Global ESG Litigation Risk: Implications for UK Board Governance 

In today’s interconnected business environment, corporate boards face unprecedented scrutiny over their environmental, social, and governance (ESG) practices. The landscape has evolved significantly in 2024, with landmark cases across multiple jurisdictions demonstrating the expanding scope of corporate liability and regulatory oversight.  

Let’s take a look on how litigation was approached in this arena last year. What are the litigation patterns in courtrooms and the impact it may have on the UK courts approach corporate responsibility and director duties moving into 2025. 

Recent legal developments shaping board responsibilities: 

Greenwashing Enforcement 

The Australian Federal Court’s AU$11.3 million fine against Mercer Superannuation in August 2024 marks a watershed moment in regulatory enforcement. This case, alongside the Dutch court’s ruling against KLM’s “Fly Responsibly” campaign in March 2024, signals that regulators are taking decisive action against misleading sustainability claims. UK boards must note that the Financial Conduct Authority’s Anti-Greenwashing Rule, effective from 31 May 2024, creates similar exposure in the UK market. 

Environmental Litigation 

The Manchester Ship Canal Company case (July 2024) represents a significant shift in UK environmental litigation, establishing that private law claims for water pollution can proceed without proving negligence. This development, coupled with the New Zealand Supreme Court’s decision in Smith v Fonterra allowing climate tort claims to proceed, demonstrates the expanding scope of corporate environmental liability. 

Director and Shareholder Liability 

The criminal complaint filed against TotalEnergies, its directors, and major shareholders in May 2024 represents an unprecedented escalation in climate litigation. This case notably extends potential liability beyond the corporation to include individual directors and shareholders who supported less ambitious climate strategies. 

Strategic Implications for UK Boards: 

Enhanced Due Diligence Requirements 

Recent cases demonstrate the need for more rigorous due diligence processes: 

– Detailed verification of ESG claims and marketing materials 

– Regular assessment of environmental impact measurements 

– Documentation of decision-making processes regarding sustainability initiatives 

– Independent verification of sustainability claims and targets 

Stakeholder Engagement and Transparency 

The landscape demands enhanced stakeholder communication: 

– Clear and accurate sustainability reporting 

– Regular stakeholder consultation 

– Transparent disclosure of environmental impacts 

– Documented responses to stakeholder concerns 

Risk Management Framework Updates 

Boards must revise their risk management frameworks to address: 

– Potential criminal and civil liability for environmental damage 

– Greenwashing risks in marketing and communications 

– Supply chain environmental impacts 

– Stakeholder litigation risks 

Practical Steps for Implementation 

Governance Structure Review 

Boards should: 

– Establish dedicated ESG oversight committees 

– Implement regular board training on emerging ESG risks 

– Create clear accountability lines for ESG-related decisions 

– Develop robust documentation processes for ESG-related decisions 

Marketing and Communications Review 

Given recent greenwashing cases: 

– Review all sustainability claims and marketing materials 

– Implement strict verification processes for ESG statements 

– Maintain detailed evidence supporting environmental claims 

– Regular audit of public statements against actual performance 

Environmental Impact Management 

Recent cases emphasise the need for: 

– Comprehensive environmental impact assessments 

– Regular monitoring and reporting of environmental metrics 

– Clear action plans for environmental incident response 

– Documentation of environmental risk mitigation efforts 

 Looking Ahead 

The legal landscape continues to evolve rapidly, with courts increasingly willing to hear novel claims related to environmental damage and climate change. UK boards must: 

– Monitor global legal developments closely 

–  Invest in environmental impact reduction 

– Strengthen stakeholder engagement processes 

As someone who is both a lawyer and Chartered Director specialising in disputes and board of directors’ governance/organisations sustainability the 2024 cases demonstrate that the risk landscape for corporate board of directors has expanded significantly.  

Success requires a proactive approach to risk management, robust governance frameworks, and genuine commitment to sustainability. UK boards must adapt their practices to meet these emerging challenges while maintaining clear documentation of their decision-making processes and stakeholder engagement efforts. 

For more information and an informal chat contact Rashmi via email  or by phone +447958920709