Introduction to ESG Litigation Trends

ESG litigation trends saw a dramatic jump from 884 to 1,550 between 2017 and 2020, spreading from 24 to 38 countries. This surge in ESG litigation marks the start of a major legal shift that continues to alter the business world.

The SEC’s regulatory oversight of ESG issues has intensified substantially. A dedicated Climate and ESG Task Force emerged in March 2021 to detect ESG-related misconduct. The enforcement scope now covers employment matters too, as shown by Activision Blizzard’s $35 million settlement over workplace misconduct disclosure controls. These class action patterns reveal mounting legal risks for companies making environmental, social, and governance claims.

A recent survey paints a concerning picture. Only 35% of senior executives in 13 countries have thought about the ethical and legal implications of their ESG disclosures and commitments. Yet 60% of consumers would pay more for products with better environmental performance. This gap creates perfect conditions for ESG lawsuits, especially “greenwashing” claims against consumer products. Plaintiffs often argue that companies charge unfair premiums for supposedly eco-friendly items.

This piece looks at the hidden risks that shape the class action scene in 2025. We explore securities litigation developments and ways companies can handle this growing legal environment of securities class actions.

Rise of ESG Class Actions in 2025

ESG litigation has changed dramatically in 2025, as legal claims continue to surge in many sectors. The World Business Council for Sustainable Development‘s research shows ESG-related lawsuits have grown by 25 percent in the last three decades. Companies now face intense scrutiny of their environmental commitments, social responsibilities, and governance practices, and this trend shows no signs of slowing.

Increased filings across environmental, social, and governance domains

Legal claims now cover a broad range of issues beyond traditional environmental concerns. Researchers have documented 2,341 climate change litigation cases globally, with 190 new cases filed in the last 12 months. The growth rate of climate cases has slowed somewhat, yet the variety of case types continues to expand.

Climate lawsuits used to target governments more than corporations. The landscape has started to change. Republican state attorneys general filed a lawsuit in the Eastern District of Texas against three large asset managers in November 2024. This groundbreaking case alleged that asset managers used their substantial shareholdings in major U.S. coal producers to force reduced coal production, which supposedly increased energy prices for consumers. The states pointed to the defendants’ involvement in groups like the Net Zero Asset Managers Initiative and Climate Action 100+ as proof of coordinated ESG strategies.

The United States District Court for the Northern District of Texas made a notable ruling in January 2025. The court found that American Airlines and its Employee Benefits Committee “breached certain fiduciary duties under ERISA when investing—or relying on others to invest—their employees’ retirement assets towards environmental, social and governance objectives”. While the court identified breaches of loyalty duty, it found no breach of prudence duty.

Securities class actions related to ESG misrepresentations have increased. The United States District Court for the Middle District of Florida rejected a motion to dismiss a securities class action complaint against Target Corporation in late 2024. The case involved Target’s alleged failure to disclose risks linked to its Diversity, Equity and Inclusion initiatives.

Role of third-party litigation funding in ESG lawsuits

Third-party litigation funding has become a vital factor in the rise of ESG litigation. This funding helps financially limited claimants pursue cases against companies they couldn’t normally afford to challenge, which helps hold businesses responsible for ESG failures.

Key players in litigation funding have started to explore ESG investments. Here are some examples:

• North Wall Capital invested $100 million in law firm Pogust Goodhead specifically for ESG cases
• Litigation Lending Services backed an ESG case about stolen wages that led to a $190 million settlement in December 2019
• Omni Bridgeway plans to launch an ESG Finance fund

A litigation funding survey revealed that 90% of respondents believe funding will expand to more case types soon. Investors now see litigation funding as a powerful way to deploy capital and encourage responsible business practices.

Securities sitigation serves as a powerful tool to establish legal precedents through landmark court decisions, which shapes future legal actions and regulatory changes. The litigation funding market has room to grow as ESG group claims increase. Non-profit organizations find this development particularly interesting for funding cases with environmental or broader social goals.

Greenwashing Claims and Consumer Protection Laws

Greenwashing claims have become a major focus in consumer protection litigation. Companies making environmental claims now face serious legal risks. The term greenwashing describes companies that spread false or misleading information about their products’ environmental benefits. This practice uses deceptive advertising to convince people that products and policies protect the environment.

False recyclability and sustainability marketing

Companies try to present their products as eco-friendly to attract environmentally conscious buyers. This practice has sparked many false environmental advertisements. These tricks hurt fair competition and fool consumers who want to make green choices.

Misleading environmental claims often show up as:

• Recycling symbols on items that most facilities won’t accept
• “Biodegradable” labels without clear timelines
• Unproven “carbon neutral” claims
• Products labeled “plastic-free” that actually contain plastic

Legal teams break down whether these claims meet requirements and gather expert input about recycling methods. They file securities class action lawsuits to get damages and stop these practices. The connection between plastics and fossil fuels makes greenwashing cases relevant to broader ESG concerns in the petrochemical sector.

FTC Green Guides and enforcement actions

The Federal Trade Commission’s Green Guides came out in 1992 with updates in 1996, 1998, and 2012. These guides help marketers avoid misleading environmental claims. They explain how consumers understand specific claims and show marketers how to prove and qualify their statements.

The FTC uses these guides to help companies stay within Section 5 of the FTC Act. They can take action against violators, and private parties can use the guides in state-level greenwashing lawsuits.

The FTC now updates these guides and wants feedback on terms like “carbon offsets,” “climate change,” and “compostable”. They might make the guides legally binding, which would let them fine companies that break the rules.

Recent settlements: Keurig, Colgate, and Coca-Cola

Big companies have faced serious greenwashing charges. Keurig Dr. Pepper paid $1.5 million to settle SEC charges about misleading recyclability claims for K-Cup pods. The SEC found that Keurig’s Forms 10-K statements about “effective recycling” left out negative feedback from recyclers.

After this SEC case, Keurig agreed to pay consumers $10 million in a 2022 class action about K-Cup recyclability claims. Their products now say: “Check Locally — Not Recycled in Many Communities”.

Coca-Cola faces similar challenges about its sustainability claims. The DC Court of Appeals ruled that Earth Island Institute made a valid case about the company’s misleading environmental impact statements.

Earth Island’s lawsuit points to Coca-Cola’s public promises: 100% recyclable packaging by 2025, 50% recycled materials by 2030, and matching each sold can with a recycled one by 2030. The court found that Coca-Cola’s heavy use of single-use plastics makes these small environmental efforts look like a distraction.

These cases show how ESG legal risks keep changing as courts let consumer protection laws tackle environmental marketing claims more often.

Supply Chain ESG Violations and Class Actions

Supply chain accountability has become central to corporate litigation. Companies now face intense public examination over human rights violations and labor abuses in their global operations. New regulations require businesses to find and fix modern slavery conditions and other human rights issues across their complex international supply chains.

Labor abuse and ethical sourcing misrepresentations

Companies’ ethical sourcing claims often trigger lawsuits when reality does not match their promises. Advocacy groups and strategic litigants now use court systems to push businesses into addressing alleged human rights violations. They want companies to look more closely at their supply chains, especially in emerging markets where transparency remains limited. This legal shift shows a worldwide push to make companies answer for their foreign subsidiaries and suppliers’ actions or inactions.

ESG requirements in commercial contracts became more common throughout 2025. Vendors, suppliers, and partners must ensure their operations avoid ESG risks through forced labor, child labor, or harmful environmental practices. These contract terms—among other public statements about ethical practices—give plaintiffs plenty of material to bring “greenwashing” claims that question corporate sustainability promises.

Cases with Starbucks, Hershey, and Aldi

Starbucks Corporation stands out in 2025’s supply chain litigation with multiple lawsuits over ethical sourcing claims. The National Consumers League sued Starbucks in January 2024 at the District of Columbia Superior Court. They claim Starbucks advertises its products as “ethical” while getting coffee from farms that reportedly abuse workers. The company displays “Committed to 100% Ethical Coffee Sourcing” on retail bags of coffee beans and K-Cup coffee pods.

The lawsuit points to documented cases of:

• Slavery-like conditions at Starbucks’ largest Brazilian supplier, including illegal trafficking of migrant workers
• Child labor on Starbucks-certified farms in Guatemala
• “Rampant sexual abuse” at a Kenyan tea plantation that supplies Starbucks

The Hershey Company battles similar claims about its Rainforest Alliance certification. In Corp. Accountability Lab v. Hershey Co., plaintiffs claim D.C. Consumer Protection Procedures Act violations. They say Hershey deceptively markets products as “sustainable” and “responsible” despite systemic problems of child labor and farmer poverty in the cocoa industry.

Supermarket chain Aldi defended itself against claims about mislabeled salmon products. The company marketed them as “sustainable” when they allegedly came from industrial fish farms that harm the environment. The case, Rawson v. ALDI, Inc., included consumer protection statute violations, breach of express warranty, and unjust enrichment claims.

D.C. Consumer Protection Procedures Act usage

The District of Columbia’s Consumer Protection Procedures Act has become the go-to tool to challenge corporate environmental and sustainability claims. Public interest organizations now use the CPPA—a law that protects consumers from deceptive business practices—to examine corporate environmental marketing, like net-zero pledges and sustainability labeling.

CPPA lawsuits typically seek to stop allegedly deceptive marketing practices and recover attorney fees. Plaintiffs often claim companies create misleading impressions about environmental benefits or efforts, even in forward-looking or aspirational statements.

These cases stay in DC Superior Court where the CPPA’s broad standing rules and consumer-friendly precedents help plaintiffs. Defendants rarely move cases to federal court because the “non-aggregation” principle makes it hard to meet the $75,000 amount-in-controversy threshold. Companies must often fight in the local DC forum, where judges tend to favor public interest plaintiffs in their interpretation of the law.

Climate Change Litigation and Emissions Disclosures

State attorneys general in the United States now lead major climate litigation efforts. Their actions have altered the map for businesses with ESG commitments. This change shows a crucial development in how legal challenges target climate-related disclosures in 2025.

State AG lawsuits against fossil fuel companies

State attorneys general have sued major fossil fuel companies. They claim these companies deceived consumers about climate change’s effects. Maine’s attorney general sued Exxon, Shell, Chevron, BP, Sunoco, and the American Petroleum Institute. The lawsuit states these entities hid their knowledge about the devastating effects of increased fossil fuel use. These defendants knew about the potentially catastrophic climate impacts as early as the 1960s. Yet they ran PR campaigns to discredit scientific consensus.

More than 20 states, tribes, cities, and counties have filed similar climate deception lawsuits. New Jersey, California, Delaware, Minnesota, Vermont, Connecticut, Massachusetts, Rhode Island, and the District of Columbia joined the fight. These cases make multiple claims about failure to warn, negligence, nuisance, trespass, and violations of state consumer protection laws.

Hawaii also sued fossil fuel companies for deceptive conduct despite the U.S. Department of Justice’s opposition. The state’s lawsuit names seven groups of affiliated fossil fuel companies and the American Petroleum Institute. It claims they violated Hawaii’s Unfair or Deceptive Acts or Practices Statute among other laws.

Net-zero claims and carbon offset scrutiny

Courts around the world look more carefully at how companies try to offset greenhouse gas emissions through carbon credits. A study of nearly 3,000 climate-related lawsuits filed since 2015 found dozens of legal challenges about carbon credits. Many of these cases succeeded.

Several key cases highlight this trend:

• Energy Australia admitted carbon offsets didn’t prevent emission damage and apologized to customers after a greenwashing lawsuit
• Oregon residents sued NW Natural over its “Smart Energy” offset scheme
• A German federal court ruled against sweet company Katjes for using “climate neutral” without proper explanation

These court decisions match actions from advertising regulators and consumer protection groups that target questionable climate neutrality claims. Companies must now prove additionality—showing their offsets create real GHG emission reductions beyond what would normally happen.

Securities class actions tied to climate risk disclosures

Companies face big liability risks in securities litigation for climate-related disclosures in securities filings. Statements in offering documents must follow Sections 11 and 12(a)(2) of the Securities Act of 1933. These laws can impose civil liability for material misstatements. The Exchange Act’s Section 10(b) also bans material misstatements in securities filings and public statements.

Current securities classs actions show these risks clearly. Porter v. GrafTech claims the company misled investors about environmental sustainability while failing to implement promised safeguards. Lyall v. Elsevier alleges the publisher made false net-zero claims while supporting the fossil fuel industry privately.

Courts have shown how future climate-related securities litigation might work. Ramirez v. Exxon Mobil Corporation’s court rejected a dismissal motion when plaintiffs showed the company used different carbon cost figures internally versus publicly. The In re Vale S.A. Securities Litigation case proved sustainability reports could contain actionable statements when a company “put the topic [of sustainability and safety] at issue”.

These developments mean businesses should create internal controls for climate-related disclosures. They need to customize disclaimers for specific climate risks and ensure voluntary disclosures include all known material information.

DEI Commitments and Reverse Discrimination Lawsuits

Reverse discrimination lawsuits now challenge corporate diversity, equity, and inclusion (DEI) initiatives. This creates a contentious new frontier in ESG litigation. Companies want to vary their workforces and leadership but face legal risks from majority-group employees who feel these policies work against them.

Shareholder suits over board diversity statements

Corporate diversity initiatives have faced the most important legal setbacks recently. A California Superior Court judge struck down S.B. 826 in May 2022. This law required California corporations to reserve board seats for women. The judge deemed it contrary to the state constitution’s equal protection clause. This ruling came after an earlier decision that stopped enforcement of A.B. 979, which had required public California corporations to add board members from underrepresented communities.

Shareholders have filed at least twelve derivative lawsuits since 2020. They claim directors and officers failed to follow through on diversity policies. These complaints typically argue that company leaders approved false statements about diversity commitments in proxy materials and codes of conduct. The plaintiffs want unusual remedies. These include removing board directors, mandatory donations to charities promoting minority advancement, and linking executive pay to diversity goals.

These suits face substantial obstacles today. Courts usually dismiss such claims because shareholders can’t prove demand futility by showing directors faced substantial likelihood of liability. Courts often rule that aspirational diversity statements are “inactionable puffery” or just vague statements of optimism.

Employee claims under Title VII and Section 1981

Employees who challenge DEI programs have stronger legal ground after recent Supreme Court decisions. The Court clarified in Ames v. Ohio Department of Youth Services that “reverse” discrimination plaintiffs no longer must prove extra “background circumstances” to support their claims. Justice Thomas noted in his concurrence that DEI initiatives “have often led to overt discrimination against those noticed to be in the majority”.

DEI-related discrimination claims follow different standards under Title VII versus Section 1981. Title VII plaintiffs must prove protected characteristics were “motivating factors” in adverse actions. Section 1981 claims require more demanding “but-for” causation, meaning race must determine the outcome. More plaintiffs choose Section 1981 claims because they don’t have to file charges with the EEOC first and face no damages cap or othre ESG legal issues.

Notable case: Duvall v. Novant Health Inc.

Duvall v. Novant Health shows these trends clearly. A white male executive won a large verdict after losing his job during his employer’s diversity push. David Duvall sued Novant Health after gettFexing fired just before his five-year anniversary despite good performance evaluations.

Trial evidence showed Duvall’s termination happened during Phase 2 of Novant’s Diversity and Inclusion Strategic Plan. The plan wanted to “add additional dimensions of diversity to the executive and senior leadership teams”. The jury found Novant’s “shifting, conflicting, and unsubstantiated explanations” for Duvall’s firing proved he was targeted as part of its diversity initiative. They awarded him $10 million in punitive damages (later reduced to $300,000 due to Title VII caps) plus $3.4 million in compensatory damages.

This verdict warns companies implementing DEI programs. Businesses should get a full picture of their initiatives with legal counsel. This helps promote diversity without creating legal risks in this complex litigation environment.

SEC and FTC Enforcement in ESG Disclosures and other ESG Legal Issues

Federal regulators have stepped up their oversight of ESG-related disclosures. The SEC and FTC now use a two-pronged enforcement approach. Companies face heavy financial penalties if they make misleading ESG claims.

SEC Climate and ESG Task Force actions

The Securities and Exchange Commission (SEC) created its Climate and ESG Task Force in March 2021 within the Division of Enforcement. Kelly L. Gibson led the 22-member team that came from SEC headquarters, regional offices, and specialized units. The team’s main goal was to spot ESG-related misconduct early. They focused on finding material gaps or misstatements in climate risk disclosures under existing rules.

The task force used advanced data analysis to find potential violations among registrants. They worked hand in hand with other SEC divisions like Corporation Finance, Investment Management, and Examinations.

The SEC quietly ended its Climate and ESG Task Force in early 2024. An SEC spokesperson said “the expertise developed by the task force now resides across the Division [of Enforcement]”. Yes, it is true that companies still face liability for material misstatements or omissions and other ESG legal issues in their ESG-related disclosures.

BNY Mellon and Activision Blizzard settlements

The SEC charged BNY Mellon Investment Adviser in May 2022. The company had made misstatements about ESG considerations in mutual fund investment decisions. From July 2018 to September 2021, BNY Mellon claimed all fund investments underwent an ESG quality review. This was not always true. BNY Mellon paid a $1.5 million penalty to settle these charges.

Activision Blizzard agreed to pay $35 million to the SEC in February 2023. The settlement addressed disclosure control violations related to workplace complaints. This became the SEC’s largest enforcement action that dealt with “social” aspects of ESG-related disclosures. The SEC discovered Activision Blizzard didn’t have “controls and procedures among its separate business units designed to collect or analyze employee complaints of workplace misconduct” or other ESG legal issues.

FTC’s updated Green Guides and marketing claims

The Federal Trade Commission uses its Green Guides to help marketers avoid misleading environmental claims. These guides outline principles for environmental marketing claims. The FTC first released them in 1992 and updated them in 1996, 1998, and 2012.

The FTC reviewed the Green Guides and collected public comments through April 2023. The review will likely cover carbon offsets, climate change, recyclability claims, organic and sustainable terminology, and energy efficiency claims. The Commission might also change the Green Guides from guidance into rules that can be enforced independently.

The SEC and FTC continue to chase down ESG disclosure violations aggressively. Companies that mislead investors and consumers about their environmental and social practices face big penalties and ESG lawsuits..

Global ESG Litigation Trends in EU and UK

The EU and UK have developed their own ways to handle ESG litigation. These regions now have unique rules that guide how companies deal with sustainability claims and disclosures.

EU Green Claims Directive and CSRD

European regulators worry about consumer trust in environmental marketing. More than half of green claims give vague, misleading, or unfounded information according to the European Commission. The Green Claims Directive wants to curb greenwashing by ensuring environmental claims are “clear and easy to understand”. The Directive might be withdrawn due to debates over the Omnibus Simplification Package.

The Corporate Sustainability Reporting Directive (CSRD) stands as the EU’s key ESG regulation. Non-EU companies that earn annual EU revenue exceeding €150 million must report their sustainability information. The CSRD requires “double materiality” reporting, which means businesses must disclose climate risks they face and the effects they cause.

UK class actions and duty of care rulings

The UK’s landmark Okpabi decision has made England an attractive place to bring ESG claims against parent companies. The Supreme Court showed that companies don’t need an “equity relationship” to be liablein an ESG lawsuit. This rule goes beyond parent-subsidiary relationships and could include supply chain relationships.

Cross-border litigation and jurisdictional shifts of ESG litigation

The jurisdictional boundaries of ESG litigation keep evolving. Recent Court of Appeal decisions have brought back claims tied to overseas incidents, including a £5 billion claim about a dam collapse in Brazil. English courts are willing to handle large, complex group ESG lawsuitswhen other jurisdictions can’t provide adequate solutions.

Mitigating ESG Litigation Risk Through Governance

Strong corporate governance structures are vital defenses against the rising tide of ESG litigation risks. Corporate boards now face mounting pressure to put strong oversight mechanisms in place to avoid ESG legal issues.

Caremark duties and board oversight

Corporate directors have legal obligations under Delaware’s Caremark doctrine that require them to monitor everything in their businesses. This framework holds directors liable if they “utterly fail to implement any reporting or information system or controls” or “consciously fail to monitor or oversee its operations”. Courts once called it “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win judgment.” But recent decisions have allowed Caremark claims to proceed at the pleading stage. Delaware courts keep expanding the scope of oversight liability, which makes watchfulness regarding these duties a vital concern.

Internal ESG disclosure review processes

Boards need to create processes that let appropriate departments verify ESG data. Companies often use certification procedures that work as with financial reporting controls. It also appears that institutional investors have started asking about third-party assurance for ESG data. Right now only 6% of S&P 500 companies get assurance from public company auditing firms.

D&O insurance and indemnification strategies

Directors and officers liability insurance protects against claims of wrongful acts and provides significant coverage for ESG-related litigation. But policies often contain conduct exclusions that insurers might use to deny coverage if sustainability policies were misrepresented on purpose. Companies should assess their D&O programs as part of their ESG legal strategy and pay close attention to policy limits, sublimits, and potential exclusions.

Conclusion

ESG litigation keeps changing how companies deal with legal issues in 2025. Businesses face close examination of their environmental claims, social promises, and how they run things. ESG lawsuits no longer targets just governments – it now holds companies directly responsible for their ESG claims.

Outside funding for ESG lawsuits has sped up this change. Small players can now take on big corporations in complex ESG lawsuits. Companies should know that their bold statements about sustainability or diversity might land them in legal trouble if they don’t match their actions.

False environmental claims show this risk clearly. Big settlements from Keurig, Colgate, and Coca-Cola serve as warnings to others. Consumer protection laws work well to curb misleading green marketing. Supply chain accountability has become a major legal risk too. Starbucks, Hershey, and Aldi’s cases about ethical sourcing claims prove this point.

Climate change lawsuits. including securities class actions, pose another big threat. State attorneys general lead cases against fossil fuel companies as net-zero claims face more questions. On top of that, DEI programs face tricky legal challenges through reverse discrimination claims. Companies must design these programs carefully to boost diversity without legal risks.

Regulators make things more complex. The SEC and FTC crack down on misleading ESG information. The EU’s CSRD rules set tough reporting standards that reach beyond borders.

Company leaders must build strong oversight systems to reduce ESG legal issues. They need solid ESG disclosure reviews, proper board oversight, and good insurance plans. Companies that tackle these issues head-on will handle the complex ESG legal environment better while keeping stakeholder trust.

The ESG legal world changes faster each day. Yet companies that stick to real sustainable practices and clear reporting will face fewer legal problems. They’ll also meet growing demands for environmental and social responsibility.

Key Takeaways

ESG litigation, including securities class actions, has surged dramatically, with climate cases nearly doubling between 2017-2020 and ESG lawsuits increasing 25% over three decades. Companies face unprecedented ESG legal issues across environmental, social, and governance claims as regulatory scrutiny intensifies.

• Third-party litigation funding fuels ESG lawsuits, enabling resource-constrained claimants to pursue complex cases against corporations with $100+ million investments specifically targeting ESG violations.

• Greenwashing claims create major liability exposure through consumer protection laws, with companies like Keurig paying $10+ million for false recyclability marketing and misleading sustainability statements.

• Supply chain accountability drives class actions as courts hold companies liable for labor abuses and ethical sourcing misrepresentations throughout global operations, exemplified by Starbucks facing multiple lawsuits.

• DEI initiatives face reverse discrimination challenges following Supreme Court decisions, with companies like Novant Health paying $3.4 million after terminating executives during diversity pushes.

• Robust governance structures are essential defenses including Caremark oversight duties, ESG disclosure review processes, and appropriate D&O insurance to mitigate litigation risks effectively.

The convergence of regulatory enforcement, third-party funding, and expanded legal theories creates a perfect storm for ESG litigation. Companies must align authentic sustainability practices with transparent disclosures while implementing comprehensive governance frameworks to navigate this complex legal environment successfully.