From Compliance to Courtroom: When ESG Becomes Liability for Greek Companies

In recent years, Environmental, Social, Governance criteria (hereinafter as “ESG”) has evolved from a peripheral corporate consideration into a central pillar of strategic decision-making. For many organisations, however, it continues to be approached primarily through the lens of compliance, as a set of regulatory requirements to be addressed through policies, disclosures and reporting mechanisms.

This approach, while necessary, is no longer sufficient.

A significant shift is already underway. ESG is no longer confined to regulatory oversight. It is increasingly becoming a source of legal exposure, with tangible implications in the context of commercial disputes and litigation.

Across the European regulatory landscape, developments such as the Corporate Sustainability Reporting Directive (CSRD) and the broader expansion of sustainability-related obligations have elevated expectations around transparency, accuracy and accountability. At the same time, ESG-related conduct is no longer assessed only by regulators, but also by investors, counterparties, competitors and, ultimately, courts.

Where the real risk emerges

In this evolving environment, the primary source of risk does not lie in the absence of ESG initiatives, but in the misalignment between what companies communicate and what they actually implement in practice.

This gap is where compliance turns into liability.

In particular, four areas are already shaping the emerging litigation landscape:

1. Misleading ESG disclosures Overstated or insufficiently substantiated sustainability claims may give rise to allegations of greenwashing, leading to investor disputes, regulatory scrutiny or claims based on unfair commercial practices. What was once considered a reputational issue is now clearly a legal one.

2. Contractual ESG obligations ESG is increasingly embedded in commercial agreements, supply chain arrangements and financing structures. Failure to meet these obligations may trigger contractual disputes, enforcement of termination clauses or claims for damages.

3. Supply chain exposure Companies are now expected to exercise oversight across their value chain. Risks arising from suppliers or partners, particularly in areas such as environmental impact or labour practices, may ultimately result in direct legal consequences for the contracting entity.

4. Directors’ and management liability Boards and senior executives are under growing pressure to demonstrate proper oversight and accurate disclosures. Failures in governance or risk management may lead to shareholder claims or broader disputes, extending ESG risk to the level of personal accountability. Recent Greek legal scholarship emphasises that climate change obligations now form part of directors’ core duties, requiring boards to integrate environmental and sustainability risks into corporate strategy and risk management as a matter of regulatory compliance and corporate transformation.

Why this matters now for Greek companies

In Greece, ESG adoption is accelerating, especially among mid-sized enterprises and companies with international exposure. Nevertheless, in many cases ESG is still treated as a reporting exercise or a branding initiative, rather than as an integrated legal and operational framework.

This creates a structural imbalance.

The legal implications of ESG are evolving faster than the internal mechanisms designed to address them. As a result, companies may appear compliant on paper while remaining exposed in practice.

While dedicated ESG case law is still developing in Greece, the risk landscape is anchored in existing frameworks. Greek courts are increasingly likely to interpret ESG commitments through the lens of Law 4706/2020 (Corporate Governance) and Law 2251/1994 (Consumer Protection). Boards should be aware that failing to align disclosures with operational realities may not only trigger regulatory fines but also expose directors to liability under Law 4548/2018 for breach of their duty of care.

As Greek legal literature underscores, this evolution reflects a broader transformation of corporate law: the traditional public/private law divide is blurring, and ESG (particularly climate-related responsibilities) is being internalised into private law mechanisms, turning sustainability from a voluntary or public-policy matter into a direct obligation of corporate management.

From compliance to strategy

Addressing this shift requires a different approach.

ESG must be treated not only as a compliance function, but as a core legal risk area that intersects with commercial strategy, contractual structuring and corporate governance.

In practical terms, this means ensuring alignment between disclosures and operations, integrating ESG commitments into contractual frameworks with clarity, and establishing internal processes that allow for continuous monitoring and legal assessment.

In order to mitigate these risks, it is essential that ESG is approached not merely as a compliance function, but as a comprehensive legal framework that informs corporate conduct at every level.

This entails ensuring that public disclosures accurately reflect operational realities, that contractual obligations are clearly defined and monitored, and that ESG considerations are embedded within risk management processes and governance structures.

The bottom line

Ultimately, the distinction between compliance and liability is becoming increasingly blurred. Companies that continue to treat ESG as a formal requirement rather than as a substantive legal risk area may find themselves exposed in ways that are both complex and difficult to anticipate.

The question, therefore, is no longer whether ESG matters. It is whether organisations are adequately prepared to address the legal consequences that may arise from its mismanagement.

In an environment where regulatory expectations, market pressures and legal accountability converge, the ability to anticipate and manage ESG-related risk is not only a matter of compliance, but a defining element of long-term resilience and competitive positioning.

PB Legal – Papachatzis | Bairaktaris Law Firm

Strategic legal support in complex commercial disputes and high-stakes litigation.

Learn more at https://www.pblegal.gr/

References & Further Reading

• European Commission, Corporate Sustainability Reporting Directive (CSRD)
• European Commission, Sustainable Finance Disclosure Regulation (SFDR)
• OECD, Due Diligence Guidance for Responsible Business Conduct
• European Securities and Markets Authority (ESMA), Guidelines on ESG disclosures