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Is it time to give the Companies Act some Paris teeth?

The landmark ruling by the Court of Appeal on Thursday has profound implications for the public and private sector in the UK. The irrefutable logic was simple. The commitment to reach net zero by 2050 is now in enshrined in UK law and any government decision around infrastructure build that doesn’t take this into account is simply breaking that law. By failing to take into account the consequences for CO2 emissions of building a third runway at Heathrow the the government was being unlawful. As Tim Crossland from Plan B pointed out, following the ruling, the Paris agreement now has teeth.

The climate activists who brought the case must feel emboldened by their victory. Although the Climate Change Act only directly applies to government decisions, it sets an important principle that, as a country, we have committed to a significant transition across multiple sectors of our economy over the next 2-3 decades.

Of course “taking it into account” doesn’t automatically mean all projects that don’t get us closer to net zero automatically get canned. But it surely means that major road projects are called into question and presumably bolsters the case for HS2. And it means that the conversation, which was rarely heard in board rooms until very recently, can be rightfully steered towards the net zero consequences of any business decision taken by a board.  Is there is now a legal risk of companies making decisions which hinder the country’s commitment to net zero?

The Companies Act was changed back in 2006 to define in law the duties of company directors. Under section 172, one of the factors a director must consider is “the impact of the company’s operations on the community and the environment”. I imagine most directors read this as a local, near-term impact, e.g. is my factory polluting a nearby river? The “environment” is a very broad term. Maybe it is now time to clarify in law the duties of directors of private and public companies to play their part in reaching net zero.

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