Global entities brace for surge in ESG-related legal battles, study reveals

Based on the survey “Global disputes forecast” conducted annually by Baker McKenzie, nearly a third of top-tier legal and risk executives in major corporations worldwide foresee an uptick in conflicts this year, with close to seventy-five percent expecting heightened exposure to ESG-related concerns. Instead, less than one-fifth of respondents anticipate a decrease in disputes over the next 12 months, while just over half expect the status quo to persist.

These results derive from a survey encompassing 600 senior legal and risk executives from organizations generating annual revenues exceeding $500 million and headquartered in the UK, USA, Singapore, and Brazil. 30% of respondents anticipate a rise in disputes in 2024, with 73% projecting ESG disputes to pose the most significant legal risk to their organization in the upcoming year (thus, marking it as the foremost risk overall.

Why ESG? Such apprehensions are exacerbated by risks linked to climate litigation and litigants extending their focus to broader environmental transgressions beyond carbon emissions, such as biodiversity depletion and potential social conflicts connected to, for example, gender diversity and inclusion, pay gap, sustainable governance. As a matter of fact, slightly more than half of respondents (52%) identified employment-related disputes as the chief risk confronting their organization in the forthcoming year, partly propelled by intensified attention on ESG and burgeoning legislation concerning employee remuneration. As many as 58% of respondents cited equal pay and pay transparency as presenting the greatest risk to their organization this year.

The report also unveiled that, despite the intensified disputes landscape, only 16% of respondents exhibited full or very high confidence in their organization’s readiness for litigation. Concurrently, more than three-quarters of respondents also express apprehension regarding the potential upsurge in internal or external investigations over the ensuing year, with cybersecurity and data privacy concerns ranking atop the list of such risks.

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As reported by The Global Legal Post, according to Peter Tomczak (pictured, left), Bakers’ co-chair, global investigations, compliance, and ethics, “ESG conflicts are now a paramount practical litigation risk. Specifically, the expanding scope of ESG conflicts implies that organizations should brace for disputes concerning human rights and social issues and should persist in assessing their policies and ESG-related disclosures.”

Michael Brewer (pictured, right), global chair of Bakers’ employment and compensation practice, asserted: “As the regulatory terrain undergoes shifts, employers globally must acclimatize. Similarly, global restructuring and reorganizations persist as intricate and potentially contentious spheres for employers. The diverse array of disparate local requisites pertaining to employee transfers, notification, termination, and other mandates, alongside variations in protected employee status, entail significant risks.”