Competition law and sustainability: lessons for the crisis beyond the crisis

It’s fair to say that until recently, concerns about climate change and the competition rules didn’t often cross paths. But over the last year, we have seen a clear increase in the number of clients talking to us about the interplay between competition law and sustainability.

Environmental protection continues to rocket up the political agenda – from the EU’s ambitious Green Deal, to Covid-19 rescue packages being subject to “green strings”. Going green is now imperative for companies and fund managers to ensure resilience and attract investment.

Meanwhile, questions are being asked about whether competition law is getting in the way of growing calls for progress. Whether it’s a desire to work together to achieve sustainability goals (and achieve government targets), green objectives driving M&A strategy (whether expansion into renewables or exit from or dilution of interests e.g. via JVs in “dirty” industries), or requests for EU state aid (now more than ever) - these issues are now coming to the forefront.

We think it’s important to highlight them, to suggest a way forward, and in the meantime to offer practical solutions to help clients navigate the current challenges.

What our survey says

Earlier this year, we commissioned a survey of 200 sustainability leaders to look at what is driving companies’ decision-making in this area. You can see our summary results here.

They confirm that, overwhelmingly, businesses want to work together to pursue sustainability goals, with more than 9 out of 10 saying that collaboration is key to achieving progress. Why? Because it enables companies to design better solutions. And changing industry practice requires coordinated action to be successful.

But, in general, competition rules prohibit cooperation between competitors. Many companies believe, like us, that there is insufficient guidance on how to stay in line with the rules. So competition agencies need to act to support efforts to work together on genuine environmental projects.

To hear a discussion about the results, why not listen to this webinar we hosted on 28 April 2020.

Lessons from the health crisis for the “crisis beyond the crisis”

The current health crisis has shown that governments and competition authorities around the world have been willing and able to act in response to a crisis. We recently saw many authorities quickly relaxing or “softening” their application of competition law where necessary in sectors most impacted by the Covid-19 pandemic.

Perhaps most interestingly, the European Commission announced plans to give individual comfort letters to companies cooperating to ensure certainty of supply. A similar approach could be used to give certainty and comfort to those wanting to cooperate on sustainability grounds. Indeed, the EU confirmed it was already considering reinvigorating the giving of comfort letters in the context of “decarbonisation of the economy”, and this trend had been “accelerated” by the health crisis.

Starting the conversation: our dedicated blog series

To find out more about the competition issues in this space, and for practical guidance on how to tackle them right now, please head over to our dedicated series on LinkingCompetition, our competition blog. You can also sign up here to receive alerts for future posts.

This five-part series, with its accompanying podcast, is intended to shed light on the interaction between competition and sustainability. It also offers practical solutions for companies who are currently grappling with the issues, and considers how competition authorities could seek to address at least some of them. We’d love to have your feedback. For our part, we’ll continue to advocate for clearer and supportive rules in this space.

As we’ve said, the response by many agencies to the current health crisis has shown that things can change quickly in extraordinary circumstances. The UK authority has already expressed its support for sustainability efforts as one of its key priorities for this year. While the Dutch authority has taken a welcome first step by publishing draft guidelines aimed at increasing opportunities for competing businesses to collaborate in pursuit of sustainability objectives. We hope not only that we will see cases mirroring the guidance, but that it acts as a blueprint for other authorities to follow suit.