Mind your business: navigating the rising tide of climate litigation

No organisation is beyond the expanding reach of climate litigation as new legal theories, targets and litigants emerge. Businesses need to be informed and mindful of the outcomes of events across the global climate-related legal landscape.

Under scrutiny

The UK government will once again come under scrutiny when the high court hears a new challenge to its updated net-zero strategy, published in March this year. The update resulted from the success of a previous challenge made last year by activist groups arguing that insufficient detail on how proposed targets would be met was a breach of the government’s commitments under the Climate Change Act. A landmark decision by the high court decided in favour of the plaintiffs, requiring the government to provide more detail.

This current challenge, by Friends of the Earth, ClientEarth and Good Law Project, argues that the modified net-zero strategy also falls short of what is required and fails to comply with central provisions of the Climate Change Act.

The addition of the Carbon Budget Delivery Plan (CBDP) to the strategy has not quelled criticism. In fact, the annual progress report to the UK Parliament from the Climate Change Committee (CCC) in June this year took a dim view of the government’s commitment to climate action stating: “Despite new detail from Government, our confidence in the UK meeting its medium-term targets has decreased in the past year. The increased transparency embodied in the CBDP is welcome but a key opportunity to raise the overall pace of delivery has been missed.”

The pace of delivery has been further hampered since the CCC offered words of warning. Last month the government pushed back a number of climate commitments, including the date marking the ban on the sale of petrol cars, from 2030 to 2035, and the target to eliminate the sale of domestic gas boilers. This was followed, last week, by news of Britain granting permission for one of the largest new oil and gas projects in years, the North Sea Rosebank field, reported to have the potential to produce 69,000 barrels of oil a day.

Climate cases are on the rise

Attracting column inches dedicated to developments, the number of climate cases is rising globally. Findings published by the UN Environment Programme (UNEP) and the Sabin Center for Climate Change Law at Columbia University, in the report, Global Climate Litigation Report: 2023 Status Review, show that climate litigation is becoming an integral part of securing climate action and justice. Commenting on this year’s record temperatures and extreme weather events across the globe, Inger Andersen, Executive Director of UNEP, said: “People are increasingly turning to courts to combat the climate crisis, holding governments and the private sector accountable and making litigation a key mechanism for securing climate action and promoting climate justice” (1).

Breaking new ground

Litigation action is emerging from a range of sources and arguments are breaking new ground. The high-profile climate case of Held v Montana, which made global headlines, saw a successful outcome for a group of young people in the American state of Montana, aided by lawyers from Our Children’s Trust. In August this year, the 16 youngsters won a landmark lawsuit against the state, a significant producer of coal and gas, for its failure to take climate change into account when approving fossil-fuel projects, which the judge decided violated their constitutional rights to a clean and healthful environment.

While the state of Montana plans to appeal, this initial outcome is being hailed as changing the litigation landscape – it was the first constitutional case to go to trial and there are other similar cases waiting in the wings. Montana is not the only state with a constitution guaranteeing rights to a clean environment.

Climate accountability

The Held v Montana trial played out against this summer’s backdrop of extreme weather events and warnings, including the devastating wildfires in Maui, Hawaii. Climate scientists have attributed the tragedy that killed more than 100 people and displaced thousands to increasingly dry conditions associated to climate change. Drought and wildfire seasons are expected to feature more frequently in the future.

The effects of climate change have not been lost on the people of Hawaii. In March 2020, the city and county of Honolulu filed a state lawsuit against major oil and gas companies “seeking to make the industry pay for the cost of climate damages that the companies long knew their businesses would create and intensify, including rising sea levels, coastal erosion, flooding, supercharged storms, and other extreme weather events”. In August, the same month as the catastrophic wildfires, Hawaii’s supreme court heard calls by fossil fuel companies to dismiss the climate accountability case. While the outcome of the appeal may take months to emerge, the debate around big oil’s alleged misinformation about the harmful effects on the climate of burning coal, gas and oil continue unabated.

This is not the sole climate case pending in Hawaii. In 2022 a group of young advocates took legal action against the Hawaii Department of Transportation (HDOT) accusing the department of implementing transportation projects that promote greenhouse gas emissions. The case, Navahine F. v Hawaii Department of Transportation, which is also supported by Our Children’s Trust, cites the constitutional right to live healthful lives and is due to go to trial in June next year.

Historic climate case

September saw a group of children and young adults from Portugal have their case – described as the world’s largest climate legal action – heard at the European Court of Human Rights. The claimants, who filed action following deadly wildfires in Portugal in 2017, accuse governments of 32 nations of breaching their human rights by not taking action to address global warming, which will lead to a future of intolerable heat. They are calling for all of these countries, including 27 members of the EU, the UK, Switzerland, Norway and Russia, to take adequate action to tackle the problem.

Beware greenwashing

Accusations of greenwashing are increasingly heard from litigants intent on holding companies to account for their statements and strategies to align their business with net-zero targets. The Risilience and Clyde & Co report, ‘The rise of climate litigation: how to understand and minimise your legal risk’ includes a number of examples of greenwashing litigation.

In the 2021 class action lawsuit by plaintiff Jessica Rawson, the supermarket chain ALDI Inc was accused of deceptive marketing of its fresh salmon product, which was advertised as ‘simple sustainable seafood’. In 2023, ALDI Inc is reported to be negotiating a settlement (3).

In July 2022, a lawsuit was filed against the airline KLM in Amsterdam for its ‘Fly Responsibly’ campaign which was accused of being false and misleading to the public and breaching the Dutch implementation of the EU’s Unfair Commercial Practices Directive. In April 2023, KLM agreed to pull the ‘Fly Responsibly’ marketing campaign (4). Other airlines, including Ryanair, Lufthansa (LHAG.DE) and Etihad have attracted criticism from Britain’s advertising watchdog, the Advertising Standards Authority (ASA) for making misleading environmental claims. The watchdog is reported to be using machine-learning tools to scan online advertising to catch wording that could misrepresent sustainable credentials (5).

Several high-profile brands have been accused of greenwashing, including fashion companies H&M and Nike. Evolving legislation in Europe, United Kingdom and the US is clamping down on greenwashing by awarding regulators increased powers to investigate businesses asserting their products and services are green, sustainable and environmentally friendly to ensure such claims can be substantiated by relevant scientific evidence.

Implications for business

Increasing numbers of businesses are at risk of climate litigation as the scope and scale of legal action continues to grow. Business leaders need to understand the evolving litigation landscape to minimise risk, effectively.

Action plan

The risk of climate litigation should not be taken lightly by business. Companies that find themselves on the receiving end of legal action could face damage to brand reputation, a negative change in consumer demand and expensive legal action, which can result in significant financial loss for a company. Preventative action is key and there are steps that all organisations can take to minimise risk.

Keeping abreast of events across the global climate-related legal landscape can provide early warning. Major legal verdicts can indicate what’s to come in the shape of imminent legislative and regulatory changes that can impact organisations. Forewarned is forearmed.

Applying a range of scenarios to understand the different ways a company can be affected by climate-related litigation, and the potential financial impacts, enables a business to be prepared – to sharpen legal-crisis plans and ensure adequate insurance is in place. Scenario analysis has the added benefit of yielding valuable business insights that can lead to upsides.

Strong foundations for growth

In short, having a proactive and authentic climate strategy lays strong foundations for growth – the more aligned a company is to a low-carbon future, the lower its climate-litigation risk. Organisations that are taking science-led steps to decarbonise their business, meet required net-zero targets and communicate transparently to regulators, stakeholders and consumers are best placed to absolve risk, maintain commercial relevance and optimise the opportunities emerging from a low-carbon economy.

Oliver Carpenter was among the expert speaker lineup at this year’s Sustainable Futures conference, at London’s Barbican Centre. The Risilience event brought together sustainability and risk leaders from global organisations to discuss the challenges and opportunities of business transformation to a low-carbon future. Read more here.
Read the Risilience and Clyde & Co report: The rise of climate litigation: how to understand and minimise your legal risk or listen to the audio report on Spotify.

References

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Mind your business: navigating the rising tide of climate litigation