/>iThis year, the environmental agenda has focused on “deregulation” to promote industrial competitiveness, as well as a sharpened focus on energy generation and transmission to support economic growth.
While deregulation may lessen the prospects for governmental enforcement related to climate issues, businesses still need to evaluate how potential climate changes may affect their operations. A study issued this week analyzing standard climate models indicates a possibility that an Atlantic Ocean current which stabilizes weather for North America and Europe is weakening, opening the door for significant changes in weather patterns in these areas, resulting in more uncertain weather. Volatility in climate can lead to volatility for businesses.
In such an environment, “resilience” may replace “ESG” in the sustainability space. In recent years, corporate sustainability efforts have involved conversations focused on environmental, social, and governance (ESG) reporting frameworks, proxy-advisory guidance, and the US Securities and Exchange Commission’s (SEC) draft climate-disclosure rule. Yet climate volatility may produce new legal risks, as ordinary tort claims become amplified by a changing planet. Climate change may convert routine equipment failures into catastrophic wildfires or “100-year” floodplains into temporary waterways.
Courts, regulators, and insurers are increasingly signaling that companies ignoring extreme-weather impacts on operations face expanding exposure — from negligence suits to derivative actions. Boards that elevate resilience from an appendix to a prime spot on meeting agendas will be better prepared for the next hurricane, fire season, or jury summons.
Sustainability, Broadly Construed
As Professor Elizabeth Pollman observes, “ESG” carries multiple meanings — from investment analytics to corporate social responsibility. ESG has been attached to issues including climate and carbon, circular economy issues, social issues, or even the political system itself.
Resilience planning deserves a place on that list. Unlike many ESG debates, preparing for floods, fires, and heat waves is politically neutral. Even Texas regulators have investigated utilities after wildfires.
Weather Events and “Mission-Critical” Risks
Recent cases illustrate how climate shifts redefine the duty of care.
- In 2024, after an Oregon jury found PacifiCorp liable for failing to de-energize lines during the 2020 Labor Day Fires, the company reached a $178 million settlement with over 400 plaintiffs.
- Hawai‘i Electric faces wrongful-death and property-damage suits following the Lahaina blaze.
- Louisiana utilities confront consolidated negligence actions alleging that downed lines worsened Hurricane Ida’s destruction. (For more, see here.)
- Facilities in floodplains have endured litigation related to workers being injured by floodwaters in hurricanes.
Plaintiffs no longer need novel public-nuisance theories. Instead, they argue that the defendants “knew or should have known” stronger storms or fires were coming and failed to engineer accordingly. Compliance with legacy standards once sufficed. Now, expert witnesses can cite National Oceanic and Atmospheric Administration and Intergovernmental Panel of Climate Change data to contend that “ordinary prudent operators” must incorporate forward-looking climate science into operations. Plaintiffs may even cite a recent International Court of Justice opinion that nation-states have a legal obligation to address climate change to assert a higher standard for private actors. (For more, see here.)
Corporate Obligations to Plan
Caremark liability takes its name from the 1996 decision In re Caremark International Inc. Derivative Litigation, which established that directors of a Delaware corporation have a duty to ensure that appropriate information and reporting systems are in place within the corporation.
Under In re Caremark, Delaware directors must implement and oversee systems that ensure legal compliance. Cases following Caremark emphasize that liability only attaches when directors disregard their obligations to companies, not when their business decisions result in “unexceptional financial struggles.” Although Delaware courts have not yet applied Caremark to climate resilience, other decisions show a willingness to hold directors liable for ignoring “mission-critical” risks.
Disclosures without matching mitigation invite cross-examination. A company that identifies wildfire risk in an SEC filing but budgets nothing for vegetation management creates Exhibit A for plaintiffs.
Insurance Markets Are Moving
Property-casualty insurers are retreating from high-risk regions, tightening exclusions, and requiring climate-risk audits. (For more, see here.) Director and officer carriers, concerned about derivative suits predicated on inadequate oversight, are increasingly examining board minutes for evidence of resilience planning. (See, e.g., here.) As premiums climb and coverage shrinks, self-retention rises, effectively increasing net tort exposure.
From Reporting to Resilience - Five Action Items
Investors want enterprise value, regulators demand reliability, and communities want protection from floods and fires. As climate hazards intensify, operational resilience becomes a linchpin of corporate sustainability, and a company’s best legal defense. The following are potential steps companies can take to increase corporate resilience.
- Embed forward-looking climate data — not historical averages — into every capital-expenditure decision.
- Treat vegetation management, floodproofing, and backup-power investments as core safety programs, and document board-level deliberations.
- Evaluate whether mission-critical suppliers have appropriate resilience plans so that key business inputs will remain available.
- Stress-test emergency-response plans under multiple extreme-weather scenarios and preserve records showing continuous improvement.
- Align public disclosures with funded mitigation measures. Misalignment can be portrayed as an admission.
