What Just Happened?
The UK underwent a record-breaking heatwave in July with another hitting the country in August.
What Does This Mean?
This has caused a lot of businesses to question how they can continue to effectively operate in this heat. As climate change continues to create extreme weather conditions, businesses must adapt to ensure that they can deal with the risks that come with it.
One such risk is a disruption to supply chain. This is expected to hamper imports and exports as there will also be an increased risk of water shortages, flooding and property damage caused by wild fires. Businesses may also be a need to take into consideration any risk to their employees’ health in extreme weather conditions. Businesses will need to ensure that the work place is able to withstand extreme weather conditions and that their employees can carry out their jobs in a hazard free environment.
Businesses may also then be directly affected by legal measures imposed by the Government to help meet their greenhouse gas reduction targets. At present perhaps the biggest impact on regulating businesses in line with climate change is the 2015 Paris Agreement. The agreement established an international framework that sets out broad boundaries within which the signatory States, and therefore its non-State actors, must operate. These include commitments to holding the global average temperature rise to well below 2⁰C and to pursue efforts to limit the temperature increase to 1.5°C, to reduce emissions to net zero by mid-century.
How Does This Affect the Legal Sector?
While climate change creates concerns for business, these developing risks also create concern amongst employees about a safe work environment. For most UK employees during the heatwave, the first question that sprang to mind was whether there is a law against having to go into the workplace when temperatures reach a certain height. Unfortunately, at present there is nothing in UK law preventing entry into the office or workplace when the weather is warm. Whilst workplaces must adhere to general health and safety regulations. At present UK regulations note that the workplace must be comfortable. However, ‘only excessive cold is defined, stating temperatures shouldn’t fall below 16 degrees Celsius in an office environment, or 13 degrees if the work is physically demanding.’
Therefore, where temperatures continue to soar there may be a requirement for the government to review businesses health and safety regulations in light of excessive heat and amend health and safety rules to take this into consideration.
Comparatively, it will be vital for businesses to focus on transitional and litigation risks.
‘Transition risks are business-related risks that follow societal and economic shifts toward a low-carbon and more climate-friendly future. These risks can include policy and regulatory risks, technological risks, market risks, reputational risks, and legal risks.’
‘For instance, as the Bank of England points out, if government policies worldwide changed in line with the Paris Agreement, two-thirds of the world's known fossil fuel reserves could not be used. As well as affecting energy companies, this might change the value of investments held by banks, insurers or pension funds in coal, oil or gas companies.’
‘Liability risks then 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 being driven by a greater focus from regulators and investors wanting to ensure businesses provide necessary disclosures and comply with an ever-evolving regulatory landscape.’
In addition, ‘firms need to integrate climate change into business strategy, governance, risk management, investment and underwriting decision-making, product design, claims handling and operations. Failure to act now might leave firms open to litigation, challenge from shareholders and regulatory pressure, and unable to adapt their business models to a changing business and economic environment.’
Finally, climate change litigation is expected to impact all facets of business including ‘supply chains, employees, customers, investors and other stakeholders. Directors and officers for example could face litigation over their failure to carry out fiduciary duties related to climate change, such as to consider the risks and opportunities or implement risk controls.’
‘Recent rulings signal a gear change for climate litigation and Europe may experience a new wave of climate change litigation with a focus on human rights arguments and European constitutional protections. While early days, climate change litigation looks set to expand further into new areas of liability, and we are likely to see more cases in areas like climate change adaptation, environmental, social and governance (ESG), and the transition to a low carbon economy.’
Written by Gabriella Cinotti
Assessing Firms
#Allen & Overy #Eversheds Sutherland #White & Case LLP #Jones Day #Baker & Mackenzie
This Article was Written Using the Following Sources:
[1] Doug Faulkner & Christy Cooney ‘UK heatwave: Four-day extreme heat warning for parts of UK’ (BBC News, 09 August 2022) <https://www.bbc.co.uk/news/uk-62472926> Accessed 9 August 2022
[2] Client Earth Communications ‘The legal perspective: Climate change’s influence on future businesses venture’ (Client Earth Communications, 28 November 2018)<https://www.clientearth.org/latest/latest-updates/stories/the-legal-perspective-climate-change-s-influence-on-future-business-ventures/> Accessed 9 August 2022
[3] Giulia Carbonaro ‘Too hot to work: what does the law say about working in a heatwave’ (euronews.net, 11 August 2022) < https://www.euronews.com/next/2022/08/11/too-hot-to-work-what-labour-laws-in-european-countries-say-about-working-in-a-heatwave> Accessed 9 August 2022
[4] GRESB ‘Transition Risk Report’ (GRESB) < https://www.gresb.com/nl-en/products/transition-risk-tool/> Accessed 9 August 2022
[5] Kezia Farnham ‘What Is Transition Risk and How Can Today’s Organisations Tackle It?’ (Diligent, 7 July 2021) < https://www.diligent.com/insights/esg/transition-risk/> Accessed 9 August 2022
[6] The Law Society ‘Climate Change Risks, the future of law as we know it?’ (The Law Society, 18 February 2021) < https://www.lawsociety.org.uk/topics/research/climate-change-risks-the-future-of-law-as-we-know-it> Accessed 9 August 2022
[7] KPMG ‘Regulating for climate change in insurance’ (KPMG) <https://home.kpmg/xx/en/home/insights/2021/11/regulating-for-climate-change-in-insurance.html> Accessed 9 August 2022
[8] Lisa Williams and Stev Bauer ‘Thinking ahead: How climate change litigation will shape future companies’ (Zurich, 5 April 2022) < https://www.zurich.com/en/products-and-services/protect-your-business/commercial-insurance-risk-insights/thinking-ahead-how-climate-change-litigation-will-shape-future-liabilities> Accessed 10 August 2022
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.