ESG Disputes Bulletin - July 2025

In our latest ESG Bulletin, we review the following global contentious and regulatory ESG developments and trends in the first half of 2025:

Litigation

Regulatory

German Court dismisses landmark climate change case brought by Peruvian farmer

In a case that spanned almost a decade, the Higher Regional Court of Hamm recently dismissed the landmark civil climate change claim of Lliuya v. RWE and ruled out any right of appeal. The claim generated significant international attention as a novel example of a plaintiff seeking cross-border damages against a single carbon emitter for alleged climate-related damages.

Relying on the general provision for protection against interference with property (nuisance) in the German Civil Code, Peruvian farmer Saúl Luciano Lliuya claimed that RWE (a German electricity producer) was liable to contribute to flood protection measures at his property, situated below a glacial lake in the Andes, due to increased flood risk caused by climate-change, in proportion to RWE’s historical contribution to global greenhouse gas emissions.

The Court was asked to consider two key issues: (i) whether there is a real and imminent risk of damage to Mr Lliuya’s property from flood waters from the glacial lake and, if so, (ii) whether RWE could be linked to that risk and was therefore liable to compensate Mr Lliuya.

The Court found that the detailed expert evidence showed no imminent flood risk to Mr Lliuya’s property, and accordingly did not need to determine the claim on the second issue. However, it accepted that a single carbon emitter in Germany could in principle be liable for the impact of its emissions. The Court also found that the distance between the source of anthropogenic emissions and the affected property is irrelevant and theorised that the consequences of such emissions would have been reasonably foreseeable to a major energy producer such as RWE since at least the mid-1960s. As such, were a relevant and imminent impairment to property established, a single emitter could be required to pay for preventative measures or damages in proportion to its share of emissions.

While this is a notable finding which has the potential to influence both legal strategies and policy debates on corporate responsibility for climate change, there remain various unresolved legal and evidential hurdles in bringing claims for climate-related damages. It is also difficult to predict how courts in other jurisdictions would approach similar fact patterns, having regard to local laws and evolving regulatory and policy considerations. These questions will continue to be examined by courts around the world.

We discuss the decision in more detail, here.

First Spanish decision on greenwashing dispute between competitors

In February 2025, the Santander Commercial Court No. 2 dismissed a claim between two major energy companies, Iberdrola and Repsol, relating to greenwashing (“ecopostureo”) advertising. This was the first claim of its type in Spain. Dentons (Santiago Hurtado, Javier Moya, Javier Royo and Adrien Coispel) acted for Repsol. Iberdrola decided not to appeal and the judgment of the Santander Court is therefore final.

Iberdrola argued that 15 statements on Repsol’s corporate website and three advertising campaigns amounted to misleading or unfair competition under the Spanish Unfair Competition Act (UCA) and sought a range of declarations and related orders.

Iberdrola’s claim focused on three aspects of Repsol’s advertising:

• Two campaigns which included references to hydrogen and biofuels. The Court found that under the UCA and other laws derived from EU Directive 2006/114, Iberdrola did not have standing to bring a claim due to the lack of a direct competitive relationship with Repsol in the electricity and gas supply sectors.
• One campaign which stated that Repsol’s products promoted energy saving and sustainability. The Court found that there were no environmental claims or allegations in the campaign such as comparative references that certain fuels were “less harmful” or “more efficient”. Commenting on the concept of sustainability, the Court explained that it involved ecological, economic and social dimensions and was not synonymous with being respectful or neutral to the environment. The campaign sought to attract customers to different types of fuel and showed an overall “commitment to sustainability”.
• Statements on Repsol’s website positioning itself as offering sustainable fuels in circumstances where (as argued by Iberdrola) much of Repsol’s business concerned fossil fuels. Again, this element of the claim failed when considered against articles 5 and 7 of the UCA. The Court found that the statements did not amount to an unfair practice: they were not false and did not assert that all of Repsol’s products were sustainable, nor did they conceal the nature of Repsol’s core business.

While enforcement action against corporate greenwashing (including by the UK’s Advertising Standards Authority) has increased significantly in Europe and beyond in recent years, this was the first time a claim was brought in the Spanish courts by a corporate in respect of a competitor’s advertising practices, and the Court’s judgment highlights the difficulties of such a claim, including the need to establish a cause of action and issues of standing.

Milieudefensie brings climate change action against major Dutch bank

Following the announcement of its intention to bring a claim against Dutch bank ING last year, Milieudefensie (a Dutch environmental NGO) formally commenced a class action in the Amsterdam District Court by serving a summons on ING Group NV and ING Bank NV (together, ING) on 28 March 2025. The represented class consists of all current and future inhabitants of the Netherlands.

Milieudefensie alleges that ING as a large corporation owes a duty of care under the Dutch Civil Code to mitigate its climate change impact (a duty which was recently confirmed by the Hague Court of Appeal in Milieudefensie et al v. Royal Dutch Shell), and that it breached this duty by continuing to adopt an inadequate climate policy, resulting in a tort. In support of its claim, Milieudefensie argues that ING failed to set absolute reduction targets which are essential to reducing climate change risk and continues to play a significant role in providing financing to the fossil fuel sector and other industries which contribute to climate change.

The writ of summons requests that ING is ordered to:

• Halve its total emissions by 2030 and continue to reduce emissions thereafter in line with climate science.
• Reduce its emissions in eight polluting sectors which it finances, including steel and aviation.
• Stop financing companies involved in new oil and gas projects.
• Require all large clients to put forward a robust climate plan.

The class action came amidst ING’s recent announcement that the Science Based Targets initiative (SBTi), a corporate climate action organisation, has validated ING’s climate targets as being in line with the latest scientific consensus.

Climate-related claims are increasingly being brought by environmental groups against financial institutions in recent years (and particularly in Europe), prompting courts in multiple jurisdictions to consider whether banks should be liable to account for their indirect contribution to emissions through their choice of investments.

Scottish Court rules consents for North Sea oil and gas fields unlawful

In January 2025, the Scottish Court of Session confirmed in judicial review proceedings brought by environmental groups Greenpeace and Uplift that consents for the Rosebank and Jackdaw North Sea oil and gas projects were unlawful and should be quashed, as the environmental impact assessments failed to consider the impact of downstream emissions. See our separate article on the decision, here.

The Court was bound by the UK Supreme Court’s decision in Finch v. Surrey County Council last year, which found that a failure to consider downstream emissions in an onshore oil project justified the quashing of the decision to grant planning permission. By the time of the hearing in late 2024, it was not in dispute that the consents for Rosebank and Jackdaw were unlawful, and the key issue was in respect of the remedy: in particular, whether the consents should be reduced (the Scottish equivalent of quashing), reconsidered or allowed to stand notwithstanding that they were unlawful.

The Court ultimately determined that the decisions should be reduced and reconsidered, this time accounting for downstream emissions. Acknowledging the practical implications of such a ruling on the projects, the Court ordered that reduction would be suspended pending reconsideration of the consents. The developers were therefore permitted to continue with preparatory works in the interim provided that there was no extraction of oil and gas.

The Scottish Court’s decision makes clear that the UK courts will not simply allow unlawful projects to proceed, while also recognising the commercial implications of an immediate quashing of the decision. Depending on the outcome of the reconsideration, it is possible that we will see further legal challenges in due course.

EU Forced Labour Regulation – EU Regulation 2024/3015

On 13 December 2024, EU Regulation 2024/3015 on prohibiting products made with forced labour on the Union market (the Regulation) entered into force. The Regulation was first proposed by the European Commission (Commission) in September 2022 as part of the EU’s broader efforts to promote supply chain transparency and due diligence and follows similar legislation in other jurisdictions, such as the Modern Slavery Act 2015 in the UK and the Uyghur Forced Labor Prevention Act in the US. 

The prohibition will apply from 14 December 2027, and there is a three-year timeline running to 14 December 2027 until the Regulation becomes fully applicable. This includes interim deadlines for the creation of national competent authorities by 14 December 2025, and the publication of EU Commission guidelines by 14 June 2026.

The Regulation will prohibit products made from forced labour from being placed on the EU market or exported from the EU and applies to EU and non-EU economic operators. The definition of “forced labour” is aligned with the definition contained in Article 2 of the ILO Forced Labour Convention No 29 which is “all work or service which is extracted from any person under the menace of any penalty and for which the said person has not offered [him or herself] voluntarily” and includes forced child labour.

The Regulation applies to all products and their components at any stage of the supply chain, regardless of industry, origin or value thresholds. Products which are found to be made with forced labour will be banned although certain products deemed to be of strategic or critical importance to the EU may be allowed back on the market if forced labour is eliminated from the supply chain.

The Regulation does not impose additional due diligence obligations on companies (beyond existing EU and national law). However, to be confident of compliance, companies will need to ensure that the risk of forced labour in their operations and supply chains is properly mitigated or eliminated. This involves aligning with existing frameworks such as the Corporate Sustainability Due Diligence Directive and applicable national laws.

The Regulation provides for the creation of a database of forced labour risks, which will offer regularly updated evidence-based information on forced labour risks in specific geographic areas or with respect to specific products or product groups. It also establishes a Single Information Submission Point for reporting infringements, where submissions must include substantiated evidence.

If an economic operator fails to comply with the Regulation, it may be subject to penalties in accordance with national law. Investigations and enforcement will be carried out by lead competent authorities (LCA) in each Member State other than investigations in relation to suspected forced labour taking place outside the EU, where the Commission will act as the LCA.

EU Omnibus – changes to EU CSRD and CSDDD

On April 3, 2025, the European Parliament approved significant changes to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) as part of its Omnibus Package. This initiative aims to ease regulatory burdens for businesses and extend compliance timelines.

For the CSRD, the changes include a two-year postponement for companies initially scheduled to report in 2026 and 2027. Reporting requirements now apply to large undertakings with over 1,000 employees and non-EU parent companies with EU-generated turnover exceeding €450 million. The European Sustainability Reporting Standards (ESRS) will be revised to reduce data points and improve clarity, whilst reports will require only limited assurance. Additionally, sector-specific standards will not be adopted, and a voluntary reporting standard will be available for companies no longer in scope.

Regarding the CSDDD, the transposition and compliance deadlines are delayed by one year. Due diligence obligations are now limited to direct business partners, with exceptions for plausible adverse impacts. The requirement for companies to terminate business relationships in severe cases has been removed. Furthermore, updates are now required every five years instead of annually, and civil liability will be determined by national laws.

The Omnibus Package requires transposition into national law by each EU member state, leading to potential variations in implementation timelines and requirements.

On 23 June 2025, the Council reinforced the above changes, emphasising the simplification of sustainability reporting and due diligence requirements to boost EU competitiveness.

See here for our full article on the EU Omnibus package.

UK government updates guidance on the Modern Slavery Act 2015

On March 24 2025, the UK government released updated guidance for section 54 of the Modern Slavery Act 2015 (MSA). Section 54 MSA requires commercial organisations operating in the UK with a turnover of £36 million or more to produce an annual modern slavery statement, outlining steps taken to prevent modern slavery in their operations and supply chains.

This guidance (which was last revised in 2017) aims to clarify expectations for modern slavery statements (MSS) and provide practical advice for businesses to effectively tackle modern slavery.

Key aspects of the updated guidance include:

• The guidance elaborates on six recommended disclosure categories, including business structure, policies, risk management, due diligence, training and evaluation. It categorises disclosures into “level 1” for beginners and “level 2” for more experienced organisations.
• A new section outlines frameworks for tackling modern slavery, emphasising stakeholder engagement and continuous improvement. Businesses are encouraged to align with voluntary human rights standards like the UN Guiding Principles and OECD Guidelines.
• The guidance highlights the severe impacts of modern slavery on victims and businesses, emphasising the importance of transparency and accountability in supply chains.
• Organisations are encouraged to upload their MSS to a government registry to enhance transparency and accountability.
• The guidance advises businesses to leverage their influence to drive change with suppliers and includes detailed advice on responsible recruitment and remediation processes.

Whilst the updated guidance does not alter the legal requirements under the MSA, it sets higher expectations for transparency and continuous improvement. Businesses should consider integrating these recommendations into their MSS to demonstrate commitment and avoid reputational risks. The guidance also aligns with international standards, encouraging UK businesses to engage with global frameworks.

The updated guidance reflects the UK government’s push for more detailed and proactive modern slavery disclosures. Businesses should review their current practices and MSS in light of these updates to ensure compliance and demonstrate leadership in eradicating modern slavery from their operations and supply chains.

Failure to Prevent Fraud Offence – ESG and Sustainability Claims in the Spotlight

From 1 September 2025, the UK’s new corporate offence of Failure to Prevent Fraud (FTPF), introduced under the Economic Crime and Corporate Transparency Act 2023, will take effect. Large organisations (those meeting at least two of the following thresholds: over 250 employees, £36m+ turnover, or £18m+ in assets) could face criminal liability where they fail to prevent fraud committed by a person associated with the company, on behalf of the organisation, with the intention of benefitting the organisation or its clients. If convicted, organisations can face an unlimited fine.

An organisation will be liable where an offence has been committed unless it can demonstrate:

• that it had reasonable procedures in place in order to prevent fraud; or
• that it was not reasonable in all the circumstances to expect the organisation to have any procedures in place.

In November 2024 the Home Office issued guidance which sets out what firms should be considering when implementing reasonable procedures.

Significantly, the guidance also includes an example of sustainability-related fraud within the potential scope of the offence. The example involves a fund provider marketing a “sustainable” investment based on knowingly false environmental claims, with the intention of attracting investors. Even if no investment is secured, the offence could apply as long as the fraudulent misrepresentation was intended to benefit the company. This reflects the growing regulatory focus on the accuracy of ESG disclosures and signals an expectation for stronger internal controls.

Firms making sustainability related claims and statements should be mindful of the new offence and ensure that any statements made in the public domain are not misleading and can be verified. Such statements may also come under fire through other legal routes, including greenwashing claims and pressure from stakeholders or supply chains, particularly as EU sustainability regulations like the CSRD and CSDDD begin to take effect. There may be a particularly higher risk when it comes to voluntary sustainability reporting where reports are not subject to external assurance and verification.

Misleading ESG and sustainability claims also remain a risk under other regulatory regimes. The FCA’s Anti-Greenwashing Rule (May 2024) and similar efforts by the Competition Market Authority and ASA underline a coordinated enforcement trend.

We recommend that organisations use the time from now until the offence coming into effect on 1 September 2025 to ensure that they have in place suitable and reasonable procedures to prevent fraud. This should include consideration of internal controls around making sustainability-related statements.