State governments and large corporates will be held to account on climate related pledges, warns Clyde & Co

In its market predictions for the year ahead, law firm Clyde & Co says that more industries will come under the spotlight as climate litigation grows and that Australia will become a centre of activity.

While the oil majors were the first to be hit by climate litigation, a growing number of emission intensive industries will face similar challenges in 2023, it predicts. 

Those already facing increasing attention include automotive companies, particularly in the US and Germany, cement manufacturers and increasingly architects, engineers and others in the construction industry. 

”The building and construction industry accounts for 40% of global carbon emissions and litigants are looking to the industry to improve its processes and make buildings more sustainable,” says Clyde & Co’s Emma Ager. “Other targets appear to include the plastics industry and the food industry.”

D&Os under scrutiny for greenwashing

With already one of the highest numbers of climate litigation cases globally, Australia will see a growing number of climate litigation cases in 2023.

In the last year, it has already seen several landmark decisions across the climate litigation landscape and there are four areas where we expect to see more.

The first is greenwashing. The Australian Securities and Investments Commission issued its first greenwashing fine to Tlou Energy in October 2022 and has just issued three infringement notices to investment manager Vanguard Investments Australia Ltd in further action against alleged greenwashing.

The Australasian Centre for Corporate Responsibility has begun proceedings against Santos, a global energy company, alleging that it made false and misleading claims about producing clean energy.

And the Australian Competition and Consumer Commission is also taking steps in tackling greenwashing.

”We will continue to see a rise in litigation raised by shareholders and activists in relation to greenwashing and ESG commitments made by companies,” says Clyde & Co partner Jacinta Studdert. “It is increasingly a high-risk area for directors and officers if there is failure to disclose or meet disclosure obligations.”

Contesting controversial projects

The second is challenges to corporate governance by shareholder actions for failure to consider and address climate risk. There is less focus on monetary compensation but rather litigation towards regulation and or accountability of corporations.

The third is challenges to the validity of approvals for fossil fuel projects such as Adani’s Carmichael coal mine in Central Queensland.

In November, Queensland’s Land Court rejected a bid by Clive Palmer’s Waratah Coal to develop Australia’s largest thermal coal mine in the Galilee Basin, due to the human rights and climate change impacts of the proposal.

Projects requiring government approval and corporations may face legal action by third parties who allege these projects will negatively affect the climate.

Human rights is another area where there may be a rise in arguments over duty of care obligationsIn September 2021, the UN Human Rights Committee found that Australia had violated the human rights of Torres Islanders because they had failed to protect them from the impact of climate change.

”Going forward, construction projects may only be approved with contractual climate change obligations in mind,” says Studdert. “However, they may be liable for negligence (pending future cases) regarding a duty of care to address climate change risks.”

“As we go into 2023, the number of climate litigation cases in Australia is set to ramp up.”