Competition Law and Sustainability

Click here to read the full article online

ESG (Environmental, Social, Governance) and CSR (Corporate Social Responsibility) are important when it comes to investment and are considered the new normal.

While many areas of law have already adapted to this shift, competition law still seems to be searching for its place in the “sustainability movement”. Combatting climate change is a priority item on the agenda of many governments. However, companies’ market behaviour with regard to sustainability objectives (in particular their interaction with competitors) remains framed by competition law. Reconciling both objectives can be challenging. On the one hand, the task of combatting climate change will require contributions on many different fronts, and companies play an important role in this context. On the other hand, companies still have to compete with others in the market.

Imagine a company that wants to build a new production plant and decommission the older “dirty plant” to combat climate change. Given the significant investment this requires, the company may need to increase its prices and risks being at a competitive disadvantage vis-a-vis its competitors: a dilemma also described as the “first-mover disadvantage”. To avoid this problem, the company agrees with its two main competitors that they will also modernize their respective plants.

From a sustainability point of view, such co-operation prima facie seems to be welcome. From the perspective of competition law enforcers, this type of co-operation rings alarm bells, and, as has been pointed out by Olivier Guersent, Director General for Competition at the EU Commission, among others, could constitute a prohibited cartel.

This Note provides an overview of the current position of sustainability in the context of competition law in several key jurisdictions.