Published 2 months ago.
About a 6 minute read.
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Over 80% of sustainability professionals acknowledge the need to work with peers
to tackle sustainability issues; but most companies are put off collaboration for fear of breaking competition rules and risking litigation.
Corporate competition laws exist for good reason. They help to build fair
markets, making sure companies operate in a way that benefits consumers and
prevents monopolies forming. Regulations such as the Federal Trade Commission
in the US, and the UK’s Competition Act
1998, work to maintain a
level playing field among businesses and prevent anti-competitive behavior.
But what happens when companies want to work closely together, to share
information and knowledge to solve common problems together? After all,
collaboration is often seen as our best bet in tackling many of our big,
21st-century environmental and social challenges — not least the climate crisis.
Sustainability issues are complex and interconnected — requiring a concerted,
cross-sectoral approach to drive meaningful change.
“Collaboration is especially useful in solving business challenges that have no
clear competitive advantage — for example, eradicating modern
Oliver Hurrey, founder of the
Scope 3 Peer Group dedicated to accelerating
collaboration to reduce supply chain
told Sustainable Brands® (SB). “It’s as simple as making it far, far
easier; cheaper and more effective to jointly tackle a very complex problem —
especially when this stuff is generally understaffed, even in big companies.”
It's a compelling argument; and yet, collaborative action could be being stifled
by competition laws. That’s certainly the feeling of the majority of businesses
responding to a new
carried out by the law firm, Linklaters. Despite the large majority (82
percent) of sustainability professionals acknowledging the importance of working
with peers to pursue sustainability goals, most companies are put off
collaboration due to the fear of breaking competition rules and the risk of
litigation. 60 percent claim competition laws are playing a role in their not
pursuing a sustainability project; just 48 percent said the same in 2020.
Despite the pressure to ramp up climate action — particularly along supply
— concerns over exposure to antitrust liability, whether at the hands of an
agency or a litigant, appear to be deterring firms from partnering with
competitors on solving environmental, social and governance (ESG) issues. More
than half (56 percent) of respondents offered concrete examples of projects that
were not pursued because the legal risk was deemed to be too high — a figure
that has not much changed since the 2020 survey.
The UK’s Groceries Supply Code of
(GSCOP) regulations, which govern the relationship between large grocery
retailers and their suppliers, are a good example of how laws might be tweaked
to foster greater collaboration. While the GSCOP is primarily focused on
ensuring fair dealing and preventing unfair practices in the grocery supply
chain, it doesn’t inherently limit sustainability efforts. In fact, GSCOP
includes provisions that can support sustainability by promoting transparency
and fair treatment of suppliers. But there are certain aspects of GSCOP that
indirectly impact ESG efforts in retail: Under the law, retailers are not
allowed to make unjustifiable demands on suppliers — especially in terms of
pricing. However, in practice, the intense price competition among retailers
could lead to pressure on suppliers to cut costs — potentially impacting their
ability to invest in sustainable practices. Similarly, while GSCOP aims to
ensure fair practices in the relationships between retailers and suppliers,
there may be instances where power imbalances persist. Suppliers, particularly
smaller ones, may feel compelled to prioritize the immediate demands of
retailers over long-term sustainability considerations.
However, despite competition laws being perceived as a big risk across the
board, they are not preventing all collaboration efforts from marching forward:
Around a third of firms surveyed pointed to a range of collaborative initiatives
as examples of progress — including pooling
collectively agreeing not to use certain suppliers, jointly funding recycling
schemes, and developing more sustainable packaging options
And the regulatory landscape seems to be evolving in way that is good news for
sustainability — with more competition authorities providing guidance to support
firms that want to collaborate without falling afoul of the law. The European
Commission, the UK Competition Markets Authority (CMA) and the
Netherlands Authority for Consumers and Markets (ACM) have all created
guides that explain when sustainability collaborations fall outside competition
rules. They also make it clear how they assess whether the benefits of any
collaboration might outweigh any damage to competition. The CMA says it has an
“open door policy,” whereby companies are free to ask questions as to whether
their collaboration is compliant with the rules.
More needs to be done to make companies aware of such guidance (only 57 percent
of professionals surveyed said they were); because, clearly, this is what
companies need. Around 65 percent of respondents say they are more inclined to
pursue collaborative projects if a competition law exemption is in place.
“Indications that, following the EU and UK Guidance, over half of those surveyed
are prepared to take forward projects previously considered too risky are
encouraging,” Nicole Kar,
Linklaters’ global head of antitrust and foreign investment, told SB.
“Authorities have opened the door — businesses need to be prepared to step
It is a different picture in the US, where guidance has yet to be published on
the subject. Alongside the risk of breaking competition laws, US firms face the
very real possibility of litigation — something that 57 percent of companies are
worried about, in all corners of the world.
Linklaters’ advice is for businesses to start engaging in conversations with
regulators on some of these issues to develop a greater understanding of the
parameters. The survey results suggest that customers are unwilling to assume
the costs associated with sustainability measures unless they are industrywide.
If companies can show this to be the case, it may help to convince regulators of
the need for collaboration.
The advice for regulators is to get better at communication. Making decisions
public will help businesses understand and gain more certainty about how
principles explained in the various pieces of guidance will actually be
implemented in practice. A good case in point is a letter issued by the
to Total and Shell, in which it explained why it would not further
investigate the pair’s plans for a joint carbon-storage project in the North
Fears over competition rules are clearly a barrier. But it is not the only thing
holding companies back when it comes to proper collaboration for sustainability
— a lack of facilitation is a common obstacle, according to Hurrey.
“Often, without good facilitation, those that are more advanced in the
collaboration can find themselves sharing but not getting much in return,” he
pointed out. “You need the right mix of talk, therapy, action on understanding,
and action on doing — otherwise you can get stuck in a talking shop.”
So, it’s time for companies to “find your tribe,” as Hurrey put it: “There are
more than 180 industry collaborations on sustainability, so there’s no real
excuse. In the last two weeks, I’ve helped both the hearing aid solution
industry and DIY retailers to launch Scope 3 taskforces. There really is
something for everyone. Just find it, or start it.
“The best collaborations draw clear lines as to where they collaborate and
where they compete. The individual companies should still also try and compete
in those areas, as well as collaborate. You need that healthy, realistic mix.”
Published Nov 29, 2023 8am EST / 5am PST / 1pm GMT / 2pm CET
Tom is founder of storytelling strategy firm Narrative Matters — which helps organizations develop content that truly engages audiences around issues of global social, environmental and economic importance. He also provides strategic editorial insight and support to help organisations – from large corporates, to NGOs – build content strategies that focus on editorial that is accessible, shareable, intelligent and conversation-driving.