Major week for legal developments on corporate sustainability

Canada, the US, France and the UK have seen breakthroughs on due diligence, greenwashing, shareholder proposals and Scope 3 emissions

There have been a number of significant legal developments around the world this week when it comes to greenwashing and sustainability-related corporate accountability.  

Greenwashing in Canada 

On Wednesday, Canada’s parliament approved legislation that will amend the country’s Competition Act to require companies to prove the credibility of any environmental claims they make in their marketing materials. 

If Bill C-59 clears the final hurdle of securing royal assent, it will mean companies making public statements about the benefits of a business or activity on the environment must be able to provide “adequate and proper substantiation in accordance with [an] internationally recognized methodology” and the claims should be “based on an adequate and proper test”. 

“The proof of which lies on the person making the representation,” the proposed text states. 

Some Canadian companies have responded by scrapping their public claims. The Pathways Alliance, a group of the country’s biggest oil sands producers, removed all content about environmental goals from its website and social media pages this week, citing “significant uncertainty” over what the new law could mean. 

Due diligence in France

Elsewhere, the Paris Court of Appeal ruled on three cases being brought using France’s Duty of Vigilance Law, which requires large companies to explain how they will monitor and mitigate the human rights and environmental impacts of their business activities and supply chains.  

The court upheld an existing decision to dismiss a case against Vigie Groupe SAS, a Latin American subsidiary of French waste management firm Suez. 

However, it said cases against TotalEnergies and EDF could proceed. 

Business and human rights groups mounted the challenge against Vigie after an oil spill contaminated water linked to one of its Chilean treatment plants, blocking the local community’s access to water for 10 days. 

The judge sided with Suez, arguing that claimants had not targeted the right company within the corporate structure, and had referred to two different vigilance plans during the process.

Meanwhile, campaign groups accused Total of breaching its due diligence obligations in relation to its business activities in Uganda; and EDF is alleged to have failed to respect indigenous communities’ right to free, prior and informed consent in relation to the development of a wind park in Mexico. 

The cases will now proceed in the courts and could result in new precedents being set for corporate accountability in France.

Shareholder proposals in the US 

In the US, a judge threw out Exxon’s case against activist investors on Monday. Follow This and Arjuna Capital used their shares in the oil major to try and file a resolution calling for more ambitious decarbonisation targets, especially in relation to the firm’s Scope 3 emissions. 

The Securities and Exchange Commission, which is the usual referee for shareholder proposals, refused to block the vote. So Exxon turned to the courts. 

Last month, the case against Follow This was dismissed because the US courts don’t have jurisdiction over the Dutch campaign group. On Monday, a judge said his “hands were tied by the constitution” and that he had to dismiss the case against Arjuna, too, because the investment house had withdrawn the climate proposal and promised never to file a similar one at Exxon again.  

Scope 3 emissions in the UK 

The UK’s Supreme Court ruled this week that local authorities must consider the Scope 3 emissions of projects when deciding whether to permit them. 

A lower court had previously ruled in favour of Surrey Council in England, which granted UK Oil & Gas Plc permission to expand its oil wells. Friends of the Earth and others argued that local authorities should evaluate the full lifecycle emissions of a project as part of the Environmental Impact Assessment required under UK law. 

Three of the five sitting Supreme Court judges agreed with the claimants, saying that Surrey’s decision only to assess the emissions produced by building and running the project was “demonstrably flawed”. 

The ruling is expected to make it easier to block new fossil fuel projects in the UK.