Climate change and sustainability disputes: Technology & Innovation perspectives
Global | Publication | July 2021
The Technology and Innovation (T&I) sector promises to offer solutions to climate change and sustainability related issues, but those solutions often come with costs, some of which may lead to legal disputes.
Market trends lead us to believe that we may see increased legal action against the T&I sector due to, for example, increased energy use (resulting in carbon emissions), increased consumption of limited resources, disposal of hazardous materials, patent disputes, service or supply chain interruptions due to weather, and false advertising associated with sustainability claims.
The T&I sector faces climate change related disputes risks, in part, due to its dependency on natural resources such as water and rare earth metals1 and its generation of byproducts such as carbon emissions and hazardous waste.2 The industry’s dependency on natural resources such as water and rare earth metals come with environmental costs.3 For example, as demand for energy-dense batteries increases, lithium mining—and the associated water consumption—is growing; lithium miners use about 500,000 gallons of water per ton of lithium in evaporation pools.4 Along with massive water consumption, lithium mining produces pollutants in the ground, water, and air affecting surrounding communities.5 Pollution and environmental degradation produced by some players in the sector may expose them to lawsuits filed by governmental agencies, environmental groups, and mining communities, for example.6 The demand, however, for new batteries, and the need to dispose of old batteries, continues to grow; “it is estimated that between 2021 and 2030, about 12.85 million tons of EV lithium ion batteries will go offline worldwide, and over 10 million tons of lithium, cobalt, nickel and manganese will be mined.”7 To reduce their legal exposure, companies in the T&I sector should be mindful of the impacts associated with fabrication and decommissioning of their products.8 This sector will need to continue to consider its environmental footprint, even as it responds to market demands to develop solutions to challenges caused by climate change.
The prevalence of digital communications such as video conferencing has allowed some industries to reduce their carbon footprint due to reduced travel. However, other industries, including some in the T&I sector, have seen an increasing demand for power. One example is power-hungry servers in datacenters (that also need to be cooled). We have seen players in the T&I sector invest significant resources in reducing power consumption and some attempts to “go to zero” net emissions.”9 However, as new technologies are developed to help decrease greenhouse emissions, power consumption, or reduce hazardous waste, we expect that many of those technologies to be patented in various jurisdictions around the world. As a result, we expect to see an increase in patent disputes in the future in district courts and/or the ITC related to technologies aimed at combatting climate change.
We have also seen an increase in dispute risks associated with climate change in the United States due to interruption of service due to weather. For example, a recent winter storm in Texas resulted in massive power outages and caused a major technology company to shut down a semiconductor fabrication plant in Austin for more than a month, which likely cost the company hundreds of millions of dollars. Climate change threatens to increase such service interruptions throughout the T&I sector, which can also lead to downstream effects such as interruptions in the supply chain. Some manufacturers, such as car manufacturers, depend on just-in-time delivery to reduce their parts inventory, including their inventory for integrated circuits. Not surprisingly, we have seen dispute threats made against chip suppliers due to these climate-related supply chain interruptions.10 Climate change, and associated business interruptions, are likely to result in increased future disputes.
Another area in which we have seen increased disputes risk is in false or deceptive advertising resulting from sustainability claims made, in part, in response to climate change. Companies operating in the U.S. have faced Federal Trade Commission (FTC) enforcement actions, along with consumer or competitor-led lawsuits claiming false advertising or misleading marketing claims relating to sustainable operation or manufacturing processes.11 Companies may look to mitigate such risks by carefully considering their sustainability claims and avail themselves of resources such as the FTC’s “Green Guides.”12 Industry should also consider the reporting requirements may vary across borders; for example, the European Union “ha[s] adopted mandatory [environmental, social, and governance (ESG)] reporting requirements.”13
Although climate change may lead to increased disputes risk across the T&I sector, companies in the T&I sector may be able to reduce that risk by identifying and understanding the causes of the risk and, if possible, taking preventative measures.