What is in store for ESG litigation in UK and EU

This article was originally published by Law.360, and has been reproduced with their permission.

2025 was a tumultuous year for sustainability and environmental litigation.

Against a challenging political backdrop, as countries and organisations reassessed their climate and environmental commitments, claimants and regulators sought to hold organisations to account as the adverse effects of climate change continued to be felt across the globe.

As we enter 2026, the struggle for dominance between the pro- and anti-sustainability movements will no doubt persist. However, organisations should avoid taking too much comfort from the slowdown in the political impetus to prioritise sustainability and environmental policies.

Claimants are seeking to exploit recent judgments to attribute liability for losses associated with climate-related events, and regulators remain on the lookout for organisations that misrepresent their sustainability and/or environmental credentials.

This article explores the key developments from the last year, the drivers behind these trends, and what organisations should anticipate as they look ahead to 2026.

Greenwashing: Regulatory and Litigation Focus Intensifies

Greenwashing was a central focus for both regulators and claimants in 2025. As claims regarding organisations' green or climate credentials become the norm, regulatory and quasi-regulatory bodies, such as the UK’s Advertising Standards Authority (ASA), have taken action against misleading sustainability claims.

As expected, we saw findings against heavy emitters, for example, the oil and gas sector, with the finding against Shell UK Ltd. on 7 April.¹ However, there were also a number of findings against other industries, with a particular focus on consumer goods and services.^[2]

The ASA’s rulings provide practical guidance for organisations. It has upheld complaints where sustainability claims were misleading or lacked context, but has also dismissed others where it deems claims were proportionate and substantiated.

On the litigation side, 2025 saw further actions related to greenwashing, with high-profile cases against major corporations such as Procter & Gamble, Apple Inc., and DWS Asset Management.^[3]

Rise of Climate Attribution and Corporate Liability

A significant trend in 2025 was the continued attempt to advance liability theories based on climate attribution science. If successful, these theories could dramatically expand corporate liability for the effects of climate change.

Courts in Germany and England have begun to opine on these theories, with the German courts in particular acknowledging that major emitters can, in principle, be held liable for their contribution to climate-related harm globall.^[4]

This opens the door to potentially far-reaching claims against high-emitting companies, although the practical application of such liability will require further judicial testing.

Parent and Subsidiary Liability

2025 saw further developments in holding parent companies and other members of a company’s group liable for specific climate or environmental events.

English courts have found, in principle, that parent companies can be liable for legacy pollution and environmental disasters caused by foreign subsidiaries or joint ventures. This trend increases the risk exposure for multinational groups and underscores the importance of due diligence and robust groupwide environmental, social and governance (ESG) monitoring.^[5]

Looking Forward to 2026

Several trends are likely to shape the ESG landscape in 2026.

Continued Focus on Greenwashing

The focus on greenwashing by regulators is likely to intensify, driven by legislation and regulation, with both the UK and European Union moving away from guidance to penalties.

In the EU, member states are required to transpose the Empowering Consumers for the Green Transition Directive by 27 March and apply it from Sept. 27.^[6]

The regulation tightens the treatment of generic environmental claims and sustainability labels, and strengthens tools against misleading so-called future performance narratives, for example, claims that a product is climate neutral based solely on offsetting.

In the UK, the Competition Market Authority’s Green Claims Code sets out expectations around environmental claims. However, it is the CMA’s new enforcement powers under the Digital Markets, Competition and Consumers Act 2024 that suggest we will see some tough greenwashing-related enforcement action in 2026. The regime means that companies can be charged fines of up to 10% of global turnover for greenwashing breaches.

Although it does not have any power to impose financial penalties, the ASA has also continued to sharpen its approach to general green claims, emphasising clarity, substantiation and lifecycle framing.^[7]

This year, we expect more coordination between the CMA, ASA and sector regulators, particularly where green marketing intersects with regulated products, pricing transparency or vulnerable consumers.

The FCA’s anti-greenwashing rule has been live since 31 May 2024, requiring sustainability references to be fair, clear and not misleading.^[8]

As the sustainability disclosure requirements regime beds in, we anticipate supervisory and enforcement activity to focus on:

• Naming and marketing claims;
• Evidence behind sustainability characteristics; and
• Consistency between stewardship narratives and actual portfolio construction

Expansion of 2025 Trends

We expect that courts will be increasingly willing to consider novel theories of liability based on climate attribution science. If these arguments succeed, high-emitting companies could face existential risks from claims linked to their proportionate contribution to global emissions.

The trend toward holding parent companies liable for the actions of subsidiaries is likely to continue, particularly in cross-border contexts, most recently seen in the Fundão Dam judgment in the High Court in November^[9]. Multinational groups must ensure robust groupwide ESG authority and risk management.

Regulation Leading to Litigation

The EU’s stop-the-clock intervention has the immediate effect of postponing certain Corporate Sustainability Reporting Directive application dates by two years and delaying the application of the Corporate Sustainability Due Diligence Directive for the first in-scope cohort by one year.^[10]

For litigators, the key consequence is not simply more time; it is that large corporations and their advisers are now operating in a moving perimeter, with uneven maturity between so-called Wave 1 reporters and the later waves.

As sustainability content embeds into annual reports, prospectuses, bond documentation and investor decks, claimants and regulators will test whether companies presented evolving obligations as settled compliance, or selectively disclosed uncertainty.

In the UK context, that risk intersects with established UK regimes on misleading statements and market disclosure, for example, the UK Listing Rules, the UK Corporate Governance Code, the Prospectus Regulation Rules and Sections 89 to 90A of the Financial Services and Markets Act 2000, but now with sustainability metrics as the subject matter.

Rolling reforms often create the greatest exposure at the interface between old and new rules, especially where internal policies, contractual undertakings or financing covenants were drafted against prior assumptions.

Takeaways

The past year has seen ESG litigation and regulatory enforcement become more sophisticated, far-reaching and consequential. As we look ahead, organisations must remain vigilant, proactive and adaptive in their approach to ESG risks and opportunities. Some points to consider include disclosures, governance and supply chain due diligence.

Public statements on an organisation’s sustainability and environmental credentials should be checked against verifiable data, and thoroughly reviewed to ensure that they do not create a misleading impression. Organisations should distinguish carefully between binding commitments versus targets; assumptions versus verified data; and short-term actions versus long-term ambition.

Directors’ duties are increasingly tested through climate-related claims. It is therefore important that organisations are able to provide evidence that climate and environmental risks have been identified and addressed appropriately.

On a related note, where organisations have subsidiaries that operate in overseas high-risk jurisdictions, governance should be arranged to avoid liability being imposed on the parent company.

Organisations should take note of increased scrutiny on adverse sustainability and environmental effects in their supply chain, including Scope 3 emissions, and human rights and environmental effects downstream.^[11]

Arrangements with suppliers should therefore align with an organisation’s public claims, as well as its legal and regulatory requirements. Audit and termination rights should be usable in practice, and commensurate with the risks involved in the supply chain.

¹ ASA's 7 April 2025 finding against Shell: https://www.asa.org.uk/rulings/shell-uk-ltdg24-1248246-shell-uk-ltd.html.

^[2] ASA's December 2025 findings against fashion brands Lacoste, Nike and Supergroup; ASA's September 2025 findings against travel companies: https://www.asa.org.uk/rulings/travelcircle-ltd-a25-1284422-travelcircleltd.html.

^[3] Five class actions against Procter & Gamble in the U.S. for alleged deceptive marketing regarding their commitment to primary forests; German Regional Court ruled against Apple for promoting the Apple Watch as "CO₂-neutral" without sufficient clarity on the reliance on offset projects; DWS fined €25 million by German authorities for greenwashing; Coca Cola settled an EU plastics greenwashing complaint; Australian Court fined Clorox AU$8.25 million in a greenwashing claim.

^[4] See the judgment of the Hamm Higher Regional Court in Luciano Lliuya v. RWE AG. Shell PLC is also the subject of a claim in the English High Court, alleging its contribution to climate change intensified the 2021 typhoon in the Philippines.

^[5] English High Court found BHP parent companies strictly liable as "polluters" for the 2015 collapse of the Fundão Dam in Brazil, operated by a joint venture. This follows the U.K. Supreme Court's ruling in 2021 in Okpabi and others v. Royal Dutch Shell PLC and another that Shell could in principle be held liable for the actions of its overseas subsidiary that allegedly caused environmental damage.

^[6] Empowering Consumers for the Green Transition Directive (EU) 2024/825.

^[7] See the ASA's guidance on environmental claims: https://www.asa.org.uk/adviceonline/environmental-claims-general-green-claims.html.

^[8] See the FCA's sustainability disclosure and labelling regime: https://www.fca.org.uk/firms/climate-change-and-sustainablefinance/sustainability-disclosure-and-labelling-regime.
^[9] Municipio De Mariana and ors v. (1) BHP Group (U.K.) Ltd. (2) BHP Group Ltd. [2025] EWHC 3001 (TCC).

^[10] Directive (EU) 2025/794.

^[11] A company's indirect greenhouse gas emissions across its value chain excluding those from its own operations and purchased energy, as established by the Greenhouse Gas Protocol's Corporate Accounting and Reporting Standard (WRI/WBCSD) and further elaborated in the GHG Protocol Corporate Value Chain (Scope 3) Standard.