those of its subsidiaries and end-users. This case accounted for the unwritten standard of care that businesses have to comply with by “authoritative and internationally endorsing ‘soft law’ instrument.” Second, there are due diligence obligations that States have adopted to identify the adverse human rights and environmental impact of their operations, including climate-related impact. The OECD Guidelines for Multinational Enterprises is one such framework that tries to balance government commitments to stakeholder concerns, but it is being adhered to by only 51 countries. The enforceability of both these mechanisms is contentious in the international plane because of them being mere guidelines and not mandatory regulations. MNCs do not have international legal personality and thus derive obligations under International law from States. Despite efforts to establish human rights responsibilities, treaty-based obligations have struggled to gain traction as private corporations are not state entities and thus cannot be subsumed as their agents.
Human Rights and Climate Change:
Anthropogenic climate change is one of the most pervasive threats to human rights as it poses a serious threat to the enjoyment of human rights like the right to life, food, adequate health, water, and sanitation. In the case of Urgenda Foundation v. The Netherlands, the Dutch government was obligated to reduce greenhouse gas emissions by 25% below 1990 levels by 2020. In formulating this positive obligation, the Court drew upon the right to life and the right to respect for private and family life, emphasising the necessity for the government to take all reasonable measures to protect individuals from environmental damage. Now, to manoeuvre this aspect of accountability towards private corporations, international treaties must encompass not only the vertical relationship between individuals and states but also create a horizontal relationship between individuals and MNCs. Article 2.3(a) of ICCPR implicitly effectuates obligations on State Parties to protect the Covenant rights, not just against violations by State agents, but also against acts committed by private persons or entities that would impair the enjoyment of the rights. Similar to this, CESR has stipulated that the States have to ensure compliance of businesses within their jurisdiction following human rights standards. There is no direct procedure to establish a horizontal relationship, which means that compliance by corporations is either voluntary or dependent on the State’s discretion to implement regulations.
The Role of Soft Law in Corporate Climate Accountability:
The other facet is soft law obligations which are non-binding. The preamble of UDHR asserts that every individual and ‘organ of society’ must work to promote the human rights outlined within it. This encompasses juridical persons. Article 30 reinforces that nothing in the UDHR should be interpreted as granting any state, group, or person the right to engage in activities or perform acts that would undermine the rights set forth therein. These provisions encapsulate all entities and ask for clear-cut accountability. In 2011, the UN Guiding Principles on Business and Human Rights (UNGP) were endorsed by the UNHR,C which rests on three pillars. First, the obligation of states to protect against human rights violations by businesses. Second, the responsibility of corporations to respect human rights, and third, to provide victims with access to effective remedies. These soft law principles have asserted accountability in the Shell case, but they might not be successful in all jurisdictions. Corporations can only be held directly responsible for human rights violations if states adopt guiding norms in a treaty format or effectively integrate them into their domestic legal systems.
In 2014, an intergovernmental working group was established to formulate a Draft Treaty for regulating the activities of transnational corporations and businesses within the human rights framework. Article 6 of the Draft ensures human rights due diligence by business enterprises and Article 7 facilitates access to remedies to overcome specific obstacles for vulnerable groups. It positions States as the enforcers of duties, imposing penalties and corrective actions for non-compliance. It does not impose binding obligations on corporations. The 2020 Second Revised Draft Treaty had a single line in the preamble asserting that all business enterprises, irrespective of their size, sector, operational context, ownership, or structure, bear the responsibility to uphold all human rights. However, under international law, treaty preambles are not legally binding. While not foolproof, by requiring businesses to proactively identify and mitigate risks while ensuring victims have effective avenues for redress, the drafts establish a more robust framework for corporate accountability. However, while states initially showed support for the guiding principles, significant opposition arose once a binding instrument was proposed. Despite initial resistance from several developed nations, the process has persisted, with the tenth negotiation session of the Open-ended Intergovernmental Working Group (OEIGWG) that took place in December 2024. This session marked a decade of deliberations, reflecting both the complexities involved and the unwavering commitment of various stakeholders to enhance corporate accountability. A significant point of contention in these negotiations has been the treaty’s scope, particularly whether it should apply exclusively to transnational corporations or encompass all business enterprises, including national companies and state-owned entities. Proponents of a broader scope argue that limiting the treaty to transnational entities could create loopholes, allowing companies to restructure or alter their legal status to evade compliance. Conversely, some stakeholders believe that focusing on transnational corporations would address the most pressing regulatory challenges without overburdening local businesses.
While the UNGPs have established a foundational framework, their voluntary nature has been criticised for lacking enforceability. The proposed binding treaty seeks to build upon the UNGPs by introducing mandatory obligations for businesses and ensuring that victims have access to justice. This evolution from voluntary guidelines to a potential legally binding instrument reflects a growing international consensus on the need for more stringent measures to hold corporations accountable for human rights violations. As the negotiations progress, balancing the interests of various stakeholders remains a complex challenge. Achieving a consensus on the treaty’s provisions requires reconciling differing perspectives on corporate regulation, state sovereignty, and human rights protection. The outcome of these deliberations holds significant implications for the future of global business practices and the protection of human rights in the context of corporate activities. Over the past decade, five drafts have emerged for a binding treaty, with another expected in October 2024, yet the process remains stalled in consultation with minimal progress. Amid geo-political tensions, policymakers have been juggling soft laws to account for corporate negligence while the planet’s temperature rises. Until we convert these guidelines into enforceable regulations, we risk remaining in a perpetual state of “call to concrete action” which will ultimately prove ineffective in combating the climate crisis.
About the author
Smruti Tripathy is a 4th year student at Jindal Global Law School, pursuing BBA LLB (Hons). Her research interests include climate change law and intersectionality in the context of gender.
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