https://orcid.org/0000-0002-1026-8292
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Ben Chester Cheong, The doctrine of corporate conscience: navigating the labyrinth of ESG litigation in the quest for sustainability and justice, Capital Markets Law Journal, Volume 19, Issue 4, November 2024, Pages 352–361, https://doi.org/10.1093/cmlj/kmae016
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1. Introduction
The growing prominence of environmental, social and governance (ESG) factors in corporate decision-making and investor considerations has led to a new era of corporate accountability.1 ESG factors encompass a wide range of issues, including climate change, human rights, labour practices, diversity and inclusion and corporate governance.2 The integration of ESG factors into investment strategies and corporate practices has been driven by the recognition that these issues can significantly impact long-term financial performance and risk management.3 As a result of this increased focus on ESG, there has been a rise in ESG-related litigation against corporations.4 This litigation has taken various forms, including lawsuits related to climate change disclosures,5 human rights abuses in supply chains6 and diversity and inclusion practices.7 ESG litigation has emerged as a powerful tool for promoting corporate accountability and driving positive change in corporate behaviour and decision-making.8
ESG regulation and litigation, while interconnected, represent distinct facets of ESG-based liability. Regulations typically involve government-mandated standards enforced by regulatory bodies, often resulting in fines or administrative actions for non-compliance.9 In contrast, ESG litigation is initiated by private parties or public entities through court system, drawing on various legal doctrines, such as securities law, corporate law, consumer protection, environmental law and human rights law.10 These cases can involve claims of greenwashing, failure to disclose material ESG risks, breach of fiduciary duty or negligence in addressing ESG-related harms.11 Litigation presents unique challenges in establishing causation, quantifying damages and proving the materiality of ESG information.12 While regulatory compliance can influence litigation outcomes and vice versa,13 the two processes remain distinct in their enforcement mechanisms and remedies.14 Given the complexity and growing importance of this area, I am going to focus on ESG litigation.
