• Probability: High. 
• Financial Impact: Very Cost Intensive.  

In light of the growing trend towards more stringent ESG regulations, we anticipate a surge in litigation and regulatory enforcement actions in 2024. This will likely result in significant legal expenses and potential reputational damage for companies. The spotlight will be on the need for precise and transparent ESG reporting and effective ESG control mechanisms. Key regions to watch include Europe, where lawsuits against fossil fuel companies are expected to increase. In the United States, we predict a rise in actions by the Securities and Exchange Commission (SEC) using reporting and disclosure laws. This will be accompanied by increased class action lawsuits initiated by interest groups. Furthermore, corporate directors and officers will likely face heightened liability risks concerning ESG disclosures. This underscores the importance of accurate and comprehensive ESG reporting and the need for companies to have robust ESG control mechanisms in place¹.

Companies should prepare for these changes by:

• Adhering to current regulations and anticipating future changes in ESG disclosure requirements. 
• Strengthening ESG compliance and reporting systems.
• Appointing an ESG controller.  This role involves ensuring compliance with ESG standards, leading ESG initiatives, and being the point of contact for ESG reporting and litigation matters.
• Regularly assessing potential legal and regulatory risks related to ESG.
• Educating employees and management about the importance of ESG compliance and the risks of non-compliance.
• Reviewing and enhancing insurance coverage to include protection against ESG-related litigation risks can provide a financial safety net.
• Maintaining open and honest communication with stakeholders.
• Ensuring that the company’s board and executives are well-informed about ESG issues, non-compliance risks, and their roles in overseeing ESG initiatives.

Sources:

1. https://www.kirkland.com/news/in-the-news/2024/01/a-litigation-look-ahead-what-to-expect-from-2024 ↩︎