World Court's Climate Change Opinion Could Alter Sustainability Reporting Debate
After over two years of proceedings, the International Court of Justice released its Advisory Opinion relating to the Obligations of States in respect of Climate Change on July 23. The Court found that large GHG emitting countries, like the United States, must take action to reduce greenhouse gas emissions, including those of private business. While not directly addressing sustainability reporting, advocates will invoke the opinion to argue nations must implement reporting standards to monitor and force businesses to reduce GHG emissions.
The ICJ was established in 1945 through the UN Charter to handle legal disputes between nations. Known as the World Court, it is an outlet for countries to settle civil disputes through a neutral court. The ICJ is composed of 15 judges elected by the UNGA and UN Council to serve a term of nine years. A country may only have one judge serving on the ICJ at a time.
On March 29, 2023, at the request of Vanuatu, the UN General Assembly asked the ICJ to issue an advisory opinion on the legal obligations of countries in preventing climate change. The opinion, while non-binding, gives an indicator of how the Court may interpret future climate related litigation and guide future legislative development. Following two years of proceedings, including both written and oral statements, the Court issued its opinion, and a shorter summary of the opinion, on July 23.
The 140 page opinion primarily focuses on interpreting obligations under existing climate treaties, including the UN Framework Convention on Climate Change, the Kyoto Protocol, and the Paris Agreement. It also looked at a recent opinion by the International Tribunal for the Law of the Sea that found climate change obligations exist in the UN Convention on the Law of the Sea. Finally, it considered customary international law.
The court found that countries are obligated to take action to reduce GHG gas emissions. Failure to act could result in large GHG emitting countries owing reparations to smaller countries for the adverse impacts of climate change. Opening the door to a wave of litigation before the ICJ as developing countries seek compensation.
Notably, these obligations do not arise exclusively from the Paris Agreement or the UNFCCC. The Court rejected arguments made by large countries, including the United States, Australia, and Germany, that the creation of a treaty that specifically addresses climate change overrides any other international law on the subject. This is known as lex specialis.
The Court found a 'duty to prevent significant harm to the environment' exists under customary international law. The Court's rejection of lex specialis effectively renders Trump's exit from the Paris Agreement as moot when it comes to liability.
The court established liability in two parts, or elements. "The main elements of the obligation of prevention in the context of protection of the climate system are (a) the environmental harm to be prevented and (b) due diligence as the required standard of conduct.'
Looking at sustainability reporting, the relevant obligations are found in paragraphs 281 and 282 of the opinion, addressing the due diligence requirement.
Quoting the ITLOS opinion, the ICJ stated that countries are required to
The opinion then applied the standard to climate change.
Sustainability advocates will use that obligation to argue that countries must enact sustainability reporting requirements. Sustainability reporting, and the broader environmental, social, and governance reporting, requires companies to disclose GHG emissions through financial statements.
For now, sustainability reporting regulations only require companies to provide information. They do not require businesses to reduce GHG emissions. However, once the information is publicly available, advocates and interested nations can use that information to force companies to reduce emissions through regulatory action and the courts.
As the European Union debates significant reductions to the Corporate Sustainability Reporting Directive, expect advocates to argue the changes violate the ICJ opinion. Similar arguments will arise in other jurisdictions around the world. However, the debate is political and the opinion is not legally binding. Countries and their elected leaders will choose whether or not to acknowledge the opinion. Application will come through the courts.
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