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ESG, Business and Human Rights: Disputes Outlook for 202514 January 2025

The last few years have seen an acceleration in the “hardening” of soft-law or voluntary standards in the ESG space, bringing environmental and human rights considerations higher up the agenda for businesses and their legal teams. Different approaches across jurisdictions have created further challenges.

Whilst 2025 is likely to bring some further legislative developments and new disputes, it seems set to largely focus on (1) the practical implementation of already, or soon to be, in force legislation; (2) receiving decisions in key cases from both national and international courts and understanding the implications for business and state obligations; and (3) greater focus and guidance on responsible exit strategies.

Legislation

  1. First reporting and compliance cycles

2025 will see the first implementation of some key legislation including reporting under the Corporate Sustainability Reporting Directive (“CSRD”) in the EU and the Climate-Related Financial Disclosures in Australia. Whilst it was set to apply from 30 December 2024, the EU Deforestation Regulation will now first apply on 30 December 2025.

  1. Practical adjustments

"New legislation often requires a period of adjustment as the practical realities of adoption and enforcement are considered."

New legislation often requires a period of adjustment as the practical realities of adoption and enforcement are considered. Less than a year after first implementation, Canada recently announced refinements to its forced and child labour reporting legislation for 2025. Similarly, only a few months after passing the Corporate Sustainability Due Diligence Directive (“CSDDD”), the EU announced plans for its omnibus legislation to consolidate CSDDD, CSRD and the EU Taxonomy.  Following a much longer period of initial implementation, the Australian government responded to the first parliamentary review of its Modern Slavery Act 2018 and agreed either wholly or in principle to over 80% of the recommendations. 2025 therefore seems set to be a year of consolidation and refinement on many fronts.

  1. Forward planning – development ahead of first compliance

These practical adjustments will also be evident in legislation yet to come into force. For example, significant work will be continuing ahead of first compliance under the CSDDD in 2027. The CSDDD’s upcoming draft transposition (the Netherlands got a head start on this in 2024) and the development of the EU Commission’s guidance will inform how companies approach preparation for compliance.

  1. Preservation – maintaining the status quo whilst other jurisdictions undertake significant changes

In the face of legislative changes highlighted above, other jurisdictions have chosen to refrain from implementing changes for the time being. In 2024 both the UK and Australia refused recommendations to introduce mandatory due diligence requirements, with the Australian government specifically noting that companies may already be subject to mandatory due diligence in other jurisdictions. Australia’s position was further validated only two weeks later (mid-December) when Canada announced its intention to introduce a new supply chain due diligence regime which will apply to international supply chains and will be supported by a new independent agency.

Likewise, whilst the EU passed its forced labour ban at the end of 2024, the UK rejected a recommendation by a House of Lords Committee to introduce a ban on the importation of goods produced by companies that use forced labour. This is despite the success of the World Uyghur Congress in convincing the UK Court of Appeal to quash the National Crime Agency’s (“NCA”) decision not to investigate whether a specific shipment of cotton goods imported from Xinjiang, China had been produced with forced labour, based on an error by the NCA in the interpretation of existing legislation. The decision was therefore remitted back to the NCA to be remade, using both the correct interpretation of legislation and other factors already outlined in their original decision letter.

Disputes: Interpretation of international instruments and state obligations

The ECtHR’s decision in Verein KlimaSeniorinnen Schweiz and Others v. Switzerland established a positive obligation on states to implement law and regulations addressing the impacts of climate change. Only a few months later, the International Tribunal on the Law of the Sea published an advisory opinion clarifying that states’ obligations to prevent, reduce and control pollution of the marine environment extended to GHG emissions.

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"Whilst not binding, the ICJ’s opinion will carry significant weight with respect to state responsibilities."

In 2025 the International Court of Justice (“ICJ”) will hand down its advisory opinion on the obligations of states with respect to climate change. This will likely represent a culmination of the various decisions of international and national courts underlying it (including those in our climate litigation series). Whilst not binding, the ICJ’s opinion will carry significant weight with respect to state responsibilities and may influence the way in which national courts interpret similar obligations under national law.

Disputes: Developing precedent for claims against corporates

Our climate litigation series (oil & gas, shipping and mining) in 2024 delved into only a small selection of recent litigation. Uncertainty remains as to how the courts will address some more novel aspects of claims against corporates, some of which may be resolved in 2025.

Most notably, in 2025 we expect a decision to be handed down in the case of Municipio De Mariana v BHP Group. The 12-week hearing commenced in mid-October 2024, with a decision expected from the English High Court in summer 2025, more than five years after the claim was first issued. The case is one of a series of cases against UK parent companies, alleging liability for harms caused by the operation of foreign subsidiaries, and it will be the first to be decided by the courts at a substantive (rather than procedural) hearing.

The allegations brought in the Mariana Dam case are brought under Brazilian law in relation to alleged breaches by parent companies domiciled in the UK. Similarly, a group action governed by Malaysian law against Dyson’s UK and Malaysian entities is now set to proceed in the English High Court, subject to further appeal. Although the court of first instance held that Malaysia was the correct place for this to be tried (see our article from 2023), the Court of Appeal recently overturned the decision, finding England to be the appropriate forum. This will be one to watch in 2025.

Mitigating risk: Focus on exits

"Shell faced pushback late last year from the Nigerian government with respect to its proposal to sell its Nigerian assets."

Increased litigation against parent companies for environmental and human rights impacts has been interlinked with greater focus on mitigating risks through responsible exits; a relationship set to continue in 2025.

In October 2024, the public authorities in Brazil reached a reparations agreement for the Mariana Dam disaster with BHP, Vale and Samarco. Similarly, whilst claims related to oil spills in Nigeria are set to proceed in the English courts in 2025, Shell faced pushback late last year from the Nigerian government with respect to its proposal to sell its Nigerian assets, only receiving approval for the sale after months of negotiation.

The recent publication of the Natural Resource Governance Institute’s Responsible Exit Principles for Oil and Gas Companies and the OECD’s guidelines on Responsible Business Conduct for Climate Action will likely shape approaches to the responsible exit process in 2025.

Conclusion

2025 will continue to see refinements to legal interpretation, legislation and practical implementation across the ESG sphere. We look forward to continuing to support clients to navigate uncertainties and to protect and evolve business throughout the coming year.

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