There are plenty of examples of lawsuits filed by NGOs to address companies' ESG behavior. Both at home and abroad. A number of them passed by during the sub-session Directors' Liability and ESG during the Damage Afternoon that the Association organized on 7 June in Bussum. Like that of the Peruvian farmer Saul. He has filed a lawsuit against the German energy company RWE and has appealed.
It can hardly be a coincidence that the sub-session on directors' liability takes place in the Boardroom of Spant! In front of a group of very interested insurers are Jochem Spaans and Tim Sweerts of law firm Allen & Overy. Sweerts is a litigator and Spaans is a partner and specialises in administrative law. Both are experts in the field of ESG risks and how best to deal with them.
Corporate Governance Code
There are few or no lawyers in the room, so the two start with a short theory lesson. What is directors' liability? And what is arranged for drivers? When can you be held (personally) liable? "Important guideline is the Corporate Governance Code , which will be updated in 2022," explains Sweerts.
This code says, in short, that a director must focus on sustainable long-term value creation. "That implicitly indicates that the focus is not on the short term and on cashing."
Pressure from all sides
The starting point for directors' liability is still that a director is not liable for what the company does, Sweerts continues his story. "You have to cross a high threshold before there is a serious personal reproach. In other words, something must really be going on."
On the other hand, Spanish agrees, "when it comes to ESG, we're dealing with a many-headed monster. There is a lot of pressure on drivers. Just read the newspaper. Headlines such as Milieudefensie threaten to hold Shell board members personally liable or Real climate activism will have to come from the banks is the order of the day."
"It almost doesn't matter what the judge thinks anymore. Just the threat of a lawsuit changes the behavior."
Green pressure
According to Spaans, there are many different forms of green pressure, which also comes from many angles and entails various risks. "As a driver, you simply can't take it lightly. The expectations of the market and the way society looks at you are changing rapidly. The focus of regulators and government is also on greenwashing and the way in which you as a company report. In practice, we are also increasingly seeing impact litigation. It hardly matters anymore what the judge ultimately thinks of it. Just the threat of a lawsuit changes the behavior."
Not a national matter
And to complicate matters further, he stresses that ESG litigation is no longer a national issue. "The Urgenda case and the ruling in the case that Milieudefensie brought against Shell show how far-reaching one ruling can be. The fact that Shell has been condemned to adhere to the goals of the Paris Agreement is legally groundbreaking. The question is whether the court would reach the same opinion with other companies."
The following sheet shows a picture of the world, with arrows here and there and lists of important court cases. Spanish lifts one out. In Germany. "The case of Peruvian farmer Saul is one to follow. He has a farm that is located next to a lake. Due to climate change, the water level has risen considerably. A large part of his lands is under water and is no longer usable. He does not try to prove causality with global climate change, but claims "only" that the German company RWE is responsible for less than 1 percent. He also claims only a correspondingly small part of his damage. That claim for damages is not large, but this could be a groundbreaking ruling. Further substantiation is now taking place in the appeal. I'm very curious to see how this turns out."
What can you do yourself?
Allen & Overy is increasingly seeing a shift in thinking about ESG among clients. Sweerts calls that logical. "The demands are increasing rapidly. There is also an increasing social expectation that you take sustainability considerations into account."
At the end of their speech, the two lawyers had some tips in store for the attendees. "Set realistic goals that are also proportionate", is perhaps one of the most important. "And make sure that these are measurable, so that you can report reliably and accurately."
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