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Why green-hushing won’t fly in the age of impact litigation
By Tricia Hobson (Partner, Litigation & Regulatory, DLA Piper) & Natalie Caton (Partner, Litigation & Regulatory, DLA Piper).
Last month DLA Piper brought together experts from across the world to discuss the rise-and-rise of impact litigation in an age of Environmental, Social and Governance (ESG) reporting.
Leaders from a range of industries were unanimous that not only is ESG reporting here to stay, it has become essential for companies in their defence from impact litigation.
So what is impact litigation? We are all familiar with litigation as a means to achieve compensation for perceived harm, but less familiar with litigation as means of achieving a social or environmental impact.
Spurned along by environmental and advocacy groups, impact litigation is on the rise in Western jurisdictions. It’s also aided by class action friendly jurisdictions such as the United States and Australia, which are both primed from an uptick of such cases.
Impact litigation is less about compensation, although it can involve that, but more about making a point.
This trend has been reflected in the number of climate dispute cases. Our report on this topic found the United States led the field on climate disputes (1213), followed by Australia (98) and United Kingdom (62). Again, we see these numbers as a taste of things to come.
Whether it’s the Torres Strait Islanders holding the Commonwealth Government to account on rising sea levels and erosion, or shareholders of financial institutions or insurance companies seeking to influence the decisions of ‘emitter enablers,’ it’s clear a tipping point has emerged.
No longer the vestige of monied classes, litigation has become feasible for activist groups and other causes with access to online fundraising and passionate followers.
In such a febrile environment, some companies have turned to understating their green credentials or going silent altogether. Green-hushing has emerged as the strategy of choice for companies worried about reporting on their environmental credentials.
Some companies have opted to withhold reporting on climate targets, thinking this protects them from activist and shareholder scrutiny. While greenhushing may provide some temporary relief, it offers no genuine protection in a system with few safe harbours for those who ignore risk.
A genuine ESG strategy requires complete buy-in from the board level down. Far from being an exotic add-on, a comprehensive ESG strategy protects the long-term performance and value of companies.
When we look at today’s major corporate failings, ethical breaches are increasingly at their core. It’s evident that rigorous framework for the management of environmental and social impact, along with appropriate governance, is the best insurance money can buy.
