Greenwashing allegations, supply chain controls, ESG obligations and “climate lawsuits” all demonstrate that companies are increasingly coming under scrutiny from authorities, associations and political activists regarding ESG obligations. Despite current political developments, the risk of “ESG litigation” remains significant.
ESG litigation: Has there been a political climbdown?
Recently, it seemed that political efforts to regulate and expand environmental, social and governance (ESG) obligations had not only subsided but had even reversed. In June 2025, it was reported that the European Commission was planning to withdraw its proposal for an EU Green Claims Directive, which aims to combat so-called greenwashing and increase the transparency of environmental claims. The implementation deadline for Member States and the application deadlines for the already adopted and enacted EU Supply Chain Directive (CSDDD or CS3D) have also been postponed. Similarly, the CDU and SPD have agreed in their coalition agreement to significantly water down the current Supply Chain Due Diligence Act by abolishing reporting requirements and making violations of due diligence obligations punishable only in cases of major human rights violations.
Across the Atlantic, these political developments are even more pronounced in some cases: In the US state of Texas, a law was passed in 2021 prohibiting state agencies from working with financial companies that boycott the fossil fuel industry and requiring the listing of such companies. Even in California, traditionally considered a pioneer in ESG regulation in the US, the kick-off of climate reporting rules has been postponed.
The fact that the US withdrew from the Paris Climate Agreement again at the beginning of the year is also in line with the above trend.
ESG is here to stay together with corresponding legal disputes
However, it is doubtful whether the above Texas law will serve as a blueprint for an “anti-ESG movement” in the future. The law is currently under review by a US court. Furthermore, recent developments should not be taken as an opportunity to write off ESG and underestimate the challenges and risks associated with it.
Although there has not yet been a widespread wave of ESG lawsuits in Germany, various court proceedings show a clear trend: companies are increasingly facing legal challenges in the ESG area. The combination of regulatory requirements, growing activism and increasing public awareness is creating an environment in which ESG violations can become relevant not only in terms of reputation but also in terms of liability. This applies not just to individual areas or industries, but across all sectors and already under current law:
- In competition law, so-called “Green claims“ are regularly the subject of legal disputes, and the public presentation and advertising of a company using terms such as “climate neutral,” “environmentally friendly” and “CO2 positive” are challenged (often successfully) by competitors and associations. Here you will find a tracker including a classification of decisions already handed down.
- The first effects are being felt in capital market and investor law: after a fine of EUR 25 million was imposed on an asset manager at the beginning of the year for what the public prosecutor’s office considered to be misleading ESG marketing practices, media reports indicate that a civil lawsuit is also pending against the asset manager for alleged greenwashing.
Incidentally, Sections 289(3) and 289b et seq. of the German Commercial Code (HGB) already stipulate reporting and disclosure requirements under capital market law. The breach of disclosure obligations or the publication of false ESG information also raises the currently hotly debated question of liability under Sections 97, 98 German Securities Trading Act (WpHG) in cases where ESG information would be classified as insider information and would trigger an ad hoc disclosure obligation
(Art. 17 MAR).
- Even in classic civil law, diverse constellations are not only interesting in theory, but have already been and continue to be tested in court. One example is the media-covered case of a Peruvian farmer against RWE , in which a claim for injunctive relief was asserted under Section 1004 of the German Civil Code (BGB) on the grounds of alleged imminent impairment of property due to greenhouse gas emissions. It is to be expected that tortious claims, in particular Section 823(2) of the German Civil Code (BGB) in conjunction with a protective law, e.g. Section 264a of the German Criminal Code (StGB) in the case of false “ESG information” that was decisive for an investor’s investment decision, or even Section 826 BGB - liability for intentional immoral damage – become the linchpin of civil law proceedings. Particularly in the wake of the case law developed in the so-called “diesel cases”, developments in consumer law are to be expected in such a way that purchase or investment decisions could be reversed in the event of (incorrect) ESG-related information.
The concept of material defects under sales law, which has been expanded for some time now in Sections 434 BGB, is also likely to be used as a “door opener” for warranty rights under sales law in connection with ESG-related quality and advertising information about products.
- In the context of so-called strategic litigation by consumer and environmental associations and also individuals, industrial companies are being taken to court in a “publicly effective” manner – e.g. for injunctions or adjustments to business strategies. This is done not least to draw more attention to the underlying political goals or demands.
Implement ESG obligations, avoid litigation risks
Proactive engagement with ESG can (and, in our view, must!) minimise legal risks and strengthen the trust of investors, customers and the public. ESG compliance not only serves to fulfil regulatory requirements, but also to avoid and minimise potential litigation and liability risks.
From a corporate perspective, therefore,
- continuously monitor the ESG regulations and regulatory developments applicable to your own company (identify).
- review your own ESG strategy, ESG reporting and specific product-related ESG disclosures,
- design and adapt business processes to comply with ESG requirements.
While a wave of ESG lawsuits has not yet materialised, the decisions handed down in ESG litigation to date point to future problem areas: questions of causality, attribution and the amount of damages claimed and the scope and protective nature of public law ESG standards will come under greater scrutiny by the courts in the future. To date, ESG litigation has not been particularly successful for the respective plaintiffs in purely civil proceedings. At the same time, such court proceedings have regularly attracted considerable media attention. This alone has a significant impact on the reputation of the companies concerned. In addition, in view of the numerous legal issues that remain unresolved (even at the highest court level), it can be assumed that the limits and possibilities for corresponding ESG proceedings are far from being exhausted. Ultimately, it remains to be seen whether the newly created possibilities for collective legal protection under the Consumer Rights Enforcement Act, especially the action for remedial relief, could be used as a procedural vehicle for potential disputes in the ESG area. Some voices in the legal press consider this to be a foregone conclusion.
