New data reveals that climate-washing litigation (challenging a company’s claims of being “carbon neutral” or “climate-friendly) is a big success for plaintiffs with 70% of completed cases ending in successful rulings for them. Of the 77 cases that reached their resolution, 54 were decided for the plaintiffs. A recent article from Thomson Reuters discusses the trend and gives three insights into how this trend will impact companies, stating:
“Increased accountability for misleading claims — With a success rate of 70% for claimants in climate-washing litigation cases, there is a growing trend towards holding companies accountable for misleading claims regarding climate neutrality and sustainability. This high success rate could serve as a deterrent for many companies.
Financial and legal risks increase — The spike in climate-washing cases, along with other climate-related litigation, poses significant financial and legal risks for corporations. This, in turn, may prompt businesses to invest more in genuine sustainable practices and thorough due diligence to avoid such litigation.
Growing scrutiny indicates a likely spike in regulation — The increased attention from financial regulators and reinsurers on climate litigation outcomes suggests that the impact of these cases extends beyond individual companies and into the broader financial system. This scrutiny may lead to stricter regulations, changes in risk assessment models, and potentially higher insurance premiums or reduced coverage for companies vulnerable to climate-related litigation.”
ESG leaders, staff and advisors: With litigation risk abounding, you should pay close attention to messaging on climate. Ensuring that claims are backed by hard evidence and openly showing the methodology surrounding claims is paramount to defending against potential greenwashing litigation. Additionally, companies must keep an eye on the developing global regulatory environment surrounding sustainability claims. More jurisdictions, particularly the EU, are passing laws that limit how climate claims can be made, and organizations that don’t adjust their messaging are likely to face enforcement actions from global regulators.
Our members can learn more about greenwashing here.
If you aren’t already subscribed to our complimentary ESG blog, sign up here for daily updates delivered right to you.
