As companies increase their environmental, social, governance (ESG) reporting and statements in response to market and shareholder demands, plaintiffs have pursued with growing success legal challenges to company claims and disclosures related to ESG performance. Similarly, inventive theories are being put forward to directly attack companies for alleged ESG-related performance and operational deficiencies. In both arenas, there has been a recent growth in efforts to hold companies accountable for supplier misconduct. The expanding growing misstatement and performance litigation signals a rising need to carefully manage ESG programs, performance, and statements.
Companies historically have viewed sustainability performance and statements as a voluntary under taking, largely devoid of legal or market risk. Asa result, management and oversight of a company’s environmental, social, and governance (ESG) (or sustainability, or corporate social responsibility (CSR)) programs and reports often operated free from legal department oversight or interference. However, recent years have witnessed a proliferation of voluntary frameworks that have given rise to growing pressure on companies to adopt and report on rapidly evolving and expanding ESG standards. Further complicating matters, governments have embraced various elements of those voluntary regimes, turning them into mandatory disclosure obligations.
Over the past decade, those developments and a growing market appetite for greater ESG information have subjected company ESG performance and disclosure to greater scrutiny in the court of public opinion and spawned new litigation.2 Those diverse and expanding legal actions fall broadly into two related categories: (1) claims challenging the veracity of ESG statements based largely on a company’s ESG conduct; and (2) suits directly contesting the propriety of company activities and performance. In the latter category, legal challenges have predominated around alleged impacts or misconduct related to climate and human rights.
Notwithstanding the success of plaintiffs in Massachusetts v. Environmental Protection Agency3 in establishing carbon dioxide and other greenhouse gases (GHGs) as air pollutants under the federal Clean Air Act (CAA),4 subsequent efforts to tag individual companies with responsibility for climate damages have been singularly unsuccessful. Those failures, though, have not diminished the appetite to pursue such claims, instead propelling litigants to craft refashioned and inventive theories in search of a viable pathway forward.
This article also appeared on the Environmental Law Reporter.
