By Hon. Prof. Kariuki Muigua, OGW, PhD, C.Arb, FCIArb is a Professor of Environmental Law and Dispute Resolution at the University of Nairobi, Member of Permanent Court of Arbitration, Leading Environmental Law Scholar, Respected Sustainable Development Policy Advisor, Top Natural Resources Lawyer, Highly-Regarded Dispute Resolution Expert and Awardee of the Order of Grand Warrior (OGW) of Kenya by H.E. the President of Republic of Kenya. He is the Academic Champion of ADR 2024, the African ADR Practitioner of the Year 2022, the African Arbitrator of the Year 2022, ADR Practitioner of the Year in Kenya 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021 and Author of the Kenya’s First ESG Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) and Kenya’s First Two Climate Change Law Book: Combating Climate Change for Sustainability (Glenwood, Nairobi, October 2023), Achieving Climate Justice for Development (Glenwood, Nairobi, October 2023) and Promoting Rule of Law for Sustainable Development (Glenwood, Nairobi, January 2024)*
In order for companies to manage the risk and liability associated with ESG litigation, it is imperative for them to strengthen their ESG reporting and disclosure requirements. It has been observed that recent ESG trends have driven the requirement by businesses to report on ESG aspects such as human rights and environmental standards as evidenced by emerging legal frameworks requiring companies to report on human rights and environmental issues, emerging mandatory human rights due diligence legislation, and increased legal enforcement and litigation risks.
As a result, it is important for companies to treat public disclosures in relation to ESG matters seriously and consider taking independent auditing and verification steps, particularly for annual ESG-related reports and/or other material ESG disclosures. Such an approach can help companies effectively manage and reduce the risk of ESG related litigation.
In addition, it has been argued that there is need for companies to embrace best practices in order to mitigate the risks of ESG litigation and also address such litigation when it arises. For example, it has been suggested that companies should conduct risk assessments in order to determine the likelihood of ESG related suits and deal with such concerns immediately; undertake public engagement to order to ensure openness and transparency in ESG matters; build knowledge on ESG issues in order to be well equipped to handle ESG claims when they arise; and strengthen their management systems and internal practices in order to enhance compliance with ESG standards.
It has been observed that ESG litigation is associated with several risks to companies including regulatory and enforcement risk, reputational risk, damage to brand, potential disruption by activists and financial risks such as loss of access to capital and financial losses as a result of damages, fines and other forms of monetary compensation. It is also imperative to strengthen access to justice in ESG matters. It has been pointed out that in order for litigants to be given the right of access to courts in ESG matters, whether individually, collectively, or as a third party or amicus curiae, the criteria pertaining to standing, which differ from jurisdiction to jurisdiction, must be followed.
It is also necessary to widen and strengthen the jurisdiction of courts on ESG issues such as climate change. Further, it has been pointed out that there is need to embrace techniques such as litigation funding in order to provide the financial stability and support needed to pursue legal action without compromising on the quality of representation or legal strategy in ESG matters. It has been argued that litigation funding can be an effective strategy for needy claimants to pursue claims against a company that they may ordinarily not be able to afford, enabling them to ultimately to hold companies to account for ESG failures.
Finally, it is imperative for companies to think creatively and strategically in order to effectively resolve ESG claims. It has been pointed out that ESG claims may significantly differ from other types of litigation companies have previously faced, hence the need for creative solutions towards these claims. For example, in ESG claims, there is need to bear in mind both the litigation aspects of a dispute, and broader ESG concerns including those around reputation and access to capital. As a result, it has been suggested that there is need for companies to be alive to the potential for resolving ESG claims outside the court room, and what mitigation strategies could be deployed to avoid litigation.
Alternative Dispute Resolution (ADR) mechanisms are ideal in managing ESG disputes by fostering privacy, cost effective and expeditious management of disputes while also allowing parties to select experts to hear and determine contentious ESG matters. In addition, it has correctly been observed that businesses would normally prefer to have their disputes managed in a private manner in order to prevent ruining their image in public and also in an expeditious and cost-effective manner in order to protect business interests.
It has also been pointed out that the use of ADR mechanisms such as mediation in managing ESG related disputes is a practical demonstration of a sustainability-oriented business culture since mediation can offer a quick, flexible, consensual and win-win solution based on the mutually accepted interests of the parties. ADR mechanisms can therefore be an effective tool to enable companies manage the risks associated with ESG litigation.
*This is an extract from the Article: Fostering Environmental, Social and Governance (ESG) Litigation for Sustainability, Available at: https://kmco.co.ke/wp-content/uploads/2024/02/Fostering-Environmental-Social-and-Governance-ESG-Litigation-for-Sustainability.pdf (Accessed 2nd March 2024) by Hon. Prof. Kariuki Muigua, OGW, PhD, Professor of Environmental Law and Dispute Resolution, Senior Advocate of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of National Environment Tribunal (NET) Emeritus (2017 to 2023) and Member of Permanent Court of Arbitration nominated by Republic of Kenya and Academic Champion of ADR 2024. Prof. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Prof. Kariuki Muigua teaches Environmental Law and Dispute resolution at the University of Nairobi School of Law, The Center for Advanced Studies in Environmental Law and Policy (CASELAP) and Wangari Maathai Institute for Peace and Environmental Studies. He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Prof. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2022. Prof. Muigua is a 2023 recipient of President of the Republic of Kenya Order of Grand Warrior (OGW) Award for his service to the Nation as a Distinguished Expert, Academic and Scholar in Dispute Resolution and recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2024 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya and the Top Arbitrator in Kenya in 2023.
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