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ESG started off as a choice. Grounded in the sentiments of Corporate Social Responsibility and Ethical Investing, ESG meant that you chose to act in accordance with your values and not merely for the sake of financial profits. Those days are long over.  Today many investors and customers expect or even require companies to “do ESG”. What had been “voluntary” became obligatory. Legislation began to mandate ESG. “Soft law” became “hard law”, and with it inevitably came enforcement, compliance and litigation. In fact, ESG is now a major category of litigation risk. According to a recent survey, corporate lawyers and risk leaders believe ESG disputes are their companies’ biggest litigation risk in 2024.

“Nearly three-quarters [73%] of organizations say that ESG disputes will be a risk to them in 2024. Recent years have seen a flourishing of ESG laws and regulations, many with extraterritorial effect. Disputes can involve tricky issues of causation, significant reputational risks, and difficulties with remedies: money doesn’t always solve the problem. For many in-house lawyers, this puts ESG disputes at the top of the agenda. Our clients tell us that they find it difficult to navigate and understand the regulations and reporting obligations.”

— Baker McKenzie annual year ahead report.

ESG is substantive and not merely cosmetic.

For more than 10 years I have been urging companies to be cautious about making bold claims concerning their ESG virtues. I especially cringe when I see such claims accompanied by a statement that they are being made because they are “material” to investors’ decisions whether to invest in the company. That can open the door to a securities fraud lawsuit.


  • Recognize that ESG litigation risk is very real. It can be costly and damage the company in many ways.
  • Think of ESG management as a category of risk management, and risk management as a category of ESG management.
  • Place ESG litigation risk on the agenda for discussion in meetings of the board of directors.
  • Be careful to ensure that your ESP statements are factual. Beware of “greenwashing” in any kind of statement, including corporate advertising and labeling.
  • Do not limit your focus to compliance. Keep your eyes open for related opportunities.