Why companies are facing climate-based legal risks

Welcome back to Sustainable Views, the podcast looking at sustainability policy and regulation in depth. I'm Philippa Nuttall, editor of Sustainable Views. Today I'm talking to acting deputy editor Elizabeth Meagher and reporter Florence Jones about the changing legal risks that are being faced by companies around sustainability regulation. Hi, Lizzie. Hello. Hi, Flo. Hi. So today we're talking about the legal risks companies may face if they fail to comply with environmental rules or laws under which they could be accused of greenwashing. For example, the UK Competition and Markets Authority was recently granted powers to issue fines under the Digital Markets, Competition and Consumers Act, and it can use these powers to target companies misleading consumers around greenwashing. At the same time, we're seeing environmental laws being simplified, for example, in the EU, or even being axed in the US under Donald Trump. And so it can be quite a complicated and confusing world for companies to navigate. Florence, you recently wrote a piece about the plastics industry and how the failure this summer to agree a global plastics treaty has not necessarily decreased the risk of corporate litigation despite kind of no overarching legal framework. Can you tell us a bit more about what you found?

Yeah, absolutely. So it's clear that when speaking to legal experts, there's kind of a split, as there is with much climate law and sustainability law, between what's a regulatory risk and what's a litigation risk. So in the case of the Global Plastics Treaty after talks collapsed in Geneva in August, states aren't going to face the same pressure to implement regulations around plastics, particularly on production limits. So in terms of regulatory risk, in that sense, the risk is lower to plastics companies. However, litigation risk is a separate risk and very much still remains in place. So lawsuits can be bought by individual claimants. For example, an employee who works for a plastics company might find that they're having health problems in relation to their work. They could bring forward a lawsuit against that company or a country which is having lots of pollution from a particular brand. They can tell by the packaging that it's branded. They could bring a lawsuit against that company. And obviously you mentioned greenwashing. Greenwashing remains a major risk in terms of plastics. So, yeah, Neil Beresford, who's a partner at the law firm Clyde Co., I was speaking to him. He told me that these greenwashing risks at this point are very, very well rehearsed by nonprofits. Even last month, Nestlé Poland faced a lawsuit from ClientEarth around recycling claims on their water bottles, and that's still ongoing. So that greenwashing risk is very, very well established at this stage. But there are other kind of emerging litigation risks around plastics to do with pollution, to do with health, to do with also chemicals and PFAS. These are all kind of evolving spaces that could become more prominent in lawsuits in the future.

Yes, it's interesting, isn't it? We're kind of seeing a lot of pushback from businesses about regulation in general. But as you say, even without sort of lots of regulation in place, there are still risks and claims that can be brought under different parts of the law which aren't necessarily directly environmental laws. And you mentioned the plastics industry there. Are there other sectors which could be similarly affected or where we're also already seeing these kinds of claims?

Yeah, absolutely. So around emissions especially is a huge area in climate law. I was speaking to Rupert Stewart-Smith this morning, who's the Deputy Director at the Oxford Sustainable Law Programme. That's part of the University of Oxford Smith School. And he's been doing a lot of work around attribution science, which is a really kind of fascinating and growing area of climate law. And that's where scientists are able to link the emissions of a particular company to a climate impact. So something like a heat wave or a storm, and they can now tell the extent to which a company is responsible for the likelihood of that storm having happened. And that's got massive, massive legal implications. So the Smith School have done some work around Hurricane Harvey, which hit the US in 2017. It caused around $13 billion in damages, and they were able to link 14 individual high-emitting companies to the specific likelihood of the hurricane, and they were all responsible for around $100 million each in climate damages just from that one hurricane. So that's one weather event that's kind of yet to be played out in the courts. It's yet to be litigated on, but in terms of the science, the link is there. So one of the really prominent cases that we've seen recently was the RWE case, which was the case of the Peruvian farmer who brought a lawsuit against the German utility giant RWE in the German courts. So an overseas claimant bringing the case forward in Germany and the case wasn't successful, but the judge rejected it on the basis of where Yuya, who is the farmer, where he lives specifically. The judge didn't have an issue with the attribution science. So in terms of those kind of legal precedents, it's very clear that the space is evolving. It's now much more straightforward to link an individual company to a specific climate impact and And that changes the game really in terms of what kind of cases can be brought forward.

I think, yeah, definitely. I mean, it's definitely interesting in the attribution science, the way it's progressed so quickly in the last few years is really interesting. I think we wrote a piece recently that there's still quite a way to go, as you suggested before, it's perhaps actually leads to some kind of conviction in a court. But it's definitely something that, as you say, we're seeing much more of. Lizzie, you cover the US, which is the sort of, is it the world's capital in terms of litigation? It's definitely up there.

Absolutely.

At the same time, we've seen President Trump gutting climate policies and said that he views climate change as a hoax in his recent speech to the UN. How is the risk of corporate litigation around sustainability laws or other laws that could be linked to sustainability playing out in such a context? Are we seeing the similar trends as Flo suggested, or are you seeing a bit of a different story in the US?

It's always a slightly different story in the US. So the first thing to note is that gutting climate policies actually arguably increases legal risks for companies because it introduces a further level of ambiguity. And it also— a lot of cases against fossil fuel companies have been dismissed on the grounds of preemption, which is the concept that federal law already kind of governs that area. So it doesn't need to be decided by either states or a judge. And the Environmental Protection Agency potentially repealing the Clean Air Act, for example, will remove some of that, those grounds for federal preemption. So that's one thing. Over the past decade or so, there's been a lot of quite kind of ambitious cases, almost theoretical. Attribution science will help them a lot, brought by states against major polluters, claiming kind of climate damages. It's definitely true that those companies will be feeling a certain amount of relief given the kind of broader political environment. This is not the time to be suing a fossil fuel company. I think most people agree the administration would do whatever it can to block something like that. But the risk has not gone, and Florence mentioned PFAS litigation. So I think the dangers of PFAS first became clear decades ago, but these lawsuits are now kind of really ramping up. And so one investor I spoke to a couple of weeks ago said that's a perfect example of how these risks that can feel quite abstract now can really become financially material in the future.

Yeah, I mean, at the state level, we've seen lots of big cases in terms of PFAS where considerable amounts of money have been awarded against the companies. Do you see then, I mean, there's always been a lot of action at a state level in the US. Do you see that the state level in terms of litigation is likely to become more important, especially while under the Trump administration?

So I think that, well, I think the courts are probably more important than ever in terms of the Trump administration in general. Obviously the government has been sued dozens, are we in the hundreds yet already this year, by various actors So there's been quite a lot of cases brought by kind of young citizens, the very famous case Juliana, which finally ended earlier this year, and not NGOs, charities, etc., but obviously states have been very active there, kind of building on the success they had with the cases against big tobacco companies in the late '90s. The state of Puerto Rico did drop its case against fossil fuel companies earlier this year, but lawyers I spoke to at the time said that, you know, it's not that surprising given what the administration is doing, maybe now is not the time to be actively pursuing these kind of very ambitious speculative lawsuits. And that, as we've said, attribution science will help massively with. I would also add that the other— there's plenty of other lawsuits against fossil fuel companies, obviously California taking a lead on many of those that are still kind of plodding along in the background.

And just remind us what the Juliana case was.

So that was a group of young plaintiffs suing the US government for failing to honor their human rights in terms of their right to a healthy environment. It was kind of history-making, and I think it inspired an awful lot of other cases around the world.

Indeed. And one of the big events we've not mentioned, which was also kicked into action by a group of young people, was the advisory opinion that was delivered in July by the International Court of Justice on the global obligations of states on climate change. I mean, there was a lot in that ruling, and we won't go into it in this podcast. But in a nutshell, the opinion basically gave the Paris Agreement teeth, I think is perhaps the best way to put it, ruling that states must take stringent action to protect the climate system as a shared resource and to limit global warming to 1.5 degrees, even though I think many would argue that that's already gone. Um, how do both of you— I'd like to ask the question to you— how do experts you've spoken to view the opinion, um, and its likely impact on litigation? I mean, they do— they really see it as sort of this landmark judgment that is going to cause a fair amount of change, or is it sort of something which is important but at the moment, given where we are in terms of geopolitics, it's not necessarily going to be as impactful? Flo, do you want to perhaps share your insights?

Yeah, definitely. So I think People I speak to largely agree that it is significant. As you say, on the day there was kind of widespread jubilation from nonprofits, really kind of signaling it as a landmark moment. I think perhaps legal experts are slightly more contained about, about its implications. It is an advisory opinion, so it's not a lawsuit, but it does make a very clear stance, as you say, linking states and giving states the obligation to support citizens in the face of climate change. And it was universally agreed by, which is rare in the International Court of Justice, that all— I know that some of them had hoped for more ambition or certain changes, but all of those sitting on the Court of Justice did sign on to the advisory opinion. And that is Rare. In terms of the implication for litigation, that's slightly less clear. The ICJ is specifically talking about states and governments and their obligations to citizens. However, it does mention regulation and the role of governments to regulate corporations in order to mitigate climate. So getting companies to reduce their emissions is explicitly referenced. I think when I speak to legal experts, they tell me that it could be used to support litigation. So it could be part of that wider evidence that's used when bringing forward a court case. But it's not explicit about companies. So in that sense, it can't necessarily trigger a particular lawsuit in and of itself. But as with much law, it's kind of a case of as things are used, they build up a precedent and that can then be used in other cases. I think all of this is kind of many threads which contribute to a whole of it's now far easier for people to prove the link and it's financially material. I think that's the thing that when these climate impacts happen, it currently is on the individual to financially rebuild their home or it's on the government to rebuild infrastructure. Now that financial risk can, can be moved via a lawsuit, via suing. To the company by holding them responsible. I think that is kind of the link that's being made in all of these threads coming together.

So, Lizzie, the US doesn't have the best track record of complying with ICJ rulings on anything, I don't think. But how do you see this one playing out?

Yes. So the US actually said back in 1986 that it would not comply with ICJ rulings. So it long predates Trump. But obviously the US being outside of the Paris Agreement does mean that whether it has teeth or not does not really affect the US? So what I've heard is, you know, it's still likely to strengthen arguments made particularly against the government, as Flo highlighted. The issue is obviously that courts move very slowly. We're already coming up for a year of Trump. It's not that long away. So yeah, the point that could kind of strengthen those arguments is where the ICJ said that the expansion of fossil fuels may represent an internationally wrong act. There have been quite a lot of lawsuits suits brought against the Trump administration, um, against his executive order in January, the, uh, I've forgotten what it was called. American energy— what was it? Energy dominant— Achieving American Energy Dominance.

Achieving American Energy Dominance.

Yeah, yeah, um, yeah, maybe edit me there, Johnny. Sorry. Achieving American Energy Dominance. Um, so that one, um, yeah, there's been a few suits filed against that, that is still to be heard. It's also worth highlighting that the Supreme Court has a 6-3 conservative majority at the moment, and, you know, for the foreseeable future, given these are lifetime appointments. Um, unsurprisingly with that, and they have sided almost overwhelmingly with, uh, the president so far during this term. And 22 cases have gone to the Supreme Court this year, um, relating to the government. Trump has won 18 of them, which is quite remarkable. And so the new term started at the beginning of October, and there's going to be a lot more kind of big key questions that the Supreme Court is going to have to consider around democracy, the concept of executive overreach. And if that EPA endangerment finding— if the EPA does pursue its attempted repeal of the endangerment finding, we'd expect that to go to the Supreme Court. As well. So they are a kind of a big blocker potentially of climate lawsuits. We will see.

Indeed, there's plenty to keep a watch on there. And just in terms of the endangerment finding, could you just explain to listeners a bit who don't necessarily follow the ins and outs of the US, and especially this word endangerment, I always find slightly odd. If you could just explain a little bit, yeah, what that actually means.

Yes. So the endangerment finding is what underpins the Clean Air Act, which is what kind of was the, I guess, the foundation of environmental regulation in the US. It essentially finds that fossil fuels, human-caused pollution endangers human population and that, yeah, kind of a lot of environmental laws in the US are kind of built on that principle. EPA Administrator Lee Zeldin would like to repeal it. He has said that it's kind of factually incorrect. One thing that said, that is looking increasingly unlikely, I have to say. So it's now open to a comment period and awful lot of comments expected. And it's also the grounding for that is based on a Department of Energy report which found that, yeah, no, fossil fuels aren't bad. They actually don't harm humans. And the committee that put that report together has since been disbanded after the Department of Energy got sued for that report as well. The US loves a lawsuit. And so it's, to be honest, um, conversations I've had with people recently, they're not so sure that that will, uh, end up going anywhere. So there may be hope for the endangerment finding yet.

Interesting. Uh, yes, and I mean, it's clear when you hear sort of Chris Wright, the US Energy Secretary, and people hold forth that they're very good at making a link between fossil fuels, energy security, poverty, women's rights. It all sort of goes together in a nice and those health problems that then come from fossil fuels are, yeah, very much ignored.

So yeah, it's fine.

Interesting to see what happens next. Well, there's plenty for us to keep an eye on there. I don't know if either of you are keeping a particular eye on any court cases that are on the way at the moment or anything, trends that you're looking out for. Flo, is there anything in particular that you're monitoring or would like to see the outcome from?

Yeah, that's That's a really great question, actually. I think there's a lot interesting happening around health and kind of chemicals. I also cover for Sustainable Views, the kind of fashion and textile sector, and there's been a lot of murmurings recent months. I've been speaking to many people and there's kind of new books and documentaries coming out around chemical additives and the impacts that that can have on people's health and the way that we kind of take them into the bloodstream. There's been a few lawsuits around uniforms that people are forced to wear and also like undergarments, things like that. So I think that's a really interesting space. I know from speaking to legal experts that it can be very hard to draw a responsibility from a specific company to a health impact because obviously there's so many different factors and And to do that in a legal case, it can be really challenging, but it's a growing area and something I'll be keeping an eye on.

Yeah, really, really, really interesting. So I think about every time I go for a run and I have my plastic running kit on, that goodness knows what it's potentially doing to us, but hopefully we'll all be okay and we won't need to bring any lawsuits. Lizzie, is there anything that you're focusing on particularly?

Well, what's dominating in the US at the moment is these many, many lawsuits against the federal government for the cancellation of various grants. Grants, loans, etc., under the Inflation Reduction Act. So I think that that will be keeping most kind of environmental groups in the US busy for a long time.

Excellent. Well, thanks, and we'll definitely get you both on again in a few weeks or months to feedback on exactly where some of these cases are going. So thanks to both of you for being there today. It was really interesting. And to keep up with changes to sustainability laws globally and litigation risks for businesses, be sure to sign up for a free trial of Sustainable Views and our daily newsletter at sustainableviews.com. We'll be back with another episode later this month.