Climate litigation: a threat to business or keeping polluters honest?

Climate change litigation is nothing new. Legal cases have been traded back and forth between individuals, activists, local and national governments for several decades.

But cases are on the rise. According to data from the Grantham Research Institute on Climate Change and the Environment, the cumulative number of climate change-related litigation cases globally has more than doubled since 2015.

And the targets of these cases are changing too. The majority of climate-related cases (70%) may still be directed against governments (both national and regional), but individual businesses are increasingly finding themselves on the hook too, as third parties challenge their carbon emissions and other forms of environmental harm.

So, where has this trend come from, and what does it mean for companies’ efforts to clean up their act?

The US is firmly established as the leading jurisdiction for climate-related litigation against individual businesses. However, filings data shows that cases are rising elsewhere too, with the number of cases ticking up particularly quickly in Latin America, Asia and Africa.

In Europe, on the other hand, it’s Germany that’s leading the way. Empowered by a 2021 ruling which declared Germany’s Federal Climate Protection Act unlawful on the grounds that its failure to adequately specify emission reductions would unduly burden future generations with more drastic targets, activists have now launched separate suits against BMW, Mercedes, Volkswagen and oil and gas producer Wintershall Dea in relation to their indirect involvement in generating emissions.

The number of climate-related cases filed each year is rising significantly, as more and more activists and NGOs seek to hold businesses responsible for their contributions to man-made climate change. And as precedent builds, that trend is likely to continue.

Up until now, it has been energy companies bearing the brunt of this, but legal challenges are increasingly touching polluting businesses of all stripes.

Of course, the idea that precedent will encourage activists to continue challenging major corporations over climate change relies on these lawsuits continuing to go their way.

That isn’t always the case but, cumulatively, the data on the outcomes of these cases suggests a slightly better than average chance of success for the activists.

For businesses, then, it’s clear that climate-related litigation by third parties is rapidly becoming a more significant risk. And even if cases don’t make it to court, it’s likely that the threat of litigation could increasingly influence decision-making. In December 2021, for instance, Shell withdrew its support for a project exploring the Cambo oil field in the North Sea in the wake of a noisy campaign against it and the threat of a lawsuit.

So, what can businesses do to mitigate this risk? Well, for now at least, it looks as though the only answer is to get serious about reaching net zero.