Explainer: Climate litigation & corporate accountability — the concepts, the economics, and the decision checklist

Climate litigation cases worldwide have surged to over 2,666 cumulative filings as of mid-2024, with the UK emerging as Europe's second-most active jurisdiction behind only Germany, according to the Grantham Research Institute's Global Trends in Climate Change Litigation report. More than 230 new cases were filed globally in 2023 alone—a 14% increase from 2022—and early data suggests 2024-2025 will exceed these figures. For UK businesses navigating mandatory climate disclosures, understanding the intersection of litigation risk, measurement integrity, and standards alignment has become essential. This explainer provides a practical primer on the key concepts, the economics driving accountability, and a decision checklist for avoiding the "measurement theater" that exposes organisations to legal and reputational harm.

Why It Matters

The UK's climate litigation landscape has transformed from a niche legal concern into a material business risk affecting companies across every sector. The 2024 ruling in ClientEarth v Shell—where the High Court allowed shareholders to bring derivative claims over climate strategy—established that directors face personal liability for inadequate climate governance. Meanwhile, the Advertising Standards Authority has issued 32 rulings against greenwashing claims since 2022, with companies including HSBC, Ryanair, and Shell receiving formal reprimands.

The financial stakes are substantial. Research from the London School of Economics estimates that companies facing climate litigation experience average stock price declines of 0.41% upon filing—translating to £2.3 billion in aggregate market value losses for FTSE 100 defendants. Legal costs for defending major climate cases now range from £5-25 million, excluding potential settlements or judgments. The Business and Human Rights Resource Centre documented 78 corporate accountability lawsuits filed against UK-headquartered companies between 2020 and 2024, spanning emissions misrepresentation, inadequate transition planning, and deceptive marketing.

UK regulatory pressure compounds litigation risk. The Financial Conduct Authority's (FCA) Sustainability Disclosure Requirements (SDR), effective from December 2024, impose strict anti-greenwashing rules requiring climate claims to be "fair, clear, and not misleading." The UK's adoption of ISSB standards through the Transition Plan Taskforce framework means companies must demonstrate credible net-zero pathways backed by verifiable data. Organisations without robust measurement, reporting, and verification (MRV) systems face both regulatory penalties and increased litigation exposure.

The Companies Act 2006 Section 172, as interpreted by recent case law, now requires directors to consider climate impacts as part of their fiduciary duties. The FCA's 2024 guidance explicitly states that climate risk is a material financial risk requiring board-level oversight. This legal evolution means climate accountability has moved from corporate social responsibility into the realm of mandatory governance obligations.

Key Concepts

Climate Litigation encompasses legal actions seeking to hold governments or corporations accountable for climate-related harms, inadequate emissions reduction, or misleading climate claims. In the UK context, this includes judicial review of government policy (as in the landmark R (Friends of the Earth) v Secretary of State case), shareholder derivative actions, consumer protection claims, and advertising standards complaints. The Sabin Center for Climate Change Law identifies three primary litigation categories: strategic cases advancing systemic change, accountability cases targeting specific corporate behaviour, and defensive cases where polluters challenge regulations.

Measurement, Reporting, and Verification (MRV) refers to the systematic processes for quantifying greenhouse gas emissions, disclosing them transparently, and obtaining independent verification of accuracy. Robust MRV underpins all credible climate claims and provides the evidentiary foundation necessary to defend against litigation. The UK's Climate Change Committee emphasises that MRV quality directly correlates with transition plan credibility—organisations with weak measurement infrastructure cannot demonstrate genuine emissions reduction versus accounting manipulation.

ISSB (International Sustainability Standards Board) standards, particularly IFRS S1 and IFRS S2 issued in June 2023, establish the global baseline for sustainability and climate-related disclosures. The UK government confirmed mandatory ISSB adoption for listed companies beginning in 2025, with phased implementation for private companies meeting size thresholds. ISSB requires disclosure of climate-related risks, opportunities, governance arrangements, strategy, metrics, and targets—with explicit requirements for Scope 1, 2, and 3 emissions quantification.

CSRD (Corporate Sustainability Reporting Directive) is the European Union's comprehensive sustainability disclosure regime, affecting UK companies with significant EU operations or listings. While Brexit removed direct CSRD applicability, UK subsidiaries of EU parent companies and UK companies seeking EU capital market access must comply. The European Sustainability Reporting Standards (ESRS) under CSRD impose more granular requirements than ISSB, including detailed value chain due diligence and mandatory third-party assurance.

SEC Climate Rules refers to the U.S. Securities and Exchange Commission's climate disclosure requirements, finalised in March 2024 (though subsequently subject to legal challenges). UK multinationals with U.S. securities listings or significant U.S. operations face SEC reporting obligations. The rules require disclosure of Scope 1 and 2 emissions, with Scope 3 disclosure for material emissions—creating consistency pressure for global climate data systems.

What's Working and What Isn't

What's Working

Third-Party Assurance and Independent Verification: Companies investing in external verification of climate data demonstrate significantly stronger litigation resilience. The FRC's 2024 review found that FTSE 100 companies with limited or reasonable assurance over climate disclosures faced 62% fewer regulatory inquiries than those with unassured data. Verification providers including LRQA, Bureau Veritas, and SGS now offer climate-specific assurance services aligned with ISAE 3000 and ISAE 3410 standards. Unilever's decision to obtain reasonable assurance over all material Scope 1, 2, and 3 categories has been cited as best practice by the Climate Disclosure Standards Board.

Science-Based Targets with Near-Term Milestones: Organisations with validated Science Based Targets initiative (SBTi) commitments demonstrate actionable transition plans that courts and regulators view favourably. As of December 2024, 423 UK companies hold validated SBTi targets, with 78% including near-term 2030 milestones that enable progress tracking. The legal significance is substantial: companies claiming net-zero ambitions without validated intermediate targets face heightened greenwashing exposure. Tesco, Sainsbury's, and M&S have successfully defended marketing claims by pointing to SBTi validation and documented progress against interim targets.

Integrated Climate Governance with Board Accountability: Companies embedding climate oversight within existing governance structures—rather than treating sustainability as a siloed function—demonstrate the strategic integration that courts expect. BP's establishment of a board-level safety and sustainability committee with explicit climate KPIs, supported by executive remuneration linkage, exemplifies structures that satisfy director duty requirements. The Institute of Directors' 2024 guidance emphasises that climate competence should be a board appointment criterion, with regular training and external expert access.

What Isn't Working

Offsetting Without Credible Measurement: Reliance on carbon offsets to substantiate net-zero or carbon-neutral claims creates acute litigation risk when offset quality cannot be verified. The Guardian's 2023 investigation revealing that 90% of Verra-certified rainforest offsets showed no evidence of meaningful emissions reduction triggered multiple consumer protection complaints against companies using such credits. The Advertising Standards Authority ruled against several offset-based neutrality claims in 2024, establishing that companies must demonstrate offset additionality, permanence, and verification—standards most offset portfolios fail to meet.

Scope 3 Estimation Without Supplier Engagement: Companies reporting Scope 3 emissions using industry average factors rather than primary supplier data face "measurement theater" accusations when these estimates diverge significantly from actual supply chain emissions. The Carbon Trust's 2024 analysis found Scope 3 estimates using spend-based methodologies diverged from supplier-specific calculations by 40-120%, rendering such disclosures legally vulnerable as potentially misleading. ClientEarth's ongoing monitoring of FTSE 100 climate disclosures specifically flags Scope 3 methodology weaknesses as potential litigation targets.

Transition Plans Without Capital Expenditure Alignment: Announcing ambitious climate targets without corresponding capital allocation undermines credibility and creates evidence for greenwashing claims. The Transition Plan Taskforce's October 2024 assessment found that only 31% of FTSE 100 transition plans demonstrated clear capex alignment with stated emissions reduction pathways. Climate Action 100+ investor engagement specifically targets this gap, with coordinated pressure on companies including Barclays and Glencore to demonstrate investment consistency with climate commitments.

Key Players

Established Leaders

ClientEarth operates as Europe's most active environmental law organisation, having filed or supported over 200 climate litigation cases including landmark actions against Shell, BP, and the UK government. Their 2024-2025 focus includes director duty claims and financial sector accountability.

Linklaters LLP leads the Magic Circle in climate litigation defence, advising FTSE 100 clients on disclosure compliance, governance arrangements, and litigation strategy. Their Climate and ESG practice includes 120+ dedicated lawyers across 20 offices.

Allen & Overy LLP (now A&O Shearman) maintains a specialist climate litigation team advising on both offensive and defensive matters, with particular expertise in financial services regulatory compliance and cross-border disclosure harmonisation.

Slaughter and May provides climate governance advisory services to major UK corporates, including board training, disclosure review, and litigation risk assessment. Their work on the Transition Plan Taskforce framework has shaped best practices.

Grantham Research Institute on Climate Change and the Environment (LSE) produces the definitive Global Trends in Climate Change Litigation report tracking case filings worldwide, providing the evidentiary foundation for litigation risk assessment.

Emerging Startups

Watershed provides enterprise carbon accounting software enabling audit-grade emissions measurement across Scopes 1-3, with clients including Stripe, Airbnb, and Klarna. Their UK expansion in 2024 targets FTSE 350 compliance requirements.

Persefoni delivers AI-powered carbon management and disclosure platforms, achieving SOC 2 Type II certification and offering integration with major ERP systems for automated emissions tracking aligned with ISSB requirements.

Normative offers automated carbon accounting for SMEs, with a particular focus on supply chain emissions measurement that addresses Scope 3 accuracy concerns driving litigation risk.

Plan A provides end-to-end sustainability management including emissions accounting, target-setting, and disclosure preparation specifically designed for European regulatory requirements including CSRD.

Sylvera operates as a carbon credit ratings agency, providing independent quality assessments of offset projects that companies can use to substantiate offset-based climate claims and reduce greenwashing exposure.

Key Investors & Funders

Generation Investment Management (co-founded by Al Gore) manages $45 billion with explicit climate accountability integration, engaging portfolio companies on disclosure quality and transition plan credibility.

Legal & General Investment Management oversees £1.2 trillion with active climate voting policies, having voted against directors at 80+ companies in 2024 for inadequate climate governance.

Aviva Investors operates the Climate Engagement Escalation Programme targeting 30 systemically important carbon emitters, with explicit warnings of divestment for companies failing to improve climate accountability.

Climate Investment backs early-stage companies developing climate measurement and accountability infrastructure, with £200 million deployed across carbon accounting, verification, and disclosure technology.

Environmental Defense Fund provides grant funding for climate litigation and corporate accountability research, supporting organisations including ClientEarth and the Carbon Tracker Initiative.

Examples

ClientEarth v Shell plc (2023-2024): ClientEarth, as a Shell shareholder, brought derivative proceedings against Shell's board alleging breach of director duties by failing to adopt a climate strategy consistent with the Paris Agreement. While the High Court dismissed the claim in May 2023 on procedural grounds (finding ClientEarth had not established a prima facie case sufficient to proceed), the Court of Appeal's January 2024 analysis confirmed that climate strategy falls within Section 172 director duties and that shareholders may bring such claims where evidence of breach is established. The case has prompted FTSE 100 companies to obtain formal legal opinions on climate governance adequacy.

Advertising Standards Authority v HSBC (2022): The ASA upheld complaints against HSBC advertisements claiming the bank was "helping to plant 2 million trees" and financing initiatives "helping to turn the tide on climate change." The ASA found these claims misleading because they omitted information about HSBC's significant financing of fossil fuel industries, creating an inaccurate impression of the bank's overall environmental impact. This ruling established that positive climate messaging must be contextualised against overall climate-relevant activities—a standard now applied across financial services marketing.

R (Friends of the Earth and Others) v Secretary of State for Business, Energy and Industrial Strategy (2022): The High Court ruled that the UK government's Net Zero Strategy failed to meet legal requirements under the Climate Change Act 2008 because it did not include sufficient quantified information showing how policies would deliver required emissions reductions. This judgment—requiring governments to demonstrate measurable pathways rather than aspirational targets—has informed corporate disclosure expectations, with regulators and investors applying analogous scrutiny to private sector transition plans.

Action Checklist

• Conduct a comprehensive climate disclosure gap analysis comparing current reporting against ISSB S1/S2, FCA SDR, and where applicable, CSRD requirements to identify compliance shortfalls before regulatory or litigation exposure
• Establish primary data collection for material Scope 3 categories, moving beyond spend-based estimates to supplier-specific emissions factors for the 10-15 suppliers representing 80%+ of supply chain emissions
• Obtain at minimum limited assurance over Scope 1 and 2 emissions data from an accredited verification provider, with a roadmap toward reasonable assurance within 24 months
• Review all public climate-related marketing, investor communications, and product claims against FCA anti-greenwashing rules and ASA precedents, withdrawing or qualifying statements lacking adequate evidentiary support
• Ensure board-level climate competence through director training, external expert access, and consideration of climate experience in succession planning
• Align capital expenditure plans with stated climate targets, documenting in transition plans how investment decisions support emissions reduction pathways
• If using carbon offsets, conduct due diligence on credit quality including additionality, permanence, and verification—avoid claims relying on credits without independent quality ratings
• Validate climate targets through Science Based Targets initiative or equivalent independent standard, ensuring near-term milestones enable progress tracking
• Establish internal audit procedures for climate data quality, including reconciliation between financial and emissions accounting systems
• Obtain formal legal opinion on director duty compliance regarding climate governance, maintaining privileged documentation of board climate deliberations

FAQ

Q: Does climate litigation primarily target large emitters, or are smaller UK companies at risk? A: While high-profile cases focus on major emitters and financial institutions, smaller companies face exposure through advertising standards complaints, consumer protection claims, and supply chain pressure. The ASA has ruled against SMEs making unsubstantiated environmental claims. Companies with consumer-facing sustainability marketing, B-Corp or carbon-neutral certifications, or participation in green procurement programs face scrutiny regardless of size. The practical risk for smaller companies is typically reputational and regulatory rather than bet-the-company litigation, but costs of defending even modest claims can be substantial.

Q: How do UK climate disclosure requirements interact with EU CSRD for companies operating in both jurisdictions? A: UK companies with EU subsidiaries meeting CSRD thresholds (€750m+ turnover, 500+ employees for large undertakings) face direct CSRD compliance obligations through those subsidiaries. UK parent companies may also face CSRD through "third-country company" provisions if they generate €150m+ in EU revenue with an EU subsidiary or branch. In practice, most affected UK multinationals are building unified disclosure systems that satisfy both UK ISSB-aligned requirements and ESRS under CSRD, using the more granular ESRS as the base standard. The primary tensions involve double materiality (required by CSRD but not ISSB) and assurance scope.

Q: What distinguishes measurement theater from legitimate climate measurement challenges? A: Measurement theater involves activities that appear rigorous but lack substantive impact—publishing detailed emissions reports using generic industry factors, obtaining certifications without operational changes, or announcing targets without implementation mechanisms. Legitimate measurement challenges involve genuinely difficult technical problems: obtaining primary data from fragmented supply chains, measuring fugitive emissions from distributed assets, or allocating emissions across joint ventures. The distinguishing factor is effort and intent: companies confronting genuine challenges document methodology limitations, pursue continuous improvement, and avoid making claims exceeding data quality. Measurement theater avoids these limitations while making confidence-projecting claims unsupported by underlying data.

Q: How should UK companies prepare for potential SEC climate rules affecting their U.S. operations? A: Despite ongoing legal challenges to SEC climate rules, prudent companies are building systems capable of compliance. This involves ensuring Scope 1 and 2 emissions tracking at entity level (enabling U.S.-specific reporting), establishing internal controls over climate disclosures equivalent to financial reporting controls, and documenting materiality assessments for Scope 3 inclusion decisions. Companies should also monitor case developments—if rules survive judicial review, compliance timelines may compress. The broader principle is that U.S., UK, and EU disclosure regimes are converging on similar data requirements, making investment in robust measurement infrastructure defensible regardless of specific regulatory outcomes.

Q: What role does third-party verification play in litigation defence, and what assurance standard should UK companies target? A: Third-party verification creates an independent evidentiary record that climate disclosures were prepared using consistent methodologies and accurate data. In litigation, verified data shifts burden to plaintiffs to demonstrate specific errors rather than general unreliability. UK companies should initially target limited assurance under ISAE 3000 or ISAE 3410 for Scope 1 and 2 emissions—this provides meaningful credibility at reasonable cost. Companies facing higher litigation risk (consumer brands making marketing claims, financial institutions with financed emissions disclosures) should pursue reasonable assurance, which requires more extensive testing procedures and provides stronger evidentiary protection.

Sources

• Grantham Research Institute on Climate Change and the Environment, "Global Trends in Climate Change Litigation: 2024 Snapshot," June 2024
• Financial Conduct Authority, "Sustainability Disclosure Requirements (SDR) and Investment Labels," December 2024
• Transition Plan Taskforce, "Disclosure Framework: Final Recommendations," October 2024
• London School of Economics, "The Economic Costs of Climate Change Litigation," March 2024
• Advertising Standards Authority, "Environmental Claims: Summary of ASA Rulings 2022-2024," January 2025
• Science Based Targets initiative, "SBTi Monitoring Report 2024," December 2024
• ClientEarth, "Corporate Climate Litigation Trends in the UK and EU," September 2024
• International Sustainability Standards Board, "IFRS S1 and IFRS S2: Climate-Related Disclosures," June 2023