Five in Five - Brodies Q&A

Our Five in Five Q&A series provides quickfire, engaging insights on topics that matter to our audience.

Each release will showcase different perspectives, give detailed focus on our partnerships and raise useful points for discussion.

In this edition, prominent law firm Brodies shared their perspective.

Q1. What role does Brodies play in supporting businesses through the growing complexity of climate and sustainability regulation?

As issues of climate and sustainability become more important for clients, our colleagues have been working closely with clients to share our legal insights on climate and sustainability.

We recognise that achieving the UK's net zero carbon emission targets will require innovation and change throughout the economy. We’ve produced a series of webinars, podcasts and articles to discuss the response needed to address the climate emergency and highlight approaches and initiatives taking place across different sectors in the UK.

We have also given legal advice to clients on a wide range of climate related issues from advice on ESG strategies, energy projects, low emission zones, and complex disputes involving climate.

Q2. We have seen a sharp rise in climate-related litigation globally. What kinds of cases or claims should companies be most alert to right now?

Clearly, there are a wide range of types of action that could impact on companies. I’d highlight three particular areas to watch.

Climate change litigation has become a key instrument to enforce or enhance climate commitments made by governments. We are still seeing a significant number of challenges to decisions made by governments including into the grant of permits and permissions which are said to be, amongst other things, contrary to Government policy on the climate. With that in mind, companies that hold permits or licences that could have an impact on the environment should be particularly alert to the risk of legal challenge.

Cases have also been brought around the world on human rights grounds against governments, states, local authorities, and corporate entities to enforce compliance with positive and negative obligations to protect and respect human rights. This has led to the consolidation of 'climate due diligence', where corporations may be included in litigation about a failure to consider human rights issues in their activities.

Finally, greenwashing litigation remains a key trend. Greenwashing is litigation that focuses on holding public bodies and corporates accountable for any climate-related claims they make. This is of increasing importance given widespread public debate about the contribution that individual lifestyle and consumer choices can make to climate change and the importance of clear communication by companies about their 'green' credentials. Greenwashing challenges may be filed either before the courts or non-judicial oversight bodies such as advertising standards boards. 

Q3. How can legal advice help companies reduce exposure to ESG and climate risks before they end up in the courts?

ESG is a critical area of focus for businesses and organisations. It is widely acknowledged that failure to address ESG and to embed a strong ESG culture within organisations may have serious financial and reputational impacts, including ending up in disputes in court or tribunals. Equally, there are significant opportunities and benefits for organisations who address and embrace these factors. As investors, customers, regulators and society increasingly focus on ESG, it has become a fast moving and complex area for businesses and organisations to navigate and manage.

We believe that one of the best ways of avoiding exposure to legal challenge is to get your compliance strategy right, including getting legal advice at an early stage where appropriate.

ESG lawyers can provide support and advice on all aspects of ESG, including:

• environmental impacts, climate and sustainability;

• impacts on society and managing relationships with colleagues, suppliers, customers, competitors and communities (including diversity and inclusion, human rights, supply chain, competition / antitrust, corruption and bribery); and

• governance and compliance, focusing on visibility and accountability, risks, threats and opportunities, and long term value creation.

Q4. How do you see climate litigation evolving over the next five years, and what should businesses be doing now to prepare?

One of the most interesting developments is climate litigation moving out of the courtroom into tribunals and complaints processes. We have seen the complaints mechanisms of large financial institutions being used to prevent or reduce access to finance by companies that are said to have either not complied with ESG reporting requirements, or who are alleged to have acted inconsistently with the lender’s ESG commitments. Whilst these complaints processes are normally conducted in private they can lead to reputational damage and have significant implications if e.g. financial covenants are tightened.

I would also anticipate a rise in the use of class actions to pursue climate litigation. The viability of these types of claims in the UK will be determined by the outcome of cases raised in the USA, and in other jurisdictions with developed class action regimes. Central to the viability of these types of claims will be whether litigation funders are incentivised to back them. The size of the claimant group is a relevant factor in securing funding. The bigger the claimant group, the larger the compensation payout if the claim is successful. Given the widespread impact of climate change, and the public awareness and activism in this space, claimant groups in these cases could be huge.

In order to prepare, businesses should ensure they have robust ESG reporting strategies and also ensure they understand all of the courts, tribunals, and complaints mechanisms that they could be subject to if they get it wrong.

Q5. Beyond carbon, do you expect to see litigation and regulation expand into biodiversity, nature, or social sustainability issues?

I see biodiversity and nature climate litigation as a growing type of climate litigation. One area to keep an eye on in particular is the planning system. A feature of many planning challenges is a failure to comply with biodiversity and the Habitats Directive.

Scotland’s National Planning Framework 4 contains a specific policy on biodiversity with a policy intent “To protect biodiversity, reverse biodiversity loss, deliver positive effects from development and strengthen nature networks.” Development that does not contribute to the enhancement of biodiversity risks non-compliance with NPF4 and therefore planning policy. Whilst challenges based on nature and biodiversity have proved difficult to win, I would anticipate seeing biodiversity being a more prominent feature in climate litigation, and in particular in relation to challenges to planning decisions.

Keep an eye out for our next installation in the Q&A series!