New research commissioned by Linklaters has found that despite most businesses wanting to collaborate on environmental, social, and governance (ESG) issues, many are still hesitant to do so for fear of falling foul of competition rules.
The survey of over 500 sustainability professionals in the UK, USA, France, Germany, and the Netherlands found that 82% believe it is important to work with peers to pursue sustainability goals, but 60% have paused or cancelled initiatives over concerns about breaking competition rules.
Competition rules are laws and regulations that aim to promote fair and open competition in markets. These rules prohibit businesses from engaging in practices that may be deemed as anticompetitive and damaging to the customer, such as price fixing, but, they can also act as a roadblock to collaboration.
However, progress is being made. The survey found that over half of respondents are now prepared to take forward projects previously considered too risky, following the publication of detailed guidance by the European Commission, UK Competition and Markets Authority, and Dutch Authority on when sustainability collaborations will fall outside competition rules.
The survey also found that crucial progress is being made, with respondents reporting to have been involved in a range of sustainability collaborations, including pooling logistics resources (34%), developing new green packaging (33%), and creating minimum standards within their sector (30%).
Linklaters’ global head of antitrust and foreign investment practice, Nicole Kar, said: “Commitment to sustainability objectives continues to be high, with 82% of those surveyed recognising the importance of working with peers to pursue sustainability goals.
“Indications suggest following the EU and UK Guidance; over half of those surveyed are prepared to take forward projects previously considered too risky, are encouraging. Authorities have opened the door – businesses need to be prepared to step through.”
The survey also revealed a shift in businesses’ motivations for collaborating on ESG issues. In 2020, when Linklaters last ran this survey, the main reason for collaboration was pooling resources and know-how, but this has now declined to 49%. Instead, the largest change in reason is now customers’ unwillingness to assume costs unless they are industry-wide (44%), which saw an increase of 21%.
Despite this, over a third of sustainability professionals are still unaware of the EU and UK guidance on competition law and sustainability collaborations. This suggests that there is still more work to be done to raise awareness and help businesses understand what is and isn’t permitted.
Jonathan Ford, Partner in Linklaters’ Antitrust & Foreign Investment practice, said, “we need to get to a point where sustainability leaders are no longer put off collaborating legitimately on ESG issues where needed, due to fear of breaking competition rules. Only then will we see larger strides in projects and initiatives around the green and wider sustainability agenda.”
Overall, the survey suggests that businesses are increasingly recognising the importance of collaboration in achieving their sustainability goals. However, more needs to be done to raise awareness of competition law and sustainability collaborations, and to help businesses understand what is and isn’t permitted.
