The growing contribution of environment, health, and safety (EHS) teams to corporate environmental, social, and governance (ESG) strategies is a major trend impacting EHS management today.
According to the Green Quadrant: ESG Reporting And Data Management Software report from independent research and advisory firm Verdantix, 15% of survey respondents expect the EHS function to define their firm’s ESG and sustainability strategy, 27% expect EHS to influence their firm’s ESG and sustainability strategy, and 24% expect EHS to implement the ESG and sustainability strategy.
In summary, 66% of survey respondents expect the EHS function to play a major role in their company’s ESG program. This result is not surprising since for many years EHS has been tracking and managing key environmental metrics related to the ‘E’ part of ESG and worker safety and health metrics related to the ‘S’ element of ESG. These metrics are used for mandatory and voluntary ESG reports.
Climate-related litigation is rising
The EHS function plays an important role in many aspects of ESG, including regulatory compliance, the mitigation of reputational risks, and the identification of opportunities to improve ESG performance.
But one contribution of EHS is often overlooked: The reduction of legal risks, especially with regard to climate-related litigation. And climate-related lawsuits are becoming a greater issue of concern for corporations worldwide.
Consider the following facts and figures from the Global trends in climate change litigation: 2024 snapshot report published by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science:
- The number of climate-washing cases has grown recently. “Climate-washing” refers to misleading or unproven claims regarding a firm’s net-zero efforts or transition to a low-carbon economy. These include inaccurate statements, failing to have full disclosure by selectively highlighting positive results while hiding negative ones, or using vague language.
- In 2023, 47 climate-washing cases were filed, bringing the recorded total to more than 140, making this type of lawsuit one of the most quickly expanding areas of climate litigation.
- More than half of the almost 140 climate-washing cases filed from 2016 to the present have reached official decisions and 54 of 77 cases have been ruled in favor of the claimant. Claimants have won 70% of climate-washing cases.
The rise in the number of cases and the significant success rate for claimants show growing ESG legal and financial risks for organizations. It’s imperative that firms be able to provide evidence for their climate-related, environmental, and sustainability efforts. EHS software can help.
EHS software provides evidence to support claims
EHS professionals have been tracking, calculating, and managing carbon emissions as part of various regulatory reporting regimes, such as the US EPA’s operating permit program under Title V of the Clean Air Act or California’s Mandatory Greenhouse Gas Reporting Regulation (MRR). Organizations that have invested in EHS or carbon management software to facilitate the process are well equipped to be protected from climate-related litigation, and therefore to reduce ESG legal risks.
EHS software allows companies to provide solid evidence supporting their carbon emission reduction claims in three ways:
1) Scientific calculation methods
EHS software includes a library of emission factors used to calculate carbon emissions. When emission factors are updated by organizations (DEFRA, EPA’s eGrid, GHG Protocol, IPCC, etc.), they are also updated in EHS software to ensure GHG and carbon calculations are up to date. In the context of litigation, this allows organizations to show that their carbon emissions data are backed by science and sophisticated calculations, thus supporting the credibility of their claims. Also, the accuracy of carbon emissions can further be strengthened through granular, equipment- and asset-level emissions used to produce totals for individual sites, plants, regions, and business units.
2) Audit trails
In addition to showing how current carbon emissions data are produced, organizations may also be required to show how past figures were generated. EHS software offers visibility on past numbers through calculation logs. Audit trails track changes to each record, including who made the change and when. Thus, in a court of law, when a company is challenged about claims made over a period of time (e.g. 25% reduction in carbon emissions over a three-year period), they can use audit trails in EHS software to show exactly how totals were calculated in past years, not just for the most recent year.
3) Data quality
Market-leading EHS software includes features to ensure data quality, such as: a) data entry validation rules that prevent users from entering inaccurate or incomplete data or guide them to enter data correctly, b) consistency checks that compare current data with past data for the same record and flag when something is out of range from what is expected, and c) automated workflows where data records must be validated by experts before being entered in the system. Integrations with other systems, such as IoT sensors, process historians, energy/utility meters, ERP systems, CEMS, and other external databases, also greatly contribute to data quality because they reduce the risk of human error. Showing that robust measures are taken to make sure carbon emissions data are accurate, consistent, and complete can provide strong evidence in court.
EHS software protects organizations from climate-related litigation, thereby helping to reduce ESG-related legal and financial risks. Also, if and when reasonable assurance is required by ESG or sustainability regulations (as will be the case with CSRD in the EU by 2028), the ability to create a comprehensive and accurate inventory of GHG and carbon emissions through EHS software will help meet compliance requirements and demonstrate superior ESG performance.