Francesca Bugg, associate in our Commercial Litigation team, spoke to FT Group publication Sustainable Views as part of their analysis that regulatory divergence will drive more ESG lawsuits in 2025. Partner Elaina Bailes provided comments for CDR Magazine’s summary of the aviation industry bracing for a wave of lawsuits and regulatory enforcement in the year ahead. Francesca and Elaina’s commentary is included in full in this article.
Just as 2024 was a pivotal year for ESG litigation, looking forward to 2025 we expect a similar sense of momentum. Consumer and investor expectations have shifted significantly in recent years with growing general awareness of corporate environmental and social responsibilities. Businesses of all kinds are expected to take action on ESG concerns, partly as a result of increased legal and regulatory compliance pressures.
Certain jurisdictions have been more active than others, though, and there has been relatively little actual litigation in England and Wales to date. In particular there has been limited success for greenwashing cases in the courts, though the Advertising Standards Authority has been active in this space.
What is likely to happen in the UK?
We expect to see further growth in the trend toward the use of group actions to bring environmental damage cases against businesses. In particular this is likely in relation to water pollution and plastic pollution cases, and potentially also for environmental harms overseas where UK parent company liability is claimed.
Companies will need to keep on top of and establish new compliance procedures to ensure they are meeting the ever-evolving regulations, including:
- the revised Sustainable Finance Disclosure Regulations (SFDR);
- the International Financial Reporting Standards (IFRS) sustainability disclosure standards, and;
- the updated Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) regulations.
Corporate social responsibility will also continue to be a focus, and companies need to demonstrate their commitment to protection across their supply chains. Failure to do so may lead to claims by investors for failures of corporate governance.
Plastic pollution on the rise
The next 12 months will be an interesting period for plastic pollution, as big-name companies have announced that they are dropping certain environmental protection commitments. At the end of 2024, The Coca-Cola Company rowed back on its pledge made in February 2022 to offer 25% of its globally-sold beverages in reusable packaging by 2030, and Morgan Stanley has recently dropped a 2030 goal to ‘facilitate’ 50 million metric tons of overall plastic pollution prevention or reduction.
Perhaps not by coincidence, this trend comes at the same time as a rise in litigation related to plastic pollution. In September 2024, the state of California filed a first-of-its-kind lawsuit against fossil fuel giant ExxonMobil for allegedly deceiving the public about the plastic pollution crisis. Shortly after, Los Angeles County brought legal action against both Coca-Cola and their largest rival PepsiCo, alleging their “significant role” in plastic pollution’s negative impacts on the environment and public health. The suit also alleges the companies have failed to disclose environmental and health harms associated with commonly used plastic drink containers and have misled the public about the extent to which they are recyclable.
What will the anti-ESG backlash mean for litigation?
While it will be interesting to see how climate activists react to the changing landscape of ESG commitments and related litigation, the potential influence of anti-ESG figures in the new US administration may be equally significant, and somewhat more unpredictable. While the rate of shareholder litigation related to ESG issues is likely to keep expanding, any potential rollback of regulation may mean fewer claims brought related to (lack of) compliance.
Sustainable commercial aviation?
It seems inevitable that the aviation sector will increasingly face the following litigation risks – these trends have started over the last few years and seem set to increase.
One likely area is greenwashing claims targeting mainly airlines for sustainability claims made in their advertising. Ironically this can often be directed at initiatives like promoting the use of SAF, that longer term look to improve the climate credentials of the industry. Regulators such as the ASA have been very active in this area too, adding to potential reputational risk.
There will also be sector expansion challenges, e.g. challenges to government policies approving airport expansion on the basis it increases pollution and the wider impact on emissions and climate change; as well as legal challenges to financing of projects not aligned with climate action or criticism of schemes promoting other types of transport.
We may also see mis-selling claims in relation to carbon credits. The aviation sector has been a heavy user of carbon credits to offset emissions but the carbon credit industry has been beset with allegations of fraud and doubts about the accuracy of methodologies for calculating offsets, which we expect may lead to many schemes being discredited. Buyers of credits could face claims from consumers but also on a business-to-business basis.
Finally, we should consider corporate governance challenges – this is an area that has not yet fully hit the aviation sector but we have seen polluters in other industries (eg oil and gas) become the target of climate activists asking courts to rule that decisions made by directors are unlawful on the basis they have breached fiduciary duties for not fully considering climate change. While these claims have had limited success so far, they are high profile and potentially damaging for defendants.
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