Company directors could face legal action over climate damage, say top barristers

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By Rhys Duncan on

Personally liable

A new report authored by a group of leading barristers has warned companies and their directors about potential legal consequences should they cause harm to the environment.

The opinion, written by specialists from 4 Stone Buildings, Maitland Chambers, and 39 Essex Chambers, offers advice on the potential risks and liabilities for both companies and their directors in an increasingly climate conscious world.

In relation to companies, the report notes an array of possible impacts on operations and supply chains, exposure to civil claims, issues of regulatory compliance, reputational consequences, and dispels the idea that nature-related impacts are only limited to large businesses.

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As for directors, the paper focusses primarily on duties to promote the success of the company for the benefit of the members as a whole (s.172 Companies Act 2006), which expressly states that directors should have regard to “the impact of the company’s operations on … the environment”, the duty to act with reasonable care, skill and diligence (s.174 CA 2006), and the obligations on directors to disclose information about the company in its narrative reports.

“In our opinion,” the document says, “it would be prudent for directors to identify the nature-related risks facing their company; assess which of those risks are relevant and non-trivial; take expert advice where appropriate; decide in good faith whether a course of action is appropriate to mitigate those risks and take such steps accordingly; and record their decision making process in writing. Directors who fail to give consideration to relevant non-trivial nature-related risks, and take appropriate steps to mitigate them, may be exposed to claims that they have acted in breach of duty.”

The opinion was commissioned by the climate advisory firm Pollination Group and the Commonwealth Climate and Law Initiative.

Elsewhere, Cornerstone Barristers has announced its first-ever ‘Climate Month’ in May. This will feature online sessions and cover topics including energy transition, climate litigation in the civil courts, greenwashing, ESG and real estate, green finance, ecocide, and the right to protest. You can find out more here.

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