ESG liability, supply chain risk, and what it means for directors – frontline notes from the UK and the Netherlands

Sustainable (ESG) business practices have become a hot topic for companies and their directors, increasingly translating into legal and strategic risks across Europe. These risks are particularly acute in the UK and Netherlands – the two jurisdictions consistently identified by CMS in its European Class Actions Report as carrying the highest group litigation risk in Europe. 1

The Netherlands, in particular, has developed into a ‘pioneer country’ in the field of ESG litigation. This trajectory has been shaped by the Dutch Act of the Settlement of Mass Claims in Collective Action (“WAMCA”), which allows interest groups to litigate on behalf of aggrieved parties and claim damages, and the now-famous Urgenda judgment, which marked the world’s first successful climate case against a state.  

At the same time, the UK has seen a consistent and relentless growth trend in “parent company liability”-style litigation, stemming from the key decisions of English courts in Lugonwe v Vedanta and HRH Okpabi v Shell.  After years of going through various procedural / jurisdiction hearings and appeal, those cases appear finally to have crystallised in 2025 in the seminal decision in Município de Mariana v BHP. 

In this article, we discuss recent developments in case law in these two jurisdictions and what implications could be drawn from them for companies’ ESG risk going forward.  We conclude with practical guidance for directors navigating this changing landscape.

ESG (climate) liability in the Netherlands began in earnest with the landmark Urgenda case in 2019, in which the Dutch Supreme Court held that the State is obliged under Articles 2 and 8 of the ECHR to reduce greenhouse gas emissions.  The judgment had significant international repercussions, triggering thousands of climate-related lawsuits worldwide and the extension of climate obligations by the European Court of Human Rights. Domestically, momentum has continued: in January 2026, the Dutch court ruled in a case brought by Greenpeace and residents of Bonaire that the State is doing too little to protect Bonaire against climate change (currently pending appeal).

Since Urgenda, ESG litigation has expanded to target companies. In Milieudefensie v Shell, the court at first instance held that companies have an unwritten duty of care to contribute to preventing dangerous climate change, ordering Shell to reduce its CO2 emissions.  Three years later, in 2024, the Dutch Court of Appeal overturned this decision, acknowledging a societal duty of care, but finding existing standards insufficiently concrete to impose specific targets on a single company.  The appeal in cassation is pending before the Dutch Supreme Court.

The scope of climate cases is also expanding beyond oil and gas. In March 2025, Milieudefensie initiated proceedings against the Dutch bank ING, arguing that financial institutions are co-responsible for the emissions of the activities they finance.  It has also sent public demand letters to 28 other large Dutch companies requesting disclosure of their climate plans, with further litigation expected.  In May 2026, a new climate case was announced against the Port of Rotterdam by the NGO Advocates for the Future.

ESG-related obligations and associated risks for companies are therefore becoming increasingly concrete. Under Dutch law, a high threshold applies for directors’ liability –  the rationale being to prevent directors from being unduly influenced by defensive considerations –  but multiple routes exist to hold directors accountable under both civil and criminal law.

Under Dutch civil law, internal and external directors’ liability is clearly distinguished.  Internal liability (Article 2:9 DCC) concerns the relationship between director and company: directors are liable for damage resulting from improper management if a serious reproach can be made against them. External liability towards third parties can be based on tort (Article 6:162 DCC), where the same elevated threshold applies,  2  or on specific statutory provisions such as ‘balance sheet liability’ (Articles 2:139/249 DCC) and liability in insolvency (Articles 2:138/248 DCC).

In certain circumstances, directors may also face personal criminal liability.  In recent years, the Dutch Public Prosecution Service has increasingly involved de facto directors in criminal cases, such as the ongoing investigation into Tata Steel Nederland regarding the discharge of harmful substances and the role of the directors.

What do these developments mean in practice for directors?  The high threshold of ‘personal serious reproach’ remains, but the statutory obligations and case law discussed above are creating new standards against which directors’ conduct will be measured.  Several specific risk areas are worth highlighting.

Internal liability and inquiry proceedings.  

Directors have a duty to ensure that the company complies with ESG regulation.  Failure to establish adequate compliance systems or to monitor ESG risks may constitute a breach.  The Dutch Enterprise Chamber can establish mismanagement with measures such as dismissal and annulment of resolutions.

Shareholder activism.  

Institutional investors are increasingly exercising their shareholder rights to influence ESG policy and to compel boards to take action on climate and sustainability. Directors may also face liability claims for misleading sustainability information under the Corporate Sustainability Reporting Directive (CSRD).

Greenwashing.  

Making misleading sustainability claims constitutes a growing risk. This manifests itself in misleading market communication, financial information, and sustainability reporting. Regulators have announced intensified supervision, and the ACM (the Dutch Consumer Protection Authority) has published the Guidelines on Sustainability Claims. Sustainability claims must be substantiated and verifiable.

Criminal exposure.  

ESG-related violations – including environmental offences, fraud in sustainability reporting, and human rights violations in the supply chain –  may be subject to criminal prosecution.  Even without conviction, the mere designation as a suspect can lead to serious reputational damage – not only for the director but also for the company.  The ongoing investigation into Tata Steel mentioned above illustrates that the Public Prosecution Service is indeed focusing on directors.

Group liability.  

Under the CSDDD (Corporate Sustainability Due Diligence Directive), parent companies may be held jointly and severally liable for violations by subsidiaries and business partners in the value chain.  The due diligence obligations impose statutory responsibilities on parent companies to actively supervise ESG risks in their chain of activities.

D&O insurance.  

As ESG-related claims increase, Directors’ and Officers’ (D&O) insurance may come under pressure.  Traditional D&O policies were not designed with ESG litigation in mind, and coverage for environmental damage, climate-related claims, or human rights violations may be excluded.

English courts have been grappling with similar themes. In the UK, the primary vehicles for ESG litigation have been the “parent company liability”-style cases, following the watershed Supreme Court decisions in Lungowe v Vedanta Resources [2019] UKSC 20 and HRH Okpabi v Royal Dutch Shell [2021] UKSC 3.  Neither was a substantive ruling on the merits, but both held the door open for parent companies to be liable for the actions of their overseas subsidiaries.  Since then, the judicial trend has been progressing from jurisdictional skirmishes to actual findings on liability, expanding in the process analysis of parent/subsidiary behaviour to that of corporates’ broader supply chains. 

Município de Mariana v BHP [2025] EWHC 3001 (TCC) was the first “parent company liability” case decided in England on its substantive merits, albeit under Brazilian law.  BHP’s English parent entity was found strictly liable as a “polluter” under Brazilian environmental law for the catastrophic 2015 Fundão Dam collapse that resulted in a number of deaths and significant community and environmental damage, estimated in the billions of USD.  Brought by over 600,000 Brazilian claimants, this claim was one of the largest pieces of group litigation ever heard by English courts, with the merits judgment alone running up to 1,129 paragraphs over 222 pages. 

While a case of this magnitude is impossible to summarise concisely, central to the judgment on BHP being a “polluter” was the finding that BHP, although not the direct owner or operator of the dam, exercised extensive control, supervision and influence over the local operator through its board representation, committee participation, involvement in operational and risk-management decisions, and assumption of responsibility for key aspects of the operator’s activities.  On that basis, the court found that BHP was responsible for the operator’s activity which caused the collapse.  In practice, the operator was controlled and operated by BHP (among others), rather than functioning as an independent arm’s-length company.  BHP’s permission to appeal was subsequently refused by the English Court of Appeal in May 2026 and the quantum trial is currently listed for 2027–2028.

The Limbu v Dyson case had the potential further to extend the scope of such liability to companies’ supply chains.  The claims were brought by 24 Nepalese and Bangladeshi migrant workers alleging trafficking, forced labour, and abusive conditions at Malaysian factories manufacturing Dyson components, operated by local entities. The workers alleged that the UK-domiciled Dyson entities had promulgated mandatory supply chain policies (e.g., codes of conduct, modern slavery statements, and migrant worker recruitment standards) but failed to implement and enforce them through effective auditing and monitoring – all while allegedly unjustly profiting from the exploitation. 

In December 2024, the English Court of Appeal reversed the first-instance finding that Malaysia was the appropriate forum for the claim, holding that England was clearly and distinctly the more appropriate jurisdiction given, among other things, Dyson UK’s role as the primary defendant, the promulgation of policies from England, and serious concerns about the claimants’ access to justice in Malaysia.  The case was due to proceed to a full liability trial following further procedural failings for Dyson but settled out of court in early 2026.  At the time of settlement, Dyson would have been aware of the BHP v Mariana decision, was facing potentially over 100 additional claimants joining the claim, and was likely tracking the direction of travel of English courts being much more willing than previously to scrutinise parent company involvement in the affairs of their subsidiaries and supply chain elements overseas. 

However, the supply chain exposure of businesses subject to English jurisdiction is not limited to “parent company liability” cases, as demonstrated in California State Teachers’ Retirement System v Boohoo Group.  In this case, institutional investors brought claims under s.90A of the UK Financial Services and Markets Act 2000 against the retailer in relation to alleged poor working conditions in its Leicester supply chain (the fact of which has been admitted by Boohoo).  The claimants allege that Boohoo’s published information (e.g., annual reports and modern slavery statements) contained untrue or misleading statements, and – crucially –  that certain persons discharging managerial responsibilities within it (such as directors) knew of or were reckless as to their falsity.  This reads across the trend in Dutch ESG litigation in relation to scrutinising the role and liability of directors (albeit noting that the Boohoo directors are not defendants to the claim).  The merits trial is currently listed to start in October 2027. 

Also similarly to the Netherlands, historically there have been attempts by activist shareholders to test the boundaries of the English directors’ duties in relation to ESG strategy. In ClientEarth v Shell Plc, the environmental NGO sought to bring a derivative claim against Shell’s board alleging breach of directors’ duties in relation to the company’s climate strategy.  As with the similar Dutch claims, this was unsuccessful, with the court emphasising that determining corporate strategy is predominantly a matter for the board and that the threshold for a derivative claim remains high. 

The Dutch and English developments tell broadly the same story from different angles: ESG claims are expanding in scope, and courts are increasingly willing to engage with them on the merits.

In the Netherlands, the trajectory runs from state liability to corporate liability and, increasingly, to the personal exposure of directors as the normative framework tightens around them.  In England, the Vedanta / Okpabi line of authority has now matured into substantive findings of liability, with the frontier extending to supply chains and to questions of knowledge of key decision-makers about the truth of their companies’ ESG disclosures.

In terms of practical implications for directors and in-house counsel, first and foremost they need to stay up-to-date with relevant ESG legislation and case law across all jurisdictions in which their corporate groups operate; ensure that sustainability reporting is accurate, substantiated, and verifiable; put robust due diligence processes in place across the value chain; align their climate and ESG strategy with their legal obligations (whilst properly documenting the process); and record decision-making processes contemporaneously.  Where ESG-related claims are on the horizon or the regulatory position is unclear, specialist legal advice should be sought at the first available opportunity.  D&O insurance coverage should also be reviewed, as traditional policies may not have been written with this class of litigation in mind.

More broadly, the apparent convergence between Dutch and English judicial attitudes, together with the rising tide of ESG-related legislation and regulation in both jurisdictions, signals that ESG compliance cannot sensibly be treated as a jurisdiction-by-jurisdiction exercise. The direction of travel is consistent: companies that seek to control or influence activities in their value chain are opening themselves up to judicial scrutiny for any perceived resulting harms, and directors who fail to ensure compliance risk personal exposure.