Litigation Risks
Guiding Definition
The risk of legal sanctions stemming from a company’s failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct.
EXAMPLES
- Legal actions or sanctions for failure to address negative environmental or human rights impacts
Business Risks - Litigation Examples
Climate Change
In late 2015, a Peruvian farmer filed suit against RWE, a large European energy company, for its alleged contributions to global warming based on its total emissions over two centuries. The complaint claims that global warming is causing glaciers near the farmer's home to melt, which in turn is causing lakes in the area to flood and threaten his property.
IMPACT
- Legal fees and monetary settlements for violating laws and regulations
Deforestation and Land Use
The Government of Indonesia has recently begun prosecuting publicly traded companies associated with air pollution produced by palm oil fires. On August 15, 2016, the Government of Indonesia fined Sampoerna Agro $81 million for 2014 forest fires on 3,000 hectares on its concessions in Riau Province, Indonesia. The $81 million fine is slightly less than Sampoerna Agro’s revenue in the first six months of 2016.
IMPACT
- Legal fees and monetary settlements for violating local laws and regulations
Soil Health and Biodiversity
In January of 2017, Ecuador's Esmeraldas Provincial Court ruled against Los Andes and Palesema Palm Oil in the matter of planting oil palm trees in place of indigenous vegetation. Los Andes was forced to pay restitution to local villages and adopt planting restrictions.
IMPACT
- Legal action orginating from compromised biodiversity
- Monetary compensation contracts affected by biodiversity loss
Livelihoods and Working Conditions
In 2015, the consumer rights law firm Hagens Berman filed separate class action lawsuits against US food companies Mars and Hershey and Swiss Nestlé for failing to report the use of child labor in their cocoa production.
IMPACT
- Legal fees and monetary settlements for violating local laws and regulations
Land Rights
A federal prosecutor in Brazil told Bunge in 2011 to stop sourcing sugarcane from Jatayvary, because of a land rights dispute with an indigenous community. The company insists that it will only consider breaking its contracts once the land is fully demarcated, and officially signed by the President.
IMPACT
- Legal fees and monetary settlements for violating local laws and regulations