Litigation seen as corporate catalyst

Litigation Viewed as Key Catalyst for Corporate Accountability and ESG Standards

London, 27 November 2024 – A new report by Portland, titled Reputation and Accountability: Class Actions, ESG and Values-Driven Litigation, reveals shifting perceptions about the role of litigation in corporate governance among UK public and business leaders. The study finds growing recognition of class actions and shareholder litigation as tools to improve corporate behavior, enhance Environmental, Social, and Governance (ESG) compliance, and ensure accountability.

Public Views on Litigation and Corporate Standards

The nationally representative poll of 2,000 UK citizens indicates a strong appetite for group legal actions, with 65% of respondents willing to join class actions, including 61% willing to act against employers accused of legal violations. Public understanding of class actions has increased, with 24% reporting a “high understanding” compared to 19% in 2023.

Class actions are seen as yielding positive outcomes:

• 57% believe they often secure compensation, up from 44% in 2023.
• 50% think they drive corporate improvements.

However, awareness of eligibility remains low, with only 22% recognising they might claim compensation in Competition Appeal Tribunal cases.

Attitudes toward litigation funders are softening. While 80% of respondents believe class actions primarily benefit law firms and funders, acceptance of funders’ returns is growing. Double the number of respondents this year supported funders receiving a tenfold return on investment compared to previous years.

The Rise of Values-Driven Investing

The report highlights the influence of retail investing, especially among younger generations, on shareholder actions. Sixty-four percent of the public agree that shareholders should sue companies over misleading information, while 50% believe such lawsuits improve governance.

More than half of the public (50%) are willing to divest from companies breaching governance standards, rising to 61% among those aged 25-34.

Business Leaders Support Litigation for ESG Compliance

A parallel survey of 540 UK business leaders, including CEOs and directors, shows even stronger support for ESG litigation:

• 77% agree directors have a duty to mitigate climate risks, compared to 72% of the public.
• 72% back lawsuits against companies accused of human rights abuses in supply chains.
• 66% support legal action to hold governments accountable for climate commitments.

Simon Pugh, Partner at Portland and Head of the Litigation and Disputes practice, commented: “We’re seeing a paradigm shift in how litigation, particularly with ethical and moral dimensions, is perceived. Business leaders and the public increasingly view legal risks not just as regulatory obligations but as tools for driving societal change.”

Reputation Risks and Future Trends

The report warns companies to adapt to growing legal and reputational risks. According to Pugh, litigation could lead to mass claims, boycotts, employee resignations, and capital flight: “Companies must align with public and investor expectations. The cost of inaction is far greater than bad headlines.”