TheCorporateCounsel.net

December 13, 2022

Coming Attractions? Lessons from European Climate Lawsuits

Over on “The D&O Diary”, Kevin LaCroix recently flagged this Jones Day whitepaper on lessons US companies can learn from European climate change litigation. Kevin points out that litigation has been a component of climate change activists’ strategy in Europe for several years, and that they’ve targeted not just companies, but also “decision-makers in government and in business.” This excerpt from the whitepaper provides the key takeaways from this litigation:

For claimants, the objective is not only to win at trial: NGOs and activists are pursuing novel and inventive litigation strategies. Many of the routes to liability are far from straightforward and difficult to bring successfully. But success at trial often is not the point. Litigation is being used to attract publicity, obtain disclosure of documentation and information, and pressure businesses to change corporate behavior. And not just the behavior of the defendant, but the behavior of other businesses and decision-makers observing the risk of litigation and the direction of judicial travel.

Mind the gap between aspiration and execution: Any gap between a company’s aspirations and its actions creates litigation risk. It is not enough for an organization to make aspirational commitments, however well intentioned. In order to mitigate litigation risks, commitments should be backed up by action—whether that is a credible plan for achieving net-zero pledges, or proper oversight of a subsidiary’s activities to ensure group policies are being adhered to in practice—and adequate justification needs to be made available to the public in order to demonstrate the accuracy of the company’s communications and the seriousness of its plans.

The importance of robust, credible, and scientifically verifiable evidence: Companies making “green” claims about their products or services will need to ensure they can justify those claims by reference to robust, verifiable evidence based on recognized scientific methodologies. Statements that give only part of the story have been found to be misleading, so care needs to be taken to ensure that environmental claims reflect, for example, the full life cycle of a product, or the overall impact of an organization’s activities on the environment or climate (rather than just one of its business lines).

Supporting decision-makers: Evidencing board decision-making is good practice in any event, but directors and other decision-makers within a business will be particularly keen to ensure proper records are kept that they have complied with all relevant obligations when making decisions with potential environmental impact.

Diligence, diligence, diligence: When it comes to ESG and climate change, lines between corporate entities are increasingly blurred. Financial institutions find themselves having to rely on data disclosures provided by corporate issuers to meet their own ESG-related reporting requirements. Supply chain due diligence legislation codifies what was in any event a growing responsibility on parent companies to be alert to the activities not just of their subsidiaries but of those with whom they do business. Robust processes to diligence information and business practices and to audit compliance are essential.

European regulators and businesses have taken the lead on ESG regulation and in corporate commitments to addressing climate change.  That’s created an environment where litigation surrounding those commitments has flourished.  As the US catches up, activists and others may increasingly use litigation as a key component of their own strategies.

John Jenkins