Emerging legal actions may push companies to act on climate change

By Naki B. Mendoza 10 May 2016

Factories in South Korea. Just as climate change itself is certain to cause weather patterns and conditions never experienced before, much of the litigation for dealing with it is also unchartered territory. Photo by: Tan 88 / CC BY-NC

Climate change is altering much more than the temperature of the earth’s oceans and atmosphere. Companies of all types that have contributed to a warming planet are now operating in a much riskier business landscape in which calls for environmental accountability can increasingly translate into legal action. Climate litigation is an emerging and evolving legal practice, according to environmental law experts.

In many ways, the historic Paris climate agreement that governments began ratifying last month officially put the private sector on notice that business as usual can no longer be accepted if countries are serious about curbing climate change. Companies themselves have been calling on governments to create clear and consistent frameworks, such as through a price on carbon,  so that they can adjust their approach.

As those policies continue to take shape, there are also a number of ways that companies are being encouraged to proactively go more “green.” They include civil society-led campaigns and the promotion of the business case for environmental sustainability. A strategy that may put even more pressure on them, however, is legal challenges.

A wave of climate litigation against companies whose actions and operations have exacerbated the problem of climate change is almost inevitable, according to Alyssa Johl, an attorney at the Washington, D.C.-based Center for International and Environmental Law. Her assertion, if true, is a potentially significant business risk that companies historically associated with high carbon emissions — and their investors — should pause to consider.

Johl’s comments came on a panel at Climate Action, a two-day summit on climate change in Washington, D.C., last week, where she spoke about the legal risks that businesses face in a post-Paris world.

At issue is the question of corporate accountability as it relates to carbon emissions and climate change. While the damage and associated costs of rising oceans and severe drought are generally known, what has been much harder to trace is culpability — “causation” in legal speak — of specific entities.

That may be changing, however.

As climate science evolves, Johl described a growing body of “attribution science” that attempts to establish clearer linkages between climate change occurrences and individual emitters. The research practice, backed by authoritative scientific bodies such as the Union of Concerned Scientists and academic institutions like Oxford University, can potentially pave the way for citizens, civil society organizations and governments to seek legal remedy from corporate entities.

“As climate science gets more precise, our ability to identify the plaintiffs and defendants is growing,” said Johl. “The next generation of lawsuits coming to life will be able to trace emissions science to companies to establish culpability.”

For example, one piece of research that begins to look at these issues is a 2013 study by the Climate Accountability Institute. The report attempts to take stock of global carbon emissions between 1854 and 2010 and trace them back to individual emitters. Its findings concluded that 90 entities were responsible for 65 percent of all industrial emissions over that time. Of that total, 50 were public companies — predominantly oil and mining firms — while the remaining 40 were either state or government-owned entities.

Studies such as that, Johl contends, will make it possible to link measurable effects of climate change such as sea level rises to individual companies.

“It’s an evolving area of law that is based on the science,” she said.

The science and methodology is, of course, extremely complex and necessarily subject to fierce debate. But it enough for some environmental law experts to envision four types of legal actions that will become increasingly common.

The first is a scenario in which affected people are plaintiffs. Indeed, this is already occurring. In December 2015, for example, the Philippines Commission on Human Rights announced plans to launch an investigation into 50 large polluting companies over their contributions to extreme weather events and climate change phenomena. International advocacy group Greenpeace has described the motion as the “world’s first national human rights investigation into big polluters.”

Lawsuits brought forward by affected people are still what Johl calls “the first generation” of torts cases.

The so-called next generation would involve consumers as plaintiffs in cases against companies for falsely advertising or misrepresenting the effects of their business on climate change. A lawsuit brought by the World Wildlife Fund against international coal giant Peabody over an ad placed in the Financial Times newspaper that depicted coal as a solution for energy poverty in developing countries, is an early example.

Another recourse could potentially involve investors as plaintiffs suing companies that fail to accurately disclose the carbon impacts of their activities, which can be a strain on a company’s — and ultimately investors’ — resources.

A fourth legal pitfall may see insurance companies that are on the hook to cover the costs from extreme weather events either refuse to indemnify future claims or file suit to recoup previous expenses from companies who underreported their carbon footprints, Johl said.

The future is not inevitably doom and gloom for large emitting companies, however. In addition to the validity of the attribution science, climate litigation is also new legal territory for the courts which must weigh, with little precedent, what cases to consider. A company’s historical emissions are also unlikely to be the only factor a court will consider when determining climate change liability. A lot might also depend on a company’s future trajectory and its commitments towards environmental sustainability, according to various legal experts at the Climate Action summit.

Just as climate change itself is certain to cause weather patterns and conditions never experienced before, much of the litigation for dealing with it is also unchartered territory. It will expose new risks for business and new opportunities to induce sustainable change.  

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About the author

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Naki B. Mendozamfbmendoza

Naki is a former reporter for Devex Impact based in Washington, D.C., where he covered the intersection of business and international development. Prior to Devex he was a Latin America reporter for Energy Intelligence covering corporate investments and political risks in the region’s energy sector. His previous assignments abroad have posted him throughout Europe, South America and Australia.

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