Business Considerations in Addressing Climate Change Impacts
As climate change impacts worsen in response to a warming planet, businesses should undertake a comprehensive review of their practices to ensure compliance with applicable laws and resilience to climate change.
Climate change will likely affect several operational and legal areas, including:
Labor and employment — Extreme heat and other dangerous conditions caused by climate change may raise labor and employment issues, especially in the context of employees or other service providers with disabilities or medical conditions. Companies should take their obligations to provide reasonable accommodations seriously, and such accommodations could be requested or required due to regional or local climate impacts. Failure to provide a reasonable accommodation for medical or other conditions that are caused by or aggravated or exacerbated by climate change impacts could result in liability under applicable laws.
Supply chain management — Unpredictable weather patterns, heat waves, and other extreme weather events may disrupt supply chain performance, particularly for companies that rely on goods or services from geographic areas vulnerable to climate change. Companies should assess the resilience of their supply chains to ensure business continuity and verify that labor practices along their supply chains comply with applicable laws, including human rights laws.
Brand and reputation management — Consumers remain attuned to the business practices of the brands with which they interact. Companies may be tempted to overstate the extent of their "green" initiatives, which could lead to accusations of greenwashing or liability for unfair or untrue business practices. Rather than making sensational claims, companies should be transparent, provide a fair and accurate assessment of their green initiatives (including how such initiatives are being measured), and disclose the steps they are taking to improve their environmental and climate impact. In an era where brands can be canceled through social media campaigns, companies should treat their green claims with care to avoid potential liability.
Liability for ecocide or violations of the right to a clean, healthy, and sustainable environment — Efforts to criminalize ecocide continue, and it is conceivable that jurisdictions will begin to implement ecocide laws in the coming months or years. Such laws could subject companies to scrutiny for business practices that cause severe and either widespread or long-term environmental damage. "Green amendments" that protect the right to a clean, healthy, and sustainable environment have been passed in several US states, including New York. While these laws have yet to be rigorously enforced, they could be a source of liability if applied to private business conduct.
Disclosures made in the context of the sale of securities — Companies should review their statements (or lack thereof) made during the sale of their securities regarding the impacts of climate change. For instance, a company reliant on a climate-vulnerable geographic region for key supplies should assess whether disclosure of such vulnerabilities is appropriate if that region is susceptible to flooding, extreme heat, extreme weather events, or political or social destabilization caused by “cascading” climate change impacts. Companies making "green" claims should ensure that such claims are accurate. A claim of "net-zero" emissions could be misleading depending on how the company accounts for its business emissions. Relying on emissions offsets can also be risky if the offset has vague or unclear measurements of emissions reductions.
Multi-jurisdictional operations — For companies operating in multiple jurisdictions, the laws of the most restrictive jurisdiction should be used to assess risks. As climate change rules are evolving and vary by jurisdiction, companies should seek advice from local counsel.
