Your Client's Green Claims Could Land Them in Court
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A client tells you their marketing says they're "carbon neutral." Another one has a fossil fuel supplier on their books. A third just signed a long-term lease on a coal-dependent operation. None of them are thinking about lawsuits. You probably aren't either. But globally, that's exactly where this is heading, and South Africa is not as far behind as most people think.
A major new study from the London School of Economics surveyed 811 equity investors worldwide. Nearly 80% said climate-related litigation is already a “material financial risk”. More than 80% expect it to affect company valuations within the next decade. And here's the part that should make you sit up: investors don't wait for a court verdict. Most said the financial damage starts the moment a case hits the media, well before any judgment is made.
This is no longer a story about big oil companies in New York.
Climate lawsuits are expanding fast. They now target greenwashing, supply chain accountability, human rights violations tied to emissions, and government approvals for high-emitting projects. In South Africa, the legal ground is being quietly prepared. The National Environmental Management Act gives communities and NGOs significant power to challenge environmentally harmful decisions. The Companies Act and King V both signal that directors carry personal accountability for sustainability governance. And as covered in our previous article on corporate governance and stakeholder activism, stakeholder groups are increasingly using litigation as a pressure tool, not just protest.
The SA Regulatory Landscape: What You Need to Know
South Africa has built up a layered set of environmental and sustainability laws that create real legal exposure for businesses of all sizes. Here are the ones that matter most.
NEMA (National Environmental Management Act, 1998, amended 2025)
NEMA is the foundation. Section 28 places a duty of care on any person who causes, or may cause, significant pollution or environmental degradation. This is not limited to mining or manufacturing. Any business that touches land, water, or waste carries exposure. Recent 2022 amendments extended compliance powers to municipal managers, widening the enforcement net to smaller, locally operating businesses. Separately, any business undertaking listed activities, including certain construction, agricultural, or fuel storage operations, must obtain environmental authorisation before commencing. Doing so without authorisation is a criminal offence.
The Climate Change Act (No. 22 of 2024, commenced 17 March 2025)
This Act is being phased in, but two operative provisions already have teeth. Section 7 requires all organs of state to take climate change risks into account in their decisions. Section 21(4)(e) requires government decisions to align with South Africa's emissions reduction commitments. For businesses that depend on government licences, permits, or contracts, their counterparty now has legally binding climate obligations. Carbon budget provisions are still being phased in, but once assigned, a business must submit a greenhouse gas mitigation plan or face fines of up to R5 million and possible imprisonment.
The Carbon Tax Act (No. 15 of 2019)
In force since June 2019, this Act taxes greenhouse gas emissions at a rate that is set to rise sharply from 2026. Under Phase Two, businesses that exceed their assigned carbon budgets face a penalty rate of R640 per tonne. For any client in energy-intensive industries, transport, or manufacturing, this is a direct and growing cost that belongs in their financial modelling.
JSE Sustainability Disclosure Guidance and ISSB Standards
The JSE has published voluntary sustainability disclosure guidance aligned with TCFD and IFRS S1 and S2. The FSCA has indicated it is assessing readiness for mandatory adoption. For listed clients, or businesses that supply to listed companies, the pressure to disclose climate-related risks in annual reports is already real and growing.
Effective late 2025, King V makes climate risk a board-level governance matter, not just an ESG consideration. It applies proportionally, but SMEs in certain contexts are not exempt.
What does this mean for your clients?
Your SME clients are not immune. The research found that banks, agriculture, construction, retail and transport manufacturing all appear on investors' radar, not just energy companies. A client who makes misleading sustainability claims in their marketing faces greenwashing exposure. A client in the agriculture or construction sector with poor environmental controls faces regulatory and reputational risk that can hit their balance sheet before any case is decided. A client whose financier or major customer is publicly linked to climate litigation may face knock-on effects through tightened lending terms or lost contracts.
The risk is not just legal costs. It is reputation, financing conditions, and investor confidence.
What can you do right now?
You don't need to become an environmental lawyer. But you do need to ask three questions when working with clients.
First, are they making any environmental or sustainability claims in their marketing, reports or tenders? If yes, those claims need to be accurate and provable. Vague language like "eco-friendly" or "green" with no supporting evidence is a growing liability.
Second, do their governance structures acknowledge climate risk? Under King V, this is no longer optional for well-governed organisations. As noted in King V Crowned: What the New Governance Code Means for Your Practice, proportionality applies but climate risk disclosure expectations are real, even for smaller entities.
Third, are they in a sector or supply chain with high climate exposure? If so, help them understand what that exposure looks like in financial terms, not just ethical ones.
This is the kind of advisory conversation that separates a trusted advisor from a compliance clerk. It's also the kind of conversation your clients will pay for.
Climate litigation is not a future problem. For your clients, the financial consequences are already starting in the newsroom, not the courtroom. Below are some examples of what this can look like in practice.
A construction company wins a tender to develop land near a wetland. An environmental NGO files a legal challenge under NEMA. The case may take years to resolve, but the contractor's bank quietly reviews the facility. The developer's insurance premium goes up. Two subcontractors walk away rather than be named in the proceedings. No judgment has been made. The damage is already done.
A food producer exports to a European retailer. The retailer's ESG compliance team flags that the producer's water usage disclosures are vague and potentially misleading. The retailer does not wait for a lawsuit. They trigger a contract review clause and request verified sustainability data within 30 days. The producer has no such data. The contract is suspended.
A small property company markets its new office park as "green" and "energy efficient" in its sales brochure. A tenant later discovers the building's energy consumption is significantly higher than implied. They approach the Consumer Goods and Services Ombud. The developer's reputation in the commercial property market takes a hit, and their next development struggles to attract anchor tenants before a single legal paper is filed.
A transport business operates a large diesel fleet. A key client, a listed retailer with Scope 3 emissions targets, informs them that suppliers must show a credible emissions reduction plan by the end of the financial year or face delisting from the approved supplier register. The transport business has no plan and no data. They lose the contract.
None of these scenarios require a courtroom victory. The financial consequence arrives through reputation, contract loss, tighter lending terms, or a lost deal. In each case, an accountant who understood the exposure could have helped their client get ahead of it.
Position yourself to see it coming before they do.
