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.
How Will the Rise of ESG Litigation Affect You and Your Clients
The current boom in ESG litigation isn’t going anywhere. In fact, we believe it hasn’t even kicked into full swing, yet. As such, it’s going to be a courtroom situation you and your clients will be dealing with for the foreseeable future, and you do need to know what to expect.
If you’re working on behalf of ESG entities to hold companies accountable, you have a bright future ahead; even if there are some obstacles to overcome.
If you’re defending companies, it might get a bit harder to do your job.
Siding with the Plaintiff in ESG Cases:
In the past, fighting against major corporations to combat practices that weren’t exactly tangible at first glance could feel impossible. With our court system being fact-based, it was difficult to prove that companies were treating workers of certain backgrounds differently, using inappropriate criteria to distribute promotions or resources, and more. After all, no one just comes out and says that’s what they’re doing, and identifying patterns within the company’s infrastructure wasn’t as easy to do. You also have to consider how the topics were treated culturally in the past; they simply weren’t seen as serious problems like they are now.
Now, the tables have turned. With multiple entities in charge of assessing companies that get within their radar, companies that aren’t operating ethically within socially accepted bounds are much easier to expose.
There have also been a large number of cases that have set precedents for modern legal teams to work on top of. In the past, when these sorts of issues were first being explored, there wasn’t a legal foundation in place to produce clear-cut results.
If you’re handling cases against companies that have ESG violations, your job is easier now than it ever was.
However, there is still the burden of proof to worry about, and you’re still competing with large companies with deep pockets. So, there are still obstacles your team will have to face.
Representing the Defendant in ESG Cases:
In the past, dealing with an ESG-like case wasn’t too much of a problem. There wasn’t an overwhelming public opinion that companies should be held accountable, and there weren’t any precedents helping the plaintiff make their case.
Now, things are a bit different. If you’re representing a client who actually has adopted some inappropriate practices, whether those be environmental or social, the tools are in place for legal teams to appropriately seek justice, and the courts are on board to actually execute that justice when needed. It’s been proven time and time again in recent news.
However, this can also present an unnecessary threat to your clients.
While most people would agree that holding companies accountable for their actions is a positive thing, what happens when overzealous entities try to pursue litigation against completely innocent companies? As a defense team, you should be able to look at it from that point of view.
Unfortunately, the best defense against false claims warranting ESG litigation is proper data recording and ensuring your company is using socially acceptable standards.
Get Help Understanding ESG Litigation with Litigation Insight Group.
As with any major change to the legal system, even if the change is just a growing trend, there are bound to be countless questions you need to ask before forming an argument to present to the court. Doing anything less than your due diligence is simply neglecting your clients.
At Litigation Insight Group, we’re here to help with that process. We can guide you and your legal team through everything from expert witnesses to the ins and outs of ESG litigation to help prepare you for the courtroom.