The Rise of ESG Litigation: Trends and Predictions

The litigation process has always been a rather complicated mess to dig through, and there are always new trends and concepts that you have to stay on top of. Right now, that’s the main concern for legal teams everywhere; this is because of something that has been growing immensely over the last few years.

We’re talking about ESG litigation and the way it’s impacting the legal field.

ESG litigation isn’t totally new, but it has never been more of a focus for the legal system as it is now. So, we’re going to provide a breakdown covering what ESG litigation is, the types of cases it’s used for, trends that affect it, and our predictions for what you should prepare for in the coming years.

Let’s get started.

What is ESG Litigation?

ESG stands for environmental, social, and governance litigation. Those are the three main spheres that ESG litigation covers and the types of trials that tend to stem from it. However, it’s a lot more complicated than that.

ESG litigation is used as a way to assess how a company holds up to social standards in relation to those three concepts, and if it doesn’t hold up to scrutiny in a way that implicates illegal or unjust behavior on the company’s part, it can turn into litigation to correct that behavior.

This can be a complicated concept to follow. So, we’ve prepared some standard examples of ESG litigation to help you familiarize yourself with it.

1: Poor Environmental Practices

For this example, let’s assume that a company has been utilizing a local water source for cooling purposes in a manufacturing plant. The company claims to follow EPA guidelines for this, and it doesn’t report any uses that can contaminate the local water source.

However, locals have been complaining about the water looking contaminated and the local water changing in flavor since the company began its operations.

The first part of ESG would be assessing the situation. Investigations would be triggered by local environmental groups or larger accountability teams to see if the company is doing something it shouldn’t.

Let’s say that the team conducting an investigation into the company’s behavior finds that the company is pulling in water for its cooling needs, but it is then pumping that untreated water that has run through its manufacturing equipment right back into the water source. This water source is used to provide fresh water to the public, and the concerns presented by the public are found to be valid.

This can move into a litigation phase where a legal team such as yours is tasked with presenting this behavior to the court, entering evidence found according to court guidelines into the records, and pursuing justice for the community this company has affected.

This would be ESG litigation in action in terms of the environmental side of things.

2: Social Injustice

Social injustice is another big topic when it comes to ESG, and it encompasses the social aspect of it. In fact, to a degree, the environmental example we gave above would have social undertones to it. After all, the main problem is that the company in that example is not only harming the environment, but it’s hurting the community that relies on it, too.

For this example, we’re going to focus more on a topic that has been entering the news a lot more, lately.

Let’s imagine that a longstanding company is being accused of employing people based on their race instead of their ability to do the job correctly, and that extends to handing out promotions based on race rather than performance. Nothing has been said specifically by management to support that claim, and seemingly, there’s no evidence of it. However, if you did deeper, there are certain patterns that can be noticed and used against the company.

Let’s say the company has a lower level of the company staffed 90% by a minority group, and only 10% of those lower positions are staffed by a majority group. However, with each rung up the corporate ladder, those percentages switch; all the way until you reach 100% of staff members consisting of a majority group at the top.

An ESG investigation can find these patterns and pose them as a social injustice situation. That can then result in the situation being brought in front of a court to properly punish the injustice and correct it.

Legal teams would use statistics to support their argument that the company is using racial factors in their hiring and promoting practices, and the company can be held accountable for that.

Trends in ESG Litigation

ESG litigation isn’t something that a lot of teams are familiar with, because it wasn’t a common thing for quite a long time. It has just now started to produce legal trends.

This is large because of how society has been looking at injustices of various kinds, and in the pursuit of correcting those injustices and holding people accountable, the litigation behind such problems has taken center stage.

That doesn’t mean that ESG litigation is brand new. While the term wasn’t thrown around a lot, there have been cases that match the concept for quite some time.

Environment ESG Litigation in the Past

This is one of the ways ESG litigation really got started. As society started to become a little more conscious about its impact on the environment, holding companies that recklessly damaged it accountable became a key point that legislators had to handle.

As such, lawsuits against specific companies for the way their everyday business practices were harming the environment became commonplace.

You might remember the massive oil spill that struck the Gulf Coast in the 2010s. Well, that resulted in ESG litigation taking place. It was necessary to hold BP accountable for the business practices that caused such a destructive and costly accident.

In that case, it was very clear-cut that BP had done something wrong, but it did open the floodgates for legal teams to hold companies accountable for various practices that are harmful to the environment.

This is currently picking up a lot of steam with key manufacturing, natural resource harvesting, and transport companies coming under fire for their lack of environmental awareness.

Social ESG Litigation in the Past and Present

When it comes to ESG litigation looking at companies, it has been an ongoing situation since the civil rights era. As society was starting to shift, simply focusing on getting minority groups, particularly African Americans of the period, into the workforce along with white workers was a major undertaking. It was also swept under the rug until a few key cases took place and made it harder for companies to avoid accountability for discriminatory crimes.

There was also a major boom in ESG litigation regarding the “Don’t ask, don’t tell” rules of the US military. This would fall partially under the governance sphere of ESG litigation, but it has social implications, too.

As “Don’t ask, don’t tell” was brought into the limelight and challenged, litigation began to take place on a case-by-case basis. Now, much of the actual widespread changes that took place were done internally and without civil cases being triggered, but there were a number of individual cases that were brought to court to find justice for soldiers impacted by the government’s practices.

Now, ESG litigation has exploded. Various groups, beyond the core groups that triggered nationwide changes in the past, have begun to take a closer look at the behavior of companies and how they are not living up to the social standards and laws that they should be.

Companies are under more scrutiny regarding their hiring and promoting standards now than they ever have been in the past, cases against racist or otherwise bigoted behavior in the workplace are brought up extremely quickly, and looking at a company’s culture to find patterns of social injustice is commonplace.

This also doesn’t seem to be slowing at all. If anything, you should expect it to become a major part of the litigation field in the coming years. People are only becoming more aware of the under-the-table tactics employed by companies to uphold old, traditional, practices that aren’t fair or acceptable in the modern world.

As ESG continues to rise in popularity, it is likely that companies will be held accountable for patterns that are far outside of the topics already brought to the table. Companies (and the legal teams representing them), should be prepared to potentially be assessed and taken to court over discreet patterns or blatant acts of social injustice.