ESG and sustainable business - Litigation risk
As the interest and focus on ESG issues grows, businesses' activities in these areas will come under increased scrutiny, be that due to the growing amount of legislation, regulation and industry guidance, or external pressures coming from investors and other stakeholders, or as a result of internal pressures within businesses. It follows that we have seen and expect to continue to see, an increase in litigation arising out of sustainability and ESG issues. The disputes which may arise in this context will be many and varied, and include climate change litigation, disputes arising out of false or misleading ESG disclosures, environmental issues, supply chain and human rights issues and corporate governance issues.
We also expect to see the scope for disputes in this context continue to broaden as new regulation is introduced and public interest increases.
Below and in the relevant pages throughout this site, you will find commentary on areas where we see high or increasing litigation risk.
As ESG and other sustainability issues continue to ascend the global agenda, institutions are facing increasing requirements to make full and detailed ESG disclosures. However, law and regulation around these issues is developing rapidly. This can prove challenging for institutions trying to keep abreast of the latest guidance and requirements. Institutions are also increasingly providing voluntary ESG and sustainable finance disclosures, either due to external pressures from investors and other stakeholders or due to internal policy.
As with any disclosure, statement or filing made by an institution to provide information to investors or other stakeholders, that institution may face liability for damages resulting from a misrepresentation or misstatement contained in any such statement which is reasonably relied upon by investors or other stakeholders. Perhaps inevitably, litigation brought by investors and other stakeholders in relation to ESG disclosures is on the rise, but carefully-managed and formulated disclosures can help to mitigate this risk.
The UN Guiding Principles on Human Rights expressly provide that: “[t]he responsibility of business enterprises to respect human rights applies to all enterprises regardless of their size, sector, operational context, ownership and structure”. Respect for the human rights of workers across all jurisdictions in which a business operates, and those involved in the supply chain, is now recognised as a core part of corporate compliance and accountability.
English courts seem increasingly willing to hold global organisations to account for ethics-related breaches committed not only by the organisations themselves, but also by their overseas subsidiaries.
In recent years, ESG issues have featured more and more in litigation brought by workers against their employers. The advent of the gig economy and more precarious working arrangements (e.g. zero hours contracts) has seen a rise in claims of exploitation and workers seeking minimum rights. The #MeToo movement paved the way for an increase in workplace sexual harassment claims and allegations. We have also seen a growth in whistleblowing litigation, often related to concerns about organisational culture and discrimination, health and safety or environmental issues – a trend which has only been exacerbated by the COVID-19 pandemic. On top of this, courts and tribunals have shown an increased preparedness to hold businesses responsible for the actions of their employees and an increased willingness to hold individual directors and managers to account.
Governments, institutions and individuals are increasingly turning to the courts to enforce action against climate change. According to the 2020 report "Global trends in climate change litigation" published by the London School of Economics, there had been 1,587 cases of climate litigation brought globally as of July 2020. Whilst most were brought in the US, cases are increasing in the UK and elsewhere in Europe (62 in the UK and 57 in Europe as of July 2020) and the range of claimants adopting novel approaches in order to establish legal liability in relation to climate change issues is widening.
"Climate change litigation" spans a broad spectrum of cases; including:
- Claims brought against states to increase climate change mitigation measures.
- Strategic cases brought against private corporations to curb carbon-emitting behaviour (often as tort or nuisance claims).
- Planning and permitting cases relating to fossil fuel projects.
- Claims relating to the need for institutions or businesses to take account of climate change risk in making investments, or to disclose the climate risk arising in respect of existing investments.
With extensive experience working on the largest and most complex commercial disputes before the English Courts, our multi-award-winning dispute resolution team has the legal expertise and skillset to provide smart, pragmatic advice in relation to the variety of litigation risks which arise from ESG and sustainability-related issues.
We have significant experience representing businesses who operate directly within ESG and sustainability-focused sectors. Our lawyers are also market-leading experts in regulatory and internal investigations, enforcement actions and disciplinary proceedings and have been instructed by clients across multiple sectors to investigate allegations involving large-scale fraud, bribery and corruption, as well as environmental liability and human rights issues.
Our team also has extensive experience of dealing with litigation brought on behalf of multiple claimants, including group litigation orders, collective proceedings orders, and very large multi-claimant actions.