Greener Than Thou

Litigation concerning ESG practices and environmental justice considerations is certain to increase in the years ahead. Public companies in particular: You have been warned.

Two individuals in business attire sitting in conference room

Tanya C. Nesbitt

June 1, 2023 11:00 PM

This year, two of the trendiest terms in the environmental lexicon are “environmental justice” and “environmental, social and governance” management principles, or ESG. Thoughtful and strategic corporate commitments to both, however, require holistic integration—in operations, supply chains and boardrooms—as the only path toward market differentiation.

Domestically, federal and state regulators are calling for companies to improve their ESG performance while simultaneously prioritizing and advancing environmental justice efforts. The days of “single-issue focus” are no more.

ESG has evolved from a peripheral social movement to the center of corporate decision making. Federal agencies including the Securities and Exchange Commission and the Federal Trade Commission are playing a pivotal role in ushering in this change. In the past year, the SEC has proposed two rules to ensure clarity and to support reliable ESG-related disclosure and investment. Two years ago, it also created a Climate and Environmental, Social and Governance Task Force to address ESG-related misconduct and has already announced high-profile investigations against publicly traded companies (Brazilian mining concern Vale was one prominent example) resulting in multimillion-dollar fines and permanent injunctions. The stakes are high for public companies as the SEC begins to weigh in on the things businesses need to share in their disclosure statements.

Initiating meaningful engagement before environmental or social problems arise or project development begins is sound practice."

Similarly, in late 2022, the FTC hinted at its intention to crack down on companies that misrepresent their ESG bona fides through “greenwashing”—a neologism that describes marketing practices that rely on environmental benefit claims that are misleading, deceptive or unsubstantiated by data. The FTC announced a plan to revise its Guides for the Use of Environmental Marketing Claims (known as “Green Guides”) for the first time in over a decade to catch up with current science, consumer expectations and marketing campaigns. The Green Guides are the leading federal interpretations of the advertising and marketing of environmental benefit claims, and the FTC is contemplating a rule to make them legally binding.

The risks of greenwashing encompass all three letters of the abbreviation: They fall under the “E” given that companies face significant liability for misrepresenting the climate change effects associated with their products; under the “S” because business practices that involve discrimination or forced labor will result in misleading claims or disclosures; and under the “G” because misleading or deceptive ESG disclosures will likely result in a materiality violation of securities laws.

Environmental justice, according to the Environmental Protection Agency, is “the fair treatment and meaningful involvement of all people regardless of race, color, national origin or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies.” Since 2021, the Biden administration has committed to instituting a “whole of government” environmental justice approach through a raft of new programs: the Justice40 Initiative, the Environmental Justice Scorecard and the Climate & Economic Justice Screening Tool. The federal Council on Environmental Quality has also directed agencies “to incorporate environmental justice principles into their programs, policies, actions and activities” as part of their consideration of the effects associated with greenhouse gases and climate change as they evaluate proposed major federal actions.

Environmental justice falls between the “E” and the “S” of ESG, and a transparent and ethical governance strategy requires management of environmental justice risks. Much like the substantiation of environmental benefit claims, measurable data exists to assist companies with tracking how their decisions may affect the vulnerable and environmentally overburdened: EJScreen is the EPA’s primary online tool for this purpose, and it contains socioeconomic data to identify such vulnerable communities.

Thus far, heightened government enforcement and oversight on ESG and environmental justice have been met with a rash of litigation—particularly consumers bringing forth accusations of greenwashing related to recyclability of consumer products and utility services. The moment is ripe, however, for increased litigation involving intersecting environmental justice and ESG claims. As the country begins its transition to cleaner energy, there will be conflicts over which communities should bear the nuisances associated with new and relocated project developments. The EPA has already indicated interest in derailing the plans of project proponents on environmental justice grounds. Other agencies will soon follow suit under new and revised federal agency guidance issued by the Biden administration. How should companies prepare?

The answer lies partly in the boardroom. A recent international study by researchers at England’s University of Portsmouth, Brunel University and Loughborough University found that companies with a gender-diverse board and female directors are less likely to misrepresent their ESG credentials and commit greenwashing. Diversity in the boardroom will be key to avoiding unintentional blind spots concerning ESG goals and management of environmental justice risks.

Management of those risks requires consistent community engagement. Initiating meaningful engagement before environmental or social problems arise or project development begins is sound practice.

Much like the federal “whole of government” approach, publicly traded companies cannot have corporate governance strategies that focus solely on climate change. These days, a company’s overall mitigation strategy must also factor in potential ESG and environmental justice risks.

Tanya C. Nesbitt is a partner in Thompson Hine’s environmental practice and a member of the firm’s ESG Collaborative. Tanya’s practice includes representing clients in highly regulated industries with an emphasis on greenwashing, environmental permitting, cost recovery, natural resources and land management and wildlife management. She collaborates with her clients to find the best business solutions, whether it involves providing detailed strategic advice and tactics, counsel on the advertising and marketing of environmental benefit claims, or fighting for her clients in litigation.

Headline Image: iStock/ Recep-BG

Related Articles

A Beautiful Mind: Motown Beginnings, Top Dealmaker

by Sara Collin

Motown scion Farah Fakir Cook has achieved her own stardom away from the klieg lights, helping clients navigate ever-changing currents in intellectual property and technology. One crucial topic looms especially large for her in the years ahead: How current law will contend with the rise of artificial intelligence.

Woman wearing pink suit standing against desk

Progress and Potential

by Michele M. Jochner

Women have undeniably made great strides in our profession in recent decades, but much remains to be done. What’s the current state of the industry, what lies ahead—and what do lawyers (male and female alike) say are the most important issues going forward

Watercolor image of person on a mountain looking at night sky

Can These Walls Talk?

by Joanne M. O'Connor

Is architecture speech? A recent landmark Eleventh Circuit case raised a host of curious issues encompassing property rights, aesthetics and the First Amendment.

Cartoon figure on the phone with documents in hand and 1st Amendment text in backdrop

Top of the Mountain

by LaVon M. Johns and Patricia Brown Holmes

Making partner, ginning up huge business, earning peer respect and industry influence are laudable goals—but it’s important to pursue them methodically and mindfully. One dynamic duo who have reached the mountaintop show how it’s done.

Red flag sitting on the top of a mountain summit

Crucial Alliances

by Jane E. Young

Workplaces everywhere have changed since the start of the pandemic in ways that can be highly beneficial to women. Here’s a road map for consolidating recent gains—and making the most of them going forward.

Woman at desk working with roadmap behind her

The Breadwinner

by Courtney E. Ervin

Two lawyers, one big life decision: How my husband and I are working to eradicate the stigma of putting my career first.

Silhouette of women in suit stands in the middle of equal scale

Trending Articles

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards

by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

The Long, Short, Thick and Thin of It

by Avrohom Gefen

“Appearance discrimination” based on employees’ height and weight is the latest hot-button issue in employment law. Here’s a guide to avoid discrimination.

Woman stands in front of mirror holding suit jacket

Trailblazing Titans of the Industry: Announcing the 4th Edition Best Lawyers: Ones to Watch® in America

by Best Lawyers

Best Lawyers honor and celebrate these talented, innovative newer lawyers who are trailblazing their way to victories in courtrooms across the country.

Connected web above map of the U.S.

Announcing the 2023 The Best Lawyers in America Honorees

by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Pearls of Wisdom: Celebrating 30 Editions of Best Lawyers’ Rankings

by Best Lawyers

In celebration of our landmark 30th edition, Best Lawyers’ leadership explains how the world’s original and most trusted legal awards maintain their esteem, integrity and reputation for excellence among the top legal entities and their clients.

Best Lawyers logo for 30th edition release with gold glitter in background

Vanguards of Victory: Best Lawyers: Ones to Watch in Canada 2024

by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in Canada™ has been announced, and the lawyers showcased by these awards are rising to the challenge each day as advocates for clients all across the country.

Blue and black background with small squares connected by lines

Best Lawyers: Ones to Watch in America for 2023

by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background


Thomson Rogers: Toronto Personal Injury Lawyers

by Thomson Rogers

Since establishment in 1935, Toronto-based firm Thomson Rogers has consistently delivered results for their clients struggling through complex litigation.

Top of a Staircase Featuring Two Large Black Doors with Bookshelves and Chairs on Each Side

Announcing the 2023 The Best Lawyers in Canada Honorees

by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

The Best Lawyers in South Africa™ 2023

by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag


How Long Does a Felony Stay On Your Record in California

by Peter Blair

A felony can remain on your record for life in California. Some felonies qualify for expungement. Learn how to remove a felony conviction from your record in California.

Hand setting bird free out of a guarded fence

What the Courts Say About Recording in the Classroom

by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Announcing the 2022 Best Lawyers® in the United States

by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

The Upcycle Conundrum

by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

The Best Lawyers in Australia™ 2024 Launch

by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

Famous Songs Unprotected by Copyright Could Mean Royalties for Some

by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?