Out-Law / Your Daily Need-To-Know

Climate-related claims impact widening range of businesses, report finds

Out-Law News | 11 Jul 2022 | 2:48 pm | 2 min. read

Climate-related litigation is increasingly targeting businesses across sectors other than those that have been traditionally associated with greenhouse gas emissions, such as energy and heavy-duty industry, according to a new report.

The Grantham Research Institute on Climate Change and the Environment (GRI) noted the growing diversity of corporate cases in a new report charting developments in climate-related litigation globally (50-page / 2.93PDF) between May 2021 and May this year. The GRI is part of the London School of Economics and Political Science.

The GRI said that, according to its own data and that of the Sabin Center for Climate Change Law, 40 of the 68 climate-related cases filed against corporations since the beginning of 2021 have been directed at businesses that are not fossil fuel companies. Businesses in the food and agriculture, transport, plastics and finance sectors are among those to have been subject to claims.

Munich-based Johanna Weißbach of Pinsent Masons, a specialist in dispute resolution, said: “Although the target of climate change litigation is still often ‘carbon majors’ and other companies involved in the fossil fuel industry, it will be a cause for concern for clients who do not operate in this sector that the trend is towards a more diverse range of defendants.”

Johanna Weibach

Johanna Weißbach

Rechtsanwältin, Partner

The increasingly diverse strategies employed by claimants, such as seeking compensation from the company, or seeking to hold directors responsible for failing to manage climate risks, looks set to continue

“Not only that, but the increasingly diverse strategies employed by claimants, such as seeking compensation from the company, or seeking to hold directors responsible for failing to manage climate risks, looks set to continue. The practical impact is that many organisations and companies that previously thought they were at a low risk of being a defendant could become the target of a claim,” she said.

The GRI’s report also highlighted how the range of strategies employed by litigants in recent years has become increasingly diverse.

Examples of the types of cases arising include those that seek to “disincentivise companies from continuing with high-emitting activities by requiring changes in corporate governance and decision-making”, the GRI said. Those cases focus on the companies’ policies and strategies and challenge whether they meet human rights and environmental due diligence standards.

Other cases are focused on obtaining compensation for the victims of climate change harms allegedly caused by businesses, while some businesses are also being challenged over alleged ‘climate-washing’, where litigants argue that the public statements businesses make in relation to climate commitments are at odds with the actions they are taking.

The report also identified how governments are being challenged over the implementation or ambition of climate targets and policies, and on alleged misalignment of public finance with climate action. It said “a significant strand of cases” also impact financial services institutions, where those institutions are accused of failing to manage and disclose both physical and transition risks associated with climate change.

The GRI also said that climate-related cases “attributing personal responsibility for contributing to or failing to adequately manage climate risks to particular individuals” are among the cases to watch in the coming year.

The report also examined how “systemic lawyering” is influencing how climate-related litigation is brought.

“Systemic lawyering refers to the process of adopting a ‘systems thinking’ approach for lawyering,” the report said. “The process is applied [before the event] and it aims to help identify legal interventions that will have the greatest impact, increasing the transformational potential of legal action. That means not necessarily filing a case against a major emitter, but rather identifying the key nodes and links of a certain system (e.g. energy, food) and identifying what interventions are most likely to destabilise those and thus transmit shocks to the system.”

Climate-related litigation expert Michael Fenn of Pinsent Masons said the contents of a letter (2-page / 158KB PDF) sent by Milieudefensie, a Dutch non-governmental organisation, earlier this year provides a good example of ‘systemic lawyering’.

Fenn said: “Milieudefensie wrote to 29 companies, including those that produce consumer goods, referring to their operations and business chain ‘causing dangerous climate change’. This letter demonstrates the need for companies to consider not only the climate change impact of its own operations, but also the impact of the companies in its supply chain. If they do not, they may in the future be the subject of novel and strategic climate litigation.”