New report shows accelerating rate of climate change litigation cases worldwide
Published on 4th Jul 2022
Global trends in climate change litigation reveal a diverse range of causes of action across many sectors. What might this mean for UK businesses?
A report published by the Grantham Research Institute and the London School of Economics and Political Science has identified the causes of action in litigation being brought against companies and directors around the world.
While it remains the case that, to date, no case brought in the UK has found a UK company or director liable for climate change-related damage, the report – which shows the range of cases brought globally – gives an indication of where claimants, and customers, might focus their attention in the UK in future.
Growing number of cases worldwide
Cases against companies and directors are growing worldwide. In 2021 more than half of the 38 claims filed against companies were brought against companies not directly linked to the extraction or provision of fossil fuels and fossil energy. As we recently reported, the plastics, food and agriculture and transport sectors are increasingly being targeted. Companies around the world have seen an increase in "value chain climate litigation" which targets companies for the acts and omissions in their supply chains.
The report predicts that "heavy-duty industry (e.g. steel and cement), textiles, shipping and aviation may be the next targets for litigants".
It identifies new and ongoing cases against private financial institutions for their "portfolio emissions", recognising the impact that the investment decisions of these institutions can have on climate change.
This can all be seen against the backdrop of a significant rise in all climate change-related litigation worldwide: the report finds that cases have more than doubled since 2015. About a quarter of all claims initiated so far were filed between 2020 and 2022.
Causes of action
The global trends are a good indication of claims that could be coming down the line for UK companies and directors.
The causes of action being relied on in cases brought outside the UK include "climate-washing" or "greenwashing" (where a company markets or communicates that it is doing more to protect the environment than it really is); "corporate framework strategy" (where the cause of action is based on company-wide policies and strategies, sometimes based on human rights law); "personal responsibility" (which focus on directors' duties) and "failure to adapt" (with a "significant strand of cases" focusing on financial service providers).
There is growing recognition that international human rights law can be used to bring actions against companies – a practice which the report says is "slowly materialising".
According to the report, "Litigants increasingly appear to draw a connection between ongoing public debates about the contribution that individuals’ consumer and lifestyle choices can make to reducing emissions and widespread concern that industry misinformation and inaction may prevent such choices from making a real difference (Jahns, 2021)".
What does this mean for UK companies and directors?
Some of the causes of action described in the report as being brought outside the UK against companies would face significant difficulties if brought before the English courts.
For example, greenwashing claims based on sustainability reports and annual reports may face the problem that these often exclude liability for negligent misrepresentations.
For claims based on the breach of directors' duties, honestly-held good faith judgments cannot easily be challenged. Also, absent a director acting in a way which is criminal or making a particular personal profit out of a company's failings, it is unlikely the director will face personal liability – although he or she could lose their job if they are failing to perform.
Furthermore, in England, there is no specific corporate duty to avoid impacting human rights through environmental damage.
But there is no room for complacency: dishonest representations by companies and directors about sustainability will become obvious very quickly and will be actionable. Moreover, what the report makes clear is that climate change-related litigation against companies is on the up (and has rapidly increased in the last two years) and is likely to reach the UK soon. Claimants are looking for ever more diverse ways to bring a claim.
Even if a legal claim may be hard to establish, the adverse publicity such a claim can bring carries with it the risk of serious reputational damage and a consequential loss of business and share value.
Companies therefore need to consider their exposure to climate change-related litigation arising not just out of their own activities but also from the activities of those to which they are linked, including their subsidiaries, suppliers and customers.