Goodbye greenwash! How the law is being used to force corporates to act on climate change

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6 min read

Organisations and their leaders will increasingly face the financial and reputational consequences of climate change inaction, believes Alice Garton, director of global legal strategy at the Foundation for International Law for the Environment (FILE).

Growing up in Australia’s first eco village,  Alice set her sights on using the law to change the world at a young age. She worked for a hard-hitting litigator, spent 14 years in law firms and multinationals before moving to ClientEarth – the first NGO to look at the whole suite of laws that can be applied to combat the climate crisis. In her latest role at FILE, she’s aiming to scale climate litigation across the world.

Based on her experience, she explains the future of climate-related litigation for businesses and lawyers to Neil Pearson, our head of ESG and social value.

Can we expect an increase in corporates and their leaders being held to account for not acting to manage climate risk within their business?

Absolutely. It’s already underway. Until now, about 70% of climate-related litigation was against governments but we’re seeing a big shift towards cases being brought against corporates and financial institutions. There are several factors causing the increase.

Successful cases inspire more successful cases. People are looking to what can be learnt from the ongoing case in Germany of Peruvian farmer, Saul Luciano Lliuya, versus energy company, RWE. The court in this case has already recognised in principle that a company can be liable for climate-related damages caused by its greenhouse gas emissions.

They will also be inspired by a world-first fiduciary duty case to be launched soon: ClientEarth is challenging Shell’s 13 board directors for breaching their duties under UK company law to manage climate risk to the business. The NGO argues that failure to transition in line with the Paris Agreement jeopardises the long-term financial viability of the company.

Another area public interest lawyers are scrutinising are the net-zero commitments made by companies. Those can potentially mislead investors and consumers so, if the commitments are not met or untrue, companies may be in breach of certain laws, including disclosure requirements, consumer rights legislation and advertising standards.

To date, most actions on greenwashing have been against corporates. But over the next year or two we’ll see cases against financial institutions as well.

Finally, recent advances in ‘attribution science’ now allow causal relationships to be established between greenhouse gas emissions and climate-related events. This will increase the growth and success of climate litigation seeking to make companies and governments liable for their role in the climate crisis.

What motivates FILE’s support for litigation?

What else can we do if we are terrified about what lies ahead? Get involved in politics, use our consumer power, shift our finances, protest on the street…all of those are important. From my perspective, as citizens, we have access to another fundamental pillar of democracy – the rule of law.

If you win a single case, you can have a strategic impact that drives system change. FILE supports brilliant public interest lawyers because it’s where we think we can scale at the pace and speed necessary to prevent the suffering that lies ahead and be of the greatest benefit to citizens and nature.

Of course, your endgame is to stop the climate crisis but are you looking to hold organisations and individuals to account for past damages?

It’s a balancing act. Greenhouse gas emissions are still increasing so we have to focus on reducing them. That is absolutely urgent and why injunctive cases like Milieudefensie v Shell in the Netherlands are so important. We’ll see more of those in the future.

However, there is also a growing urgency, particularly after COP26, to obtain ‘loss and damage’ for climate vulnerable countries that are going to lose their homeland and ability to develop. At FILE, we are committed to supporting those most impacted by climate change.

The bottom-line for corporates is that if you continue ‘business-as-usual’ contributing to climate change, you are harming your own business opportunities and increasing the risk that a wide range of claimants will seek to hold you financially liable for the losses they suffer.

What are the risks for large UK corporations if they don’t change?

Boards need to focus on their core individual directors’ duties and, particularly for larger corporates, disclosure requirements too. The risk of personal liability for directors will set alarm bells off in many boardrooms.

I do think the regulators are going to start stepping up on monitoring how companies and financial institutions are managing climate risk. At COP26, Rishi Sunak announced plans to introduce mandatory net zero transition plans, so the trajectory is clear.

While the pace of change may not be as clear, it can only help to immediately start transitioning your company to net-zero – and it will also make you feel better when tucking your children into bed at night!

If I’m a general counsel in a UK corporate and I’ve read this article and started to worry about what’s coming down the tracks, how do I make sure my company’s not next on your target list?

Find the right professional advisors. For general counsel, that includes your law firms. What are their commitments to net zero lawyering? Is it greenwash? How much fossil fuel enabling work do they do? How are they transitioning their clients? You can understand pretty quickly whether what’s been proposed is marketing or genuine. Law firms should be actively, creatively finding solutions. If the solution doesn’t exist, they should be engaging with lawmakers and regulators to fix the problem.

It is important for law firms to join together through groups such as the Net Zero Lawyers Alliance and the Chancery Lane Project, so they can share ideas to achieve societal outcomes for their clients, providing they participate genuinely of course and not use the sign up for greenwash!

There’s a quote that goes, “We’re all climate lawyers now”, and it’s true. Every single area of practice now touches climate change in some way.

How do cases you recently funded or supported shape your strategy when you’re bringing a new case?

An important factor for FILE is that cases are community-led and part of a much broader campaign. There was a recent example in Australia where eight students and a nun took action on a proposed new coal mine – Sharma versus the Minister for Environment. They had their landmark first instance ruling overturned which was incredibly disappointing. But the case also galvanised the youth and parents of Australia which will be important for the upcoming election – it’s created a movement.

Cases should always be robust and technically accurate but we should never lose sight of the fact they are also about people, livelihoods, and where we need to be in the future. Win or lose, it’s about shining a spotlight on inaction or bad actions.

There is increasing momentum on climate – from citizens, within the professional world and from the courts. That makes me optimistic we can arrest the very worst impacts of climate change.

This article first appeared on The Lawyer on 17 May 2022.

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