The battle over whether businesses have an obligation to prevent climate change is intensifying, with international treaties like the Paris Agreement setting clear goals to reduce carbon emissions and reach net zero by 2050. This has led to the development of new regulatory frameworks to work towards these goals, focusing on businesses as the major emitters of greenhouse gases through their production of goods and services. As a result, businesses are facing increased pressure to reduce their greenhouse gas emissions in order to obtain insurance, loans, and even a checking account.
In addition to regulations on reducing emissions, businesses are also facing pressure from financial markets as fund managers adopt environmental, social, and governance (ESG) investing strategies. This means that businesses must provide data on their sustainability and ESG practices in order to attract investments. To meet this demand, governments and regulatory bodies are developing reporting standards for businesses to disclose their greenhouse gas emissions, climate risks, and other environmental factors. Failure to comply with these standards can lead to penalties and legal repercussions.
Beyond reporting standards, legal liabilities are emerging related to sustainability issues, climate change, and human rights. The Corporate Sustainability Due Diligence Directive in the European Union establishes a due diligence standard for businesses to ensure compliance with sustainability requirements, creating a pathway for individuals to sue companies for failing to address climate change. Additionally, regulations on greenwashing, or the exaggeration of environmental actions by companies, are becoming more prevalent globally, further increasing legal liabilities for businesses.
The ongoing debate over whether businesses should be legally required to consider climate change in their business decisions is impacting businesses of all sizes, including small businesses like Joe’s family-owned Ace Hardware stores in Jacksonville, FL. As regulations require businesses to calculate and reduce their greenhouse gas emissions, businesses like Joe’s will need to make significant changes to the way they operate. Failure to comply with these regulations could result in enforcement actions, loss of access to financial resources, and potential lawsuits for damages.
The shift towards requiring businesses to consider climate change in their operations is seen as a necessary step to address the serious threat of climate change by some, while others view it as an overreach into business operations. As more regulations are developed and implemented, businesses will need to adapt to these changes to remain compliant and competitive in an evolving business landscape focused on sustainability and environmental responsibility.
