Corporates can expect to see an increase in litigation over climate issues in the coming years, driven in part by the arrival of new European legislation aimed at increasing disclosure of non-financial factors.
The warning came from experts at the World Economic Forum’s annual gathering in Davos in Switzerland, brought together to discuss the rising wave of climate cases in courtrooms around the world.
Alice Garton, a director of global legal strategy at the Foundation for International Law for the Environment, said corporates and governments would only see more litigation sagas in the future. “Regrettably, I don’t see the number of cases going down; I only see them going up.
“And that’s a great shame because it means that more harm has ensued, therefore more people are justified in bringing their cases to court.”
Garton added that cases against corporates currently account for about 30% of climate litigation around the world, but that percentage was rising.
Her prediction was backed by Sebastian Vos, a partner and chair of the global public policy practice at international law firm Covington & Burling. He said the advent of the Corporate Sustainability Due Diligence Directive, as well as the Corporate Sustainability Reporting Directive (CSRD) , would create more transparency that could be used by campaign groups to bring litigation to court.
“I expect to see an increase, especially in Europe,” said Vos. “That’s because of the new ESG due diligence and CSRD corporate sustainability reporting rules, which are going to make it increasingly necessary for companies who are either European headquartered, or who have substantial operations in Europe, to be transparent about what they’re doing, and to disclose what they doing, not only when it comes to their sustainability efforts, but also when it comes to forever chemicals—mercury—and these kind of things.
“And that opens companies up to the risk of more litigation.”
He added that the “extra-territorial” scope of EU law could mean the new directives could be influential globally.
A report last year from the London School of Economics revealed that so far more than 2,000 climate litigation cases have been filed around the world, though a quarter of these happened in the past two years. The success rate stands at around 50%, higher than the average rate for litigation.
When it comes to action against corporates, most litigation is aimed at “carbon majors”, or the extractive industries. But other sectors are now in the crosshairs of campaigners. “Cases against corporate actors are also increasingly targeting the food and agriculture, transport, plastic and finance sectors,” says the LSE report. Of the 38 corporate cases filed in 2021, 22 were aimed companies outside the majors.
Though most cases are brought for action alleged to have harmed the environment, litigation cases aimed at “greenwashing” are on the increase.
Climate litigation is being felt in many quarters. Last week, Board Agenda reported providers of directors’ and officers’ insurance have begun collecting more information on ESG risk because of the potential for climate litigation against individual board members. Academics argue the move is turning insurers into active participants in sustainability governance .
One high-profile example of litigation involves a case brought against directors of Shell by the campaign group ClientEarth. This followed another case brought in the Dutch courts won by the NGO Milieudefensie.
Vos wrapped up his speech at the Davos event with another warning: “If you know as a company or a government that you’re doing everything right, don’t worry. But my guess is there’s not many governments or companies who can say that they know that for sure.
“So, I guess my message would be: go do your homework.”