In the battle to bring down emissions from their currently dangerous highs, energy corporations’ actions are coming under the spotlight as people seek change on a grander scale than individual reform.
Environmentalists have previously called into question whether these companies’ are doing more than paying lip service to the green transition, and now, in what is thought to be the most comprehensive study to date, researchers have found actions have not followed words for the world’s energy giants.
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These firms are already seeing increasing levels of court action from claimants who say that environmental agendas are not being adequately pursued, and that companies’ claims otherwise are a wide scale form of climate-related greenwashing (or climate-washing).
Now, with this data to back it up, environmentalists have even greater incentive to push back and demand change.
‘Well-founded’ accusations of greenwashing
The clean energy study – published in February this year by authors Mei Li, Gregory Trencher, and Jusen Asuka – examined the records of ExxonMobil, Chevron, Shell, and BP to determine whether the carbon cutting actions each had pledged were, in fact, upheld.
In the reviewed timeframe between 2009 and 2020, each was found to have been expanding rather than curbing exploration activities, despite simultaneously ramping up their environmental rhetoric; during this time, words such as “climate”, “low-carbon”, and “transition” became increasingly prominent in annual reports and public announcements.
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By GlobalDataFor instance, BP’s use of the words “climate change” rose in its discourse from 22 to 326, while Shell’s use of keywords “low-carbon energy”, “renewable”, and “clean” rose from 59 to 503, three to 91, and nine to 82 times respectively.
While the majors’ language may have undergone a change, the researchers found that the move away from fossil fuels was “dominated by pledges rather than concrete actions”, with all four majors continuing to lobby governments to curb carbon-pricing policies and exaggerating (or refusing to disclose) the scale of their clean energy investments. The disparity between pledges and action led the authors to warn that a transition to a clean energy model “is not occurring”.
They wrote: “Financial analysis reveals a continuing business model dependence on fossil fuels along with insignificant and opaque spending on clean energy. “Until actions and investment behaviour are brought into alignment with discourse, accusations of greenwashing appear well-founded.”
The majors have come increasingly into the spotlight as concerns over the ticking clock on climate change reach fever pitch. Last month, the Intergovernmental Panel on Climate Change released its latest report warning of the irreversible damages of climbing global temperatures, which was described by UN Secretary General Antonio Guterres as an “atlas of human suffering”.
In this context, public and investor demand is calling for corporate as well as governmental change, and pressure to turn promises into action is mounting as environmentalists increasingly turn to legislative action to try and force their hand.
Taking it to the courts
Over the past few years, there have been a spate of legal cases taking energy groups to task over a failure to meet climate commitments. In February this year, non-profit monitoring group CDP reported that the number of companies disclosing potential substantive litigation risks has almost quadrupled since 2018.
“We expect this, and other risk disclosure…to only increase in the next few years, as the impacts of climate change become clear, more measurable, evidence of a lack of action mounts, and calls for accountability continue to increase,” the group’s statement reads.
While legal action against energy majors is not new, the reasons why these companies are being taken to court are changing – honing in to more directly link their inaction to environmental damages. While greenwashing forms a key complaint of this, it is only a part of the spectrum of corporate responsibility that is becoming increasingly important for majors to prove.
“Litigation around climate change is not new,” says Chris Hilson, professor of law and director of the Centre for Climate and Justice at the University of Reading. “However, it is still relatively novel in Europe, and the legal strategies being used are definitely newer.
“Typically, a lot of climate change cases in the past have been brought against governments rather than against a company, but this has really changed since the Paris Agreement because people gained greater awareness that it isn’t just governments who need to be prodded into action, we need to target the corporate sector too and use litigation against them.”
Changing kinds of litigation
According to Hilson, there are three main types of claim that can be levelled against energy groups, with these kinds of court action only emerging in recent years.
“Broadly speaking, claims can either be about advertising or consumer law, climate law, or company law,” says Hilson. “The former is most closely linked to green- or climate-washing, where you have complaints over customers being misled via advertising or marketing material.
“The second type targets the company’s climate strategy, arguing that they are taking inadequate action on climate change; and the third is one that challenges individual directors of the company themselves for failing to report climate risks adequately. There is arguably a greenwashing element to all of these, in that companies are not admitting how great the climate risk they are taking is when they continue to pursue fossil fuels over renewables.”
These emerging challenges to corporate action are creating new avenues for environmental claimants to hold companies, and their members, accountable. Most recently, this is shown in a case against Shell that, in a first-of-its-kind action, is seeing the group’s 13 directors being sued for a failure to prepare the company for net zero. If successful, the court could order Shell to restructure its climate strategy to more closely align with the Paris agreement.
A case against TotalEnergies is also underway, with legal action levelled by non-profits Greenpeace, Friends of the Earth, Notre Affaire à Tous, and ClientEarth, who say its rebranding to include a more environmental-heavy discourse is a form of greenwashing, breaching European consumer protection law as it misled the public about the group’s climate commitments.
Now that social licence to operate has become so important, it’s less and less likely that these companies will get away with avoiding climate pledges.
“It’s almost like a pincer movement,” says Hilson. “You’ve got all of these different forces like climate change litigation, ESG sustainable finance and investment, and pressure from the public who are increasingly aware of the problem of climate change. The social licence to operate has become a lot more demanding, with many more eyes on it.”
The net result is a sector facing intensifying scrutiny over its environmental actions, and a growing body of evidence of inaction that makes denial increasingly difficult. While we are a way off from seeing wide-scale decarbonisation come into effect, we are certainly on the right path to get there.
