Fit for 55 and the increased risk of litigation on governments and businesses.
A major legislative overhaul called ‘Fit-for-55’ was launched in the summer of 2021 as part of the European Union's Green Deal initiative. This initiative requires organisations to rethink their business risk at the operational level.
In releasing the ‘Fit for 55’ Package of policies, the EU has created a global precedent by proposing a thorough policy framework to achieve a 55 per cent net reduction by 2050.
Here at Martello, we anticipate increased climate litigation cases because of recent and ongoing legislative efforts at the EU level. Significant litigation is likely following the Introduction of the ‘Fit for 55’ package, the European Union’s flagship decarbonisation measure.
A recent example is the decision taken by Europe’s human rights court, which ruled on 9 April 2024 that the Swiss government had violated the human rights of its citizens by failing to do enough to combat climate change. This decision will set a precedent for future climate lawsuits.
Boards and companies need to start identifying their liability and transition risks.
Increase in business risks
The impact of the court’s decision will be felt across all industries. But what risks should business leaders be most concerned about, and how can they best prepare to mitigate them at an operational level? Based on our analysis, we have identified the following key risk areas for businesses to focus on.
Liability risks
Liability risks arise from a failure to mitigate, adapt to, disclose, or comply with changing legal and regulatory expectations. Climate litigation is increasing worldwide, reflecting advances in attribution science, evolving legal disputes, and changing public sentiment. It is also driven by a greater focus from regulators and investors wanting to ensure businesses provide necessary disclosures and comply with an ever-evolving regulatory landscape.
Companies that pollute are exposed to potential litigation. But so are companies that fail to consider future climate change in their products and services.
Transitional Risks
Transitional risk comes from the potentially higher business costs of new policies, laws, and regulations designed to address climate change. Transitional risks can also arise from changes in technologies and consumer trends, which may lead to reputational risk as society changes its view on ethical business practices.
How should businesses respond to these liability risks?
Understand what legislation will affect your business now and in the future.
Develop a robust ESG strategy and framework.
Measure your business and supply chains carbon emissions. Enabling you to uncover and mitigate your carbon liabilities.
How can we help?
We identify the legislation that will affect your company now and in the next five years.
Help you develop your ESG Strategy and Operating model.
Create an action plan to reduce your liability.
Ends
Martello supports businesses and investors in reducing costs and liabilities in response to global carbon, climate and net zero legislation.
The Martello Carbon Stream Map (CSM) unlocks the blueprint for boards and investors to decarbonise an organisation, supply chain or portfolio by quickly calculating end-to-end operational and supply chain costs and liabilities.
To discuss how we can help your organisation reduce its carbon footprint and business risks, click here and let's talk!
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