Greenwashing firms and public entities face growing threat of litigation

Irish companies and public entities face mounting risks of legal challenges for “greenwashing” their commitments to cut carbon emissions in the coming years, US environmental lawyer Maren Salaheldin has said.

“ESG [environmental, social and governance] will become a big area of litigation in the next 10 years,” said Ms Salaheldin, co-lead of US law firm Clark Hill’s ESG and sustainability advisory practice. Irish public and private sectors “are going to be in the hot seat” like those in other jurisdictions, she said.

Ms Salaheldin said claims by the Government and companies as they highlight progress towards targets to reduce carbon emissions will come under growing scrutiny. Greenwashing is when an entity makes misleading or unsubstantiated environmental claims for marketing purposes.

The incoming EU Corporate Sustainability and Reporting Directive, which strengthens rules around the social and environmental information that large companies and public interest entities must disclose annually, is due to be transposed into Irish law by the middle of next year.

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“Companies that have not already started to set up systems to gather data and analyse it are going to be behind the curve,” said Ms Salaheldin.

A recent survey carried out for the Irish Compliance Institute suggested that more than 40 per cent of companies here will struggle to provide the data required, while almost 60 per cent said the new rules will have a significant or huge impact on their business.

The most high-profiled ESG legal case in the Republic was when an advocacy group, Friends of the Irish Environment, filed a suit in the High Court in 2017 against the then government, claiming a national mitigation plan spanning 2017-2022 failed to specify any measures to urgently reduce greenhouse emissions as required by law. The Supreme Court ultimately moved in 2020 to overturn what it called an “excessively vague and aspirational” plan.

The number of climate litigation cases has more than doubled globally to 2,000 over the past seven years, with about a quarter of them filed in 2020-2022, a report published last year by the London School of Economics states.

Beyond litigation, accusations of greenwashing or ESG-washing can severely damage a company’s reputation and share price in the court of public opinion, said Ms Salaheldin.