Business leaders are increasingly mindful of the exponential rise in climate litigation actions, globally. Such cases are not good for business, can be costly and wreak havoc on a company’s reputation. Dr. Andrew Coburn, CEO at Risilience, and a contributing author to the new expert report: ‘The rise of climate litigation: how to understand and minimise your legal risk’, flags five climate-related litigation trends for CEOs to watch out for in 2023.
Climate litigation cases have been hitting the headlines, reflecting the unprecedented rise of climate-related litigation across the globe. Cases have not yet peaked – the upsurge in climate litigation is forecast to rise even further, making monitoring and understanding the ever-evolving legal landscape surrounding climate increasingly important to astute business leaders.
Our recent report: ‘The rise of climate litigation: how to understand and minimise your legal risk’, produced in collaboration with global law firm Clyde & Co shines a light on recent and significant cases brought against a range of private sector companies, including: energy and petrochemical company, Royal Dutch Shell; multinational energy company RWE; airline KLM; oil and gas company, Santos; supermarket chain, ALDI; and asset management company DWS Group.
In the few months since our report was published in December last year, the number and variety of climate-related cases filed has continued to grow, with FIFA, the Swedish government, SK Lubricants Co and French food company Danone finding themselves in the legal spotlight.
Gone are the days when only major energy companies and governments attracted the ire of activists applying litigation to their cause – the line of sight has widened and triggers for legal action have multiplied. The upshot is that no sector or company is immune if it is identified as falling short of its climate obligations.
Business leaders facing the ever-present risk of climate litigation need to be well-informed in order to ensure their own house is in order. Our report highlights five trends to observe in 2023:
1. Claimants now targeting perceived facilitators of carbon-intensive businesses
Activists are increasingly taking legal action against perceived facilitators of carbon-intensive businesses, such as PR agencies, financiers and insurers. An ever-growing wave of climate change litigation is being brought against various corporate and state actors. More recently, financial organisations and service providers, such as auditors and many other types of business have been targeted. Public authorities and financial watchdogs around the world are also keeping these types of companies in sight.
2. Multiple companies can be targeted by claimants
While climate litigation often targets a single defendant, a new strategy sees claimants targeting multiple companies at once. In the case of Milieudefensie et al. v. Royal Dutch Shell, the District Court found that Shell’s existing carbon-mitigation strategy was not concrete and, instead, filled with conditions and disclaimers. The court also concluded that Shell falsely claimed its plans were aligned with the 2015 Paris Agreement. Following the judgement, on 13th January 2022, the claimant, NGO Milieudefensie, sent a letter to 29 Dutch companies attaching the judgment and order, asking the companies to implement a climate change plan or face similar legal proceedings. This case raises a litigation strategy that may become more popular in the future.
3. Range of triggers for climate litigation is broadening in scope
Climate activists are bringing legal action for a wider range of reasons. Allegations of greenwashing, failure to adapt a business and breach of directors’ duties are just a few of the emerging trends in litigation. The rise in climate change litigation, coupled with a deeper, scientific understanding of the nexus between climate change and biodiversity loss, has led many active climate litigants to turn their attention to the biodiversity crisis – see the Risilience blog post: ‘Nature crisis: implications and impacts of COP15 for business’.
4. Directors and officers are coming under greater scrutiny
The Taskforce on Climate-related Financial Disclosures (TCFD) 2021 Status Report indicated an acceleration in corporate climate-related disclosures. It flagged the increasing importance for directors to demonstrate that climate-related risks have been considered when taking decisions and that actions have been taken to mitigate those risks. This focus is starting to surface in the courts. ClientEarth recently reported that it was taking legal action against Shell’s Board of Directors for failing to exercise reasonable care, skill and diligence to devise an adequate climate strategy.
5. Stricter reporting and disclosure for business
This spill-over effect from increasing numbers of high-profile cases could have consequences for businesses, such as bringing about more stringent emissions standards and procedural obligations for corporates. This will be a key feature of the litigation landscape and will drive, for example, stricter reporting and disclosure. There are currently reports of EU plans to force companies promoting their products with claims of reduced environmental impact to provide evidence to support their assertions.
As well as climate litigation trends, real-life cases and in-depth scenario case studies, our report provides practical steps a business can take to be best protected and prepared – in short, monitor the legal landscape, conduct scenario analysis and develop a proactive and authentic climate strategy. Aligning business objectives with a low-carbon future will best prepare companies to seize opportunities and flourish, and, as championed in former Energy Minister Chris Skidmore’s Net Zero Review, reap the economic benefits of green growth.
• Download the free report: ‘The rise of climate litigation: how to understand and minimise your legal risk’. The report is co-published by the Cambridge Centre for Risk Studies, Judge Business School at the University of Cambridge, Clyde & Co, and Risilience.
• Listen to our expert-led webinar: The rising tide of climate litigation – what business leaders need to know. Learn about this fast-evolving legal landscape and take away key actions to identify emerging exposures and prepare for opportunities in a low-carbon future. Speakers include: Nigel Brook, Partner at global law firm Clyde & Co; Thomas Harvey, VP Product at Risilience; Professor Danny Ralph, Academic Director, Centre for Risk Studies at the University of Cambridge Judge Business School.
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