Thanks to COP26, climate change is once again at the forefront of the global agenda. But as the public becomes ever more interested and concerned, so too will businesses in the UK begin to face a growing risk of climate litigation.
Put simply, climate change litigation refers to any cases that raise issues of law or fact regarding the science of climate change and/or mitigation and adaptation efforts.
This type of litigation is undoubtedly on the rise: globally, over 1,000 cases have been brought in the last six years alone, compared to around 800 cases between 1986 and 2014. Outside of the US, the majority of cases are being brought in the UK, Australia and the EU.
For a number of years, the focus has been on the public sector: claimants have utilised strategic litigation to pressure governments and public bodies into adopting climate-positive measures. The vast majority of cases continue to be brought against public sector actors.
But recent research carried out by the London School of Economics has highlighted an emerging trend in climate change litigation: increasingly, the focus is beginning to shift towards the private sector and innovative legal arguments are being used to challenge corporate decisions.
Which businesses are most at risk?
Perhaps the most obvious example is businesses that directly contribute to harmful emissions: the so-called Carbon Majors (companies with the highest historical emissions, including fossil fuel and cement companies). Other high-emitters, including in the meat and dairy industries, are also being targeted.
Businesses involved in carbon-intensive projects and developments, such as the construction of coal-fired power plants, could face litigation in the context of challenges to planning decisions.
Increasingly, climate change litigation is also affecting the financial sector including banks, pension funds and asset managers. Claims against financial actors are based on the understanding of climate change as a financial risk, and tend to focus on fiduciary duties and corporate due diligence.
So what types of litigation do businesses need to be aware of?
Climate change litigation covers diverse areas of law, and the types of arguments used by claimants continue to grow and develop. Examples include:
- accusations of deliberate disinformation and “greenwashing”
- challenges to specific high-emission projects and developments
- investor-led challenges to investment decisions
- attempts to establish corporate liability for past contributions to climate change
- cases seeking disclosure of climate-change related risks and their relevance to investment decisions
- challenges to pension funds based on inadequate due diligence and a failure by trustees to manage climate risk
- arguments that decisions to pursue carbon-intensive projects constitute a breach of directors’ fiduciary duty to act in the best interests of the company and its shareholders.
How is climate change litigation likely to evolve in the coming years?
As more businesses begin to focus on setting net-zero targets (either voluntarily or due to government pressure), the plans and efforts for achieving these targets are likely to come under increased scrutiny.
Businesses that fail to adopt net-zero targets, or fail to make serious efforts to achieve their targets once set, may find themselves facing an increasing risk of litigation. In Australia, a recent case against gas company Santos has challenged the company’s claims to have a credible plan to reach net-zero on the grounds that it constitutes misleading or deceptive conduct.
Supply chains are likely to be another focal point for future climate litigation. Companies and businesses face being held responsible for not only their own actions, but also the acts and omissions of those within their supply chains.
Examples include a case brought against French supermarket chain Casino, for failing to conduct environmental due diligence when sourcing its beef from slaughterhouses where the primary suppliers were responsible for huge swathes of deforestation.
Similarly, Shell has recently been held to have a legal obligation not only to reduce direct CO2 emissions from its own operations, but also to reduce the emissions of its customers and supply chain.
Where do we go from here?
With climate change litigation continuing to evolve, businesses will increasingly need to be aware of the claims that could be brought against them and how to mitigate this litigation risk. We can provide you with the clear, commercial and practical advice you need.
If you would like to discuss any of the matters above in more detail, please contact a member of the Litigation and Dispute Resolution Team.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at November 2021.