Abstract
Companies are an important feature in modern society as they influence many spheres of life
such as economic development, global policy and international relations. Although the positive
impact of companies cannot be overstated, it is undeniable that when companies are
inadequately regulated, they can have a devastating impact on the environment and on
communities where they operate. South Africa’s industrial sector emits greenhouse gases
(GHGs) as an inherent part of their industrial processes and thereby contribute to climate
change which is a global human rights crisis.
Recent climate change impacts such as extreme weather patterns, a rise in sea levels and poor
air quality are driving the global outcry for the urgent adoption of climate change mitigation
measures. Globally, rights-based climate change litigation is being adopted as a means of
compelling public and private actors to adopt adequate measures to reduce and prevent climate
change risks. Whilst South Africa has a growing body of climate change jurisprudence,
specifically within the realm of public law, climate change action against companies has not
gained as much traction owing to the fundamental question regarding the extent to which
companies have human rights obligations.
Company law has traditionally been silent on the role that companies play in the promotion
and realisation of human rights. The adoption of the Constitution of the Republic of South
Africa, 1996 (Constitution) has however sought to bring about a transformative shift in all areas
of our law, demanding that that all law and conduct must be in alignment with the Constitution’s
normative value system. Within South Africa’s constitutional dispensation, the judiciary plays
an important role of interpreting legislation in a manner that promotes the spirit, purport and
objects of the bill of rights. The transformative nature of the Constitution is concerned with
promoting the realisation and enjoyment of human rights; thus, the bill of right is viewed as an
important instrument for achieving socio-economic rights.
Within the context of company law, the transformative shift brought about by the Constitution
requires that company law must be brought in alignment with the spirit, purport and objects of
the bill of rights. The introduction of section 7(a) of the Companies Act 71 of 2008 (Companies
Act) thus echoes the constitutional mandate by placing a human rights imperative on
companies, mandating that all decisions of the company as well as their internal policies and
day to day operations are guided by human rights considerations. Section 24 of the Constitution
contains the environmental right which is relevant in the context of climate litigation. This right
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intersects with the purposes of the Companies Act in section 7(a) raising the question whether
companies have a positive obligation to take measures to mitigate or prevent climate change
risks. To answer this question, it is considered whether company law aligns with the bill of
rights and if the transformative nature of the Constitution creates a basis for leveraging the
Companies Act to found rights-based climate change litigation.
The research considers the tension that exists between development, which is necessary for
achieving economic growth and improved living standards, and the environmental degradation
that often arises from the operations of industrial companies. This analysis highlights that
failure by companies to adequately balance their quest for profits against environmental and
human rights considerations has resulted in climate change. It is established that the Companies
Act contains mechanisms in sections 7(a), 5(1) and 158 that create an intentional alignment
between company law and the bill of rights, and that alignment makes companies, along with
the Companies Act itself subject to the Constitution. Given that the Companies Act, and our
courts have emphasised that companies are bound by the bill of rights, the nature and content
of the environmental right and the extent to which section 24 of the Constitution has horizontal
application is considered. It is outlined that the Constitution contains sections 8(3) and 39(2)
which overlap with sections 7(a), 5(1) and 158 of the Companies Act in a manner that facilitates
the indirect application of the environmental right to companies. This interaction between the
bill of rights and the Companies Act allows for a constitutional interpretation of the Companies
Act, opening the door for the potential liability of companies for climate change.
Increasingly, the international community is seeking to hold directors personally liable where
companies have failed to adequately address climate change risks. Although our courts are yet
to consider the personal liability of directors in respect of climate change, it is expected that
over time, this trend will begin to emerge locally. As it is not immediately clear whether within
the South African context, directors have a duty to take measures to manage climate change
risks, the impact of the Constitution’s normative value system on directors’ fiduciary duties is
considered and recommendations are provided on the manner in which transformative
constitutionalism locates rights-based climate change litigation within the framework of
company law.