www.alston.com ESG Sustainability Spotlight Q1 | 2025
Q1 | 2025 3 2 MARCH SEC Drops Defense of Climate Reporting Requirements March 27, 2025 | Iowa v. SEC, No. 24-01522 The SEC withdrew from litigation over climate reporting requirements promulgated last year, stating that its lawyers are “no longer authorized to advance” arguments defending the climate rules. The regulations required companies to disclose their greenhouse gas emissions and report on other climate metrics. Acting SEC Chair Mark Uyeda stated that, in voting to withdraw the SEC’s defense of the rules, the SEC’s goal was to “cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”The litigation will continue without the SEC, with Democratic state attorneys general taking up the defense of the reporting requirements. Despite the SEC’s withdrawal from this litigation, the climate regulations will remain on the books until they are officially rescinded by the SEC or Congress or vacated by a court. The SEC paused the implementation of the rules last year pending the result of the litigation. SEC Rejects Attempt to Block Microplastics Proposal from Proxy Statement March 7, 2025 | Letter to The Goodyear Tire & Rubber Company The SEC rejected an attempt by Goodyear Tire & Rubber to exclude from its annual proxy statement a shareholder proposal relating to microplastics. The proposal was brought by shareholder advocacy group As You Sow and seeks to require the tire manufacturer to report on goals and timelines for reducing tire shedding and the resulting microplastic pollution. Goodyear sent a letter to the SEC arguing that the proposal should be excluded from the proxy statement because it “deals with a matter relating to the Company’s ordinary business operations and impermissibly seeks to micromanage the Company.”The SEC disagreed, finding that Goodyear had failed to demonstrate that the proposal related to the company’s ordinary business operations. Shareholders voted against implementing the proposal at the company’s annual meeting. to exclude shareholder proposals that implicate a company’s “ordinary business operations”or have no“economic relevance” to a company’s operations, which has the potential to curb ESG-related proposals. Adapting to these new interpretations and monitoring how the SEC responds to attempts to exclude such proposals should be top of mind for executives this year. Enforcement. Initiatives by state attorneys general scrutinizing anti-ESG actions in 2025 will continue to shape what companies disclose and how they craft ESG policies. A Balancing Act. As federal and state policies evolve alongside judicial rulings, and international frameworks for ESG regulation are revised, companies in 2025 will be striking a balance between the demands of investors, stakeholders, and regulators. Careful and timely review of institutional voting policies, court rulings, and executive orders is more important than ever in setting ESG priorities. Alston & Bird’s ESG Advisory Team At Alston & Bird, our ESG Advisory Team provides strategic guidance to companies navigating the ESG landscape. Our services include: Understanding ESG Dynamics. We help companies grasp the nuances of ESG and tailor their approaches accordingly. Regulatory Insights. Our team stays abreast of ESG-related regulations worldwide, ensuring clients remain compliant. Shareholder Engagement. Crafting effective responses to shareholder proposals requires expertise. We guide companies in this critical area. Risk Mitigation. Minimizing litigation and enforcement risk is crucial. Our strategies and materials help companies proactively address potential legal challenges. ESG Tracker and Sustainability Spotlight Our ESG Tracker and this publication offer valuable insights into federal and state enforcement actions, litigation trends, and shareholder proposals. They serve as a resource for companies seeking to stay informed and make up-to-date decisions on all matters related to ESG. Dave Brown, Kevin Minoli, Elise Paeffgen, Cara Peterman, Jason Outlaw Environmental, Social & Governance (ESG) Team In today’s business world, environmental, social, and governance (ESG) issues have taken center stage, and companies, both public and private, are increasingly recognizing the significance of ESG responsibility. Today’s executives, managers, and stakeholders find themselves navigating a complex landscape filled with risks and opportunities. The ESG Imperative ESG encompasses a broad spectrum of factors that impact a company’s long-term sustainability and performance. Let’s break down what each component entails: Environmental (E): This dimension focuses on a company’s impact on the environment. It includes considerations such as carbon emissions, resource usage, waste management, and climate change resilience. Social (S): The social aspect encompasses how a company interacts with its employees, customers, communities, and other stakeholders, as well as the non-environmental impacts of its supply chain. Topics like diversity and inclusion, labor practices, human rights, and community engagement fall under this category. Governance (G): Governance refers to the systems and processes that govern a company’s decision-making. It involves board composition, executive compensation, transparency, and adherence to ethical standards. The ESG Landscape Today Regulatory Landscape. In the United States, pressure from the federal government has resulted in the rollback and deemphasis of ESG. For example, the Securities and Exchange Commission (SEC) voted to end its defense of rules requiring climate risk and emissions disclosures while statelevel regulation of ESG and anti-ESG policies has diverged. According to the Conference Board, reports published by S&P 100 companies that included “ESG” in the title declined from 40% in 2023 to 25% in 2024 and 6% year to date in 2025 (with approximately 50% of S&P 100 companies having reported). However, despite fewer references to ESG, most companies still have sustainability goals and objectives. Companies should stay informed about emerging state-level and international requirements and restrictions to ensure compliance. New SEC Staff Legal Bulletin No. 14M, published February 12, 2025, has given companies more opportunity Navigating the ESG Landscape: Risks, Opportunities, and Strategic Insights ESG SEC Enforcement Actions
Q1 | 2025 5 4 ESG SEC Enforcement Actions FEBRUARY SEC Loosens Guidance on Proxy Exclusions February 12, 2025 | Staff Legal Bulletin No. 14M The SEC issued a staff legal bulletin clarifying its interpretation of Rule 14a-8 promulgated under the Securities Exchange Act, which governs the types of shareholder proposals that can be omitted from proxy statements. Companies can exclude shareholder proposals from their proxy statements when they deal with a company’s “ordinary business operations.” However, such proposals must nonetheless be included if they relate to a significant policy issue. Under previous guidance, the SEC had increasingly denied exclusion requests, leading to an increase in shareholder proposals on environmental and social issues such as worker rights and climate change. The new guidance instructs SEC staff, in determining whether a proposal relates to a significant policy issue, to “take a company-specific approach in evaluating significance, rather than focusing solely on whether a proposal raises a policy issue with broad societal impact.” JANUARY SEC Charges Former CEO for Failure to Disclose Settlements to Board January 10, 2025 | Vince McMahon, Former CEO of WWE, Charged for Failure to Disclose to WWE Two Settlement Agreements He Executed on Behalf of WWE The SEC entered a settlement agreement with Vince McMahon, CEO of World Wrestling Entertainment Inc. (WWE), for failing to disclose two settlement agreements related to personal relationships between McMahon and individuals who were employed by WWE. The settlements, totaling over $10 million, secured the release of claims against McMahon and WWE by the two individuals, one of whom accused McMahon of unlawful conduct. According to the SEC, the nondisclosure of the settlement agreements led to accounting discrepancies that in turn caused the company to make material financial misstatements. The SEC’s order found that McMahon violated Section 13(b)(5) of the Securities Exchange Act by “knowingly circumventing WWE’s internal accounting controls” and “making or causing to be made false or misleading statements to WWE’s auditor.” McMahon agreed to pay a fine of $400,000 to the SEC and reimburse WWE $1.3 million. FEBRUARY New Jersey’s Attorney General Climate Change Suit Dismissed as Preempted February 5, 2025 | A New Jersey superior court dismissed the state attorney general’s suit targeting fossil fuel companies for alleged deceptive practices related to climate change, ruling the state’s claims were preempted by federal law. The state attorney general had alleged eight state-law causes of action for harm from alleged interstate and international emissions, including failure to warn, negligence, impairment of the public trust, trespass, public and private nuisance, and violations of state consumer fraud law. In the court’s view, federal law preempts all the state’s claims, with interstate air pollution held to be an area of uniquely federal interest and foreign emissions being subject to federal common law. The attorney general has indicated that the state intends to appeal. JANUARY Eleven State AGs Warn of Potential Enforcement Actions for ESG and DEI Initiatives January 27, 2025 | Apparent Legal and Contractual Violations by Financial Institutions Led by the attorney general of Texas, attorneys general for 11 states (Alabama, Georgia, Idaho, Indiana, Iowa, Montana, Nebraska, South Carolina, Texas, Utah, and Virginia) issued a letter to six high-profile financial firms, warning of potential enforcement action to address decisions made under ESG and DEI policies perceived to potentially violate federal and state laws. The letter asks firms to respond to inquiries into contracting, employment, alleged board and supplier quotas, and management of client assets, including participation in Climate Action 100+, Net-Zero Banking Alliance, and Net Zero Asset Managers initiatives, to assist the states in assessing whether violations have occurred, whether they will continue, and whether enforcement is necessary. The state AGs frame the requested response to the letter as an opportunity for the firms to avoid a lengthy enforcement action. State Attorney General Actions Attorneys General Urge Congress to Strengthen the Inflation Reduction Act to Protect and Increase Critical Domestic Energy Resources January 16, 2025 | A bipartisan coalition of attorneys general issued a letter urging Congress to affirm its commitment to safeguarding the Inflation Reduction Act (IRA). The attorneys general assert that the IRA is critical to bolstering the county’s infrastructure, diversifying the country’s energy resources, and significantly reducing harmful pollution in the environment. The IRA offers several substantial initiatives to encourage further investment in the country’s energy infrastructure and manufacturing, including the IRA’s Qualifying Advanced Energy Project Tax Credit, which the attorneys general credit for a private company investing hundreds of millions of dollars in a power transformer factory in North Carolina. The attorneys general cite several additional examples of the IRA helping fund or incentivizing significant investment in critical energy infrastructure while imploring Congress to protect and further develop the IRA and its regulatory progeny to help spur clean energy technology development and myriad economic benefits.
Q1 | 2025 7 6 Litigation Tracking MARCH March 31, 2025 | Stitching Pensioenfonds Metaal en Techniek, et al. v. Verizon Communications Inc., et al., No. 1:23-cv-05218 (D.N.J.). The District of New Jersey dismissed a case against Verizon Communications Inc. that alleged that the company had violated U.S. securities laws by concealing the fact that the company owned and allegedly had abandoned hundreds of miles of copper and lead cables, which the plaintiffs claimed exposed securities holders to substantial financial risks due to the potential for human health impacts due to lead exposure. The court dismissed the claims without prejudice, finding that the plaintiffs had not filed sufficient facts to support their claims but allowing them the opportunity to refile. March 19, 2025 | Williams v. Whitestone Home Furnishings, No. 1:25-cv-01527 (E.D.N.Y.). The plaintiffs filed a complaint in a proposed class action against Saatva, a direct-to-consumer mattress company, in the Eastern District of New York, alleging that the company markets its products as nontoxic, natural, and chemical-free when in fact they contain materials that pose risks to human health and the environment, including polyester, viscoelastic polyurethane, and rayon. The suit asserts claims under the New Jersey Consumer Fraud Act and Florida’s Deceptive and Unfair Trade Practices Act, breach of express and implied warranties, unjust enrichment, and various other state consumer protection statutes. March 18, 2025 | Plastic Pollution Coalition v. Danone Waters of America LLC, No. 2024-CAB-004562 (D.C. Super. Ct.). A D.C. superior court judge denied Danone Waters of America’s motion to dismiss the greenwashing case filed against it in October 2024. The plaintiffs in the case allege that Danone, which imports Evian-branded bottled water, has violated the D.C. Consumer Protection Procedures Act by misleadingly marketing its products as sustainable and natural when in fact they produce significant amounts of plastic. The court held that the plaintiffs have alleged sufficient facts to support their claims and declined to dismiss the case or strike the jury demand filed in the case. March 14, 2025 | Ramos v. Amazon.com Inc., No. 2:25-cv-00465 (W. D. Wash.). Consumers in four states filed a proposed class action against Amazon, alleging that the online retail giant greenwashed claims about its Basics line of paper products. The plaintiffs assert that Amazon claims identical environmental benefits for two of its lines of toilet paper; however, one of the lines is produced through a process requiring clearcutting and burning boreal forests. As a result, they claim they were deceived into purchasing products that are environmentally destructive. The 48-count complaint includes several statespecific fraud and consumer protection claims. March 5, 2025 | Merrell v. Florida Crystals Corp., No. 5:25-cv-02264 (N.D. Cal.). A California woman filed a proposed class action against a Florida sugar manufacturer in the Northern District of California, asserting that the company falsely markets certain of its products as environmentally conscious and climate friendly. The complaint alleges that, rather than slashing sugar cane vegetation, Florida Crystals burns sugar cane to make its products – a practice that is currently banned or restricted in other sugar-producing countries such as Brazil, India, and Thailand because it generates harmful air pollutants. In burning sugar cane while simultaneously marketing itself as an environmentally conscious company, the complaint alleges, Florida Crystals is in violation of several state false advertising, unfair competition, and consumer protection laws. FEBRUARY February 14, 2025 | State of Utah, et al. v. Micone, et al., No. 2:23cv-00016 (N.D. Tex.). The Northern District of Texas ruled that the U.S. Department of Labor’s rule allowing fiduciaries to consider collateral benefits when deciding between competing investment options that each equally serve the beneficiaries’ financial interests does not violate the Employment Retirement Income Security Act of 1974 (ERISA). February 13, 2025 | Shapiro, et al. v. U.S. Department of the Interior, et al., No. 2:25-cv-00763 (E.D. Pa.). Pennsylvania Governor Josh Shapiro, along with Pennsylvania agencies including the Pennsylvania Department of Environmental Protection, filed a complaint for declaratory and injunctive relief claiming that federal agencies are unlawfully restricting Pennsylvania agencies from accessing congressionally appropriated federal funds for a variety of grants, including grants for repairing abandoned mine lands and the waterways impacted by those former mine sites, grants for investment in clean-water infrastructure, and a program aimed at supporting reliable electric service in rural communities, in violation of the Administrative Procedure Act and constitutional separation of powers. February 11, 2025 | State of West Virginia v. James, No. 1:25-cv00168 (N.D.N.Y.). West Virginia and 21 other states; coal, oil, and gas trade associations; and a mining company filed a complaint for declaratory and injunctive relief challenging New York’s Climate Change Superfund Act. The complaint alleges that the act violates the Commerce Clause, Due Process Clause, Equal Protection Clause, Eighth Amendment, and Fifth Amendment of the U.S. Constitution and that the state act is preempted by the federal Clean Air Act. JANUARY January 31, 2025 | Plastic Pollution Coalition v. The Wonderful Company LLC, et al., No. 2025-CAB-000585 (D.C. Super. Ct.). A nonprofit organization filed a complaint against the Wonderful Company LLC and FIJI Water LLC alleging false and deceptive marketing in violation of the D.C. Consumer Protection Procedures Act. The complaint alleges that the makers of FIJI bottled water promote the products as “untouched by man,”“collect[ed] in a sustainable artesian aquifer,” and “protected … from external elements,” but that test results allegedly reveal that the products contain microplastics and bisphenol-A (BPA). The complaint also alleges the products have “significant and ongoing contributions to plastic pollution” contrary to the defendants’ marketing representations to consumers that their businesses are “sustainable” and “promote a circular economy.”The nonprofit organization seeks declaratory and injunctive relief, as well as costs and fees. Litigation Tracking
Q1 | 2025 9 8 Authors Dave Brown Partner, Washington, D.C. +1 202 239 3463 dave.brown@alston.com Cara Peterman Partner, Atlanta, New York ATL +1 404 881 7176 NYC +1 212 905 9176 cara.peterman@alston.com Noah LeGrand Associate, Washington, D.C. +1 202 239 3017 noah.legrand@alston.com Jason Outlaw Partner, Atlanta +1 404 881 7941 jason.outlaw@alston.com Hillary Sanborn Senior Associate, Washington, D.C. +1 202 239 3640 hillary.sanborn@alston.com Andrea Galvez Associate, Atlanta +1 404 881 7649 andrea.galvez@alston.com Kevin Minoli Partner, Washington, D.C. +1 202 239 3760 kevin.minoli@alston.com Megan Ault Senior Associate, San Francisco +1 415 243 1056 megan.ault@alston.com Madeleine Juszynski Davidson Associate, Atlanta +1 404 881 7173 madeleine.davidson@alston.com Elise Paeffgen Partner, Washington, D.C. +1 202 239 3939 elise.paeffgen@alston.com Andrew Boyer Associate, Atlanta +1 404 881 7455 andrew.boyer@alston.com Samantha Van Winter Associate, Charlotte +1 704 444 1131 samantha.vanwinter@alston.com Litigation Tracking January 28, 2025 | National Consumers League v. Starbucks Corporation, No. 1:24-cv-00421 (D.D.C.). The federal D.C. district court granted the plaintiff’s motion to remand to the D.C. superior court a case alleging unfair and deceptive trade practices in violation of D.C.’s Consumer Protection Procedures Act. The plaintiff alleges that Starbucks tells consumers that it ethically sources coffee and tea, but it sources products from farms that engage in human rights and labor abuses. Starbucks had removed the case from the D.C. superior court, asserting federal subject-matter jurisdiction via the Class Action Fairness Act (CAFA) and diversity of citizenship. The court rejected Starbucks’s arguments, ruling that the suit was not a class action brought under Federal Rule of Civil Procedure 23 or D.C. Superior Court Rule 23 but rather was brought on behalf of the general public. The court also found that the damages amount required under CAFA and for diversity jurisdiction were not met because the plaintiff seeks damages arising from two coffee purchases. January 16, 2025 | Lowry, et al. v. Proctor & Gamble Co., No. 2:25cv-00108 (W.D. Wash.). Eight consumers from Washington, California, Illinois, and Massachusetts filed a proposed class action alleging that Proctor & Gamble is greenwashing its Charmin toilet paper by misleading consumers into believing that the toilet paper is ethically sourced and that the company is following through with sustainable reforestation promises. The complaint alleges that Proctor & Gamble relies on its “Keep Forests as Forests” campaign and its “Protect-Grow-Restore” messaging at points of sale and online to market Charmin products as environmentally sustainable and that this is misleading because Charmin’s suppliers are allegedly converting key forests into “Frankenforests” with monoculture tree crops. The consumers allege 48 counts, including fraudulent concealment under multiple states’ laws.
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