Insight

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
TN

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

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

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

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

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

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

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

Trending Articles

2025 Best Lawyers Awards Announced: Honoring Outstanding Legal Professionals Across the U.S.


by Jennifer Verta

Introducing the 31st edition of The Best Lawyers in America and the fifth edition of Best Lawyers: Ones to Watch in America.

Digital map of the United States illuminated by numerous bright lights

Unveiling the 2025 Best Lawyers Awards Canada: Celebrating Legal Excellence


by Jennifer Verta

Presenting the 19th edition of The Best Lawyers in Canada and the 4th edition of Best Lawyers: Ones to Watch in Canada.

Digital map of Canadathis on illuminated by numerous bright lights

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™


by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom


by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing the 16th Edition of the Best Lawyers in Germany Rankings


by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™


by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias


by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

Things to Do Before a Car Accident Happens to You


by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery


by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

Find the Best Lawyers for Your Needs


by Jennifer Verta

Discover how Best Lawyers simplifies the attorney search process.

A focused woman with dark hair wearing a green top and beige blazer, working on a tablet in a dimly

Key Developments and Trends in U.S. Commercial Litigation


by Justin Smulison

Whether it's multibillion-dollar water cleanliness verdicts or college athletes vying for the right to compensation, the state of litigation remains strong.

Basketball sits in front of stacks of money

Prop 36 California 2024: California’s Path to Stricter Sentencing and Criminal Justice Reform


by Jennifer Verta

Explore how Prop 36 could shape California's sentencing laws and justice reform.

Illustrated Hands Breaking Chains Against a Bright Red Background

Is Premises Liability the Same as Negligence?


by Jeremy Wilson and Taylor Rodney Marks

In today's age, we are always on the move, often inhabiting spaces we don't own. But what happens when someone else's property injures you or someone you know?

A pair of silhouetted legs falling down a hole with yellow background

Woman on a Mission


by Rebecca Blackwell

Baker Botts partner and intellectual property chair Christa Brown-Sanford discusses how she juggles work, personal life, being a mentor and leadership duties.

Woman in green dress crossing her arms and posing for headshot

Best Lawyers Celebrates Women in the Law: Ninth Edition


by Alliccia Odeyemi

Released in both print and digital form, Best Lawyers Ninth Edition of Women in the Law features stories of inspiring leadership and timely legal issues.

Lawyer in green dress stands with hands on table and cityscape in background

Beyond the Billables


by Michele M. Jochner

In a recently conducted, comprehensive study, data reveals a plethora of hidden realities that parents working full-time in the legal industry face every day.

Women in business attire pushing stroller takes a phone call