Insights

On March 20, 2025, Florida Attorney General James Uthmeier announced an investigation into whether two leading proxy advisors’ advice involving the consideration of Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) constitutes deceptive or unfair trade practices under Florida law or a violation of Florida antitrust law.

On February 18, President Trump issued an Executive Order titled “Ensuring Accountability for All Agencies” that directs independent agencies (as well as Cabinet Departments and their sub-agencies) to route all “proposed and final significant regulatory” and budgetary actions through the White House and the Office of Management and Budget. If implemented to its full extent, this action will significantly strengthen the authority of the White House by weakening the political autonomy of these independent agencies. As an assertion of the President’s inherent powers under Article II of the U.S. Constitution, it also stands to weaken congressional influence over these independent agencies, both through the appropriations and confirmation processes.

On February 4, 2025, U.S. Environmental Protection Agency (EPA) Administrator Lee Zeldin announced the agency’s Powering the Great American Comeback Initiative, signaling five pillars that will guide EPA’s work in the short term, which are summarized below:

Mandatory climate disclosures for US federal contractors are officially off the table—at least, for the foreseeable future.  On January 10, 2025, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration announced that they are withdrawing a proposed rule, “Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk,” which would have required thousands of federal contractors to inventory and publicly disclose their Scope 1 and Scope 2 greenhouse gas (GHG) emissions and would also have required  “major” contractors to also establish and validate GHG emission-reduction targets tailored to the goals of the Paris Agreement.  The proposed rule, discussed in further detail here, was introduced in November 2022 and resulted in thousands of public comments from the government contractor community and beyond. 

On November 27, 2024, a group of eleven state attorneys general (the “AGs”) sued three of the world’s largest asset managers (the “Asset Managers”), accusing them of anticompetitive stock acquisitions, deceptive asset management practices, and an antitrust conspiracy to restrict coal output. The states seek declaratory and injunctive relief including divestitures, as well as fines under state laws, although the allegations could provide a basis for follow-on private treble damages claims under the antitrust laws.

On November 8, 2024 the SEC announced a settled enforcement action against Invesco Advisers, Inc. for making misleading statements about its integration of environmental, social, and governance (ESG) factors into the firm’s investment decisions. Invesco agreed to pay a $17.5 million civil penalty to settle the matter. This enforcement action makes it clear that, even though the SEC dissolved its ESG Task Force, the Commission continues to monitor firms’ statements and representations for misleading statements about ESG.

There is currently a deluge of new EU law being finalized and adopted – particularly on environmental and sustainability issues. At times it may seem overwhelming – with certain new EU laws being overlooked.  However, when serious environmental problems come to light within companies – the first major concern is normally criminal liability. That includes potential criminal liability of the company itself, but also of the CEO, Board Members and other persons leading it. With that in mind – top of a company’s ‘to-do’ list should be ensuring compliance with the new EU Environmental Crime Directive.

Cattle, cocoa, coffee, oil palm, soya, wood, rubber?  Do you sell any of these commodities? Do you sell any products derived, containing or using any of these commodities? Are there any companies in your supply chain which sell or use these commodities, or derivative products?  Do you (or others in your supply chain) sell products in the EU/EEA, or export products from the EU/EEA?  If so, you – and your supply chain – must likely comply with the Deforestation Regulation.[1] And getting ready is no easy feat – even despite the recent actions to postpone some of the application deadlines of concern. 

The EU Institutions are currently adding the finishing touches to the new Packaging & Packaging Waste Regulation (“PPWR”) which is expected to be adopted in Q4 2024 or Q1 2025. While many companies are fully preoccupied with preparing for other EU legislation (e.g. the Deforestation Regulation) – companies will ignore the PPWR at their peril. The PPWR contains a host of ambitious legal targets and requirements – which industry will find it difficult to achieve in practice. And the deadlines to comply – are perhaps even more challenging. Companies will need to start preparing for the EU PPWR now, to avoid serious problems – including supply-chain disruption, penalties and litigation – in the future.

On September 10, 2024, the U.S. Securities and Exchange Commission (the “SEC”) announced a settlement with Keurig Dr Pepper Inc (“Keurig”).  The SEC alleged that Keurig made incomplete and inaccurate statements in the Company’s annual reports for fiscal years 2019 and 2020 touting the recyclability of its K-Cup products. Keurig agreed to pay a $1.5 million civil penalty. 

Earlier this week, another case of apparent Modern Slavery and Forced Labour came to light in the UK. [1]  According to media reports, the former UK Prime Minister, Baroness Teresa May of Maidenhead, now Chair of the Global Commission on Modern Slavery and Human Trafficking[2] – described the case as “shocking” and showed “large companies not properly looking into their supply chains”. The UK Government is now contemplating further steps to strengthen UK Modern Slavery and Forced Labour laws. This recent UK case, follows a number of other cases in Europe – particularly the EU – including those involving high profile Italian fashion houses.[3] In all these cases, the ethical and social responsibilities – including the legal obligations – incumbent on large companies to root-out modern slavery and forced labour concerns in their supply chains, have been focused on. This comes in the wake of, a number of concerns in the same area with, for example, a United Nations Working Group recently noting a general lack of understanding in the banking and investment community that ESG data and information requires undertakings to provide information and data on the “S” – including, therefore, on human rights issues.[4]

The amount of litigation regarding environmental and climate change issues is, perhaps unsurprisingly, growing worldwide.[1] A significant portion of that litigation relates to so-called ‘greenwashing’, ‘climate-washing’ or ‘social-washing’ disputes. In other words, legal cases where people or organisations (often NGOs and consumer groups) accuse companies, banks, financial institutions or others, of making untrue statements. They argue these companies or financial institutions are pretending their products, services or operations are more environmentally-friendly, sustainable, or ethically ‘good’ for society – than is really the case. Perhaps more interestingly, of all the litigation in the environmental and climate change space – complainants bringing greenwashing and social washing cases have, according to some of these reports, statistically the most chance of winning. So, in a nutshell, not only is greenwashing and social washing litigation on the rise, companies and financial institutions are most likely to lose cases in this area.

Investors pursuing environmental, social, and governance (ESG) programs or applying sustainability standards have recently faced high-profile antitrust accusations, leading some to reconsider their participation in certain sustainable investment groups. On August 9, 2024, Climate Action 100+ confirmed the withdrawal of a major investor from the initiative, less than two weeks after the Judiciary Committee of the U.S. House of Representatives had sent information requests to more than 130 of the group’s members as part of an investigation into ESG programs. This follows numerous similar requests by the Committee since December 2022, as well as similar requests and threats of legal action against asset managers by some State Attorneys General since August 2022.

The Securities and Exchange Commission (SEC) has reportedly recently dissolved its Climate and ESG Enforcement Task Force (the Task Force). The Task Force was part of SEC Chair Gary Gensler’s broader push to increase investors’ access to environmental, social, and governance (“ESG”) information about public companies and registered investment companies. The dissolution of the Climate and ESG Enforcement Task Force comes after three years marked by industry resistance and a mixed record in the courts. Prior to the Task Force’s dissolution, the agency removed ESG from its annual Examination Priorities Report, which provides areas of particular focus during SEC examinations. While the Task Force has been dissolved, the SEC is still pursuing a number of its proposed ESG and climate-related rules.

More than a year ago, the EU Batteries Regulation (Regulation (EU) 2023/1542) entered into force.  In approximately one year’s time, the EU Batteries Regulation is set to repeal the 2006 Batteries Directive (Directive 2006/66/EC), with some exceptions. During the 2024 summer, a number of the new requirements under the EU Batteries Regulation have begun to apply.  With these points in mind, it is an opportune time to take stock of the new requirements being phased-in under the EU Batteries Regulation, consider the most recent requirements which begun to apply last month (August 2024), and assess the significant, and growing, impact the EU Batteries Regulation is having more generally.

Over the 2024 summer, new EU rules entered into force regarding unsold consumer products under the new ESPR (i.e. the Ecodesign for Sustainable Products Regulation – Regulation (EU) 2024/1781).  The legal obligations themselves are relatively concise and short in number and therefore perhaps easy to overlook.  However, companies selling or supplying consumer products in the EU/EEA – particularly companies in the clothing, footwear, apparel, textile and retail sectors – should beware and not underestimate their importance or impact.

After a somewhat turbulent adoption process, on 25 July 2024 the Corporate Sustainability Due Diligence Directive (“CS3D”)[1] finally entered into force.  The CS3D requires certain companies operating in the EU/EEA, to identify and address adverse impacts on human rights and the environment as regards their actions both inside and outside of Europe. This includes obligations for companies to issue publicly available annual statements on human rights and environmental issues, and to adopt and put into effect transition plans for climate change mitigation.

The EU Institutions are in the process of agreeing new rules to further prevent greenwashing.  On 17 June 2024, the Council adopted its general approach to the proposed Green Claims Directive (“GCD”). The GCD is focused primarily on how companies would need to substantiate and verify green claims which are potentially permissible in the EU.  It complements the Directive on Empowering Consumers of the Green Transition (“ECGT Directive”) which entered into force in March 2024.  That Directive focuses primarily on blacklisting and prohibiting certain greenwashing practices. Together these two Directives will create a single regulatory framework concerning environmental, and to some extent, social claims.       

Congress enacted the UFLPA on December 23, 2021 in response to alleged forced labor violations occurring in the People’s Republic of China. The UFLPA supports U.S. Customs and Border Protection’s (CBP) enforcement of Section 307 of the Tariff Act of 1930. The act aims to prevent the importation of goods sourced and/or made in whole or in part with forced labor from China into the US by imposing a rebuttable presumption that holds that any goods “mined, produced, or manufactured wholly or in part” in the XUAR or “produced by an entity on the UFLPA Entity List” are prohibited from import into the US. The UFLPA’ s rebuttable presumption went into effect on June 21, 2022.  

New EU legislation is about to be adopted which will require pharmaceutical and cosmetics companies to pay water pollution costs. More specifically, it will oblige those companies to pay for the clean-up and removal of micropollutants from effluent water. In addition, it will increase the risk of pharmaceutical and other companies facing legal damage-to-health claims. The new EU legislation – called the (Recast) Urban Wastewater Treatment Directive (“New UWWTD”) – is expected to be formally adopted in Q3/4 of this year.