92 percent of businesses call for changes to competition rules to boost climate change collaboration

  • Nearly 6 in 10 businesses have walked away from sustainability projects in fear of being rebuked by competition agencies, according to new research by law firm Linklaters
  • 92% of businesses call for changes and clarification of competition rules to encourage collaboration on ESG
  • The global pandemic has seen authorities rapidly relax competition rules to allow for essential cooperation, offering hope a similar approach could be taken for climate change

Nearly 6 in 10 (57%) businesses have had to walk away from cross-industry environmental initiatives because the legal risk was too high, according to new research by global law firm Linklaters. This is despite an overwhelming number of businesses (93%) wanting to work closely with peers in responding to climate change.

As competition authorities globally relax competition rules in a range of sectors to allow for essential cooperation to respond to the implications of Covid-19, businesses would welcome a similar approach for sustainability initiatives. In a poll of 200 sustainability leaders across five countries, over a third (36%) want to see an exemption from competition rules for sustainability and an additional third (32%) are calling for explicit guidance from competition authorities on what counts as lawful and unlawful cooperation.

Nicole Kar, Head of UK Competition at Linklaters, commented:

 

"Mounting social, political and investor pressure is being directed at companies to tackle climate change issues. Whilst responses will vary across industries depending on the challenges they face; a consensus is forming that greater collaboration between players is needed in order to bring about long-lasting and radical change. This remains true in the current crisis where there is an expectation that corporates receiving government money will have strings attached in terms of achieving government policy objectives, including sustainability. 
In addition, authorities around the world have responded rapidly to provide exemptions from or comfort that competition law will not be invoked where necessary in those sectors most affected by Covid-19. This should provide a blueprint for how competition law is flexible enough to accommodate action in response to a crisis, namely the climate emergency we face. Companies should be encouraged to work together for the benefit of all citizens where it is necessary for the greater good.”

Responding to the ‘climate emergency’

As companies face growing pressure to address environmental, social and governance issues, a survey of 200 sustainability leaders at large corporates in the UK, USA, France, Germany and The Netherlands reveals the challenges they face in taking industry action on climate change:

  • A vast majority (68%) of sustainability leaders believe that industry collaboration offers the opportunity to pool resources and share expertise;
  • Whilst a similar number (64%) say that in order to change ingrained industry practices competitors must come together.

When it comes to the areas that will benefit most as a result of collaboration:

  • Senior sustainability professionals say that sector-wide initiatives to reduce CO2 emissions (65%) and pollution levels (57%) would be the first in line;
  • Green innovation will also accelerate when competitors join forces, with nearly half (49%) of sustainability professionals agreeing that collaboaration will result in the sharing of new ideas to address industry challenges.
Shift in attitudes must come soon


With sustainability at the heart of the European Commission’s agenda, Executive Vice-President Vestager has made it clear that “all of Europe’s policies, including competition policy” has a role to play in making Europe the world’s first climate-neutral continent. The Commission is currently evaluating the list of certain categories of agreements between competitors that should be exempt from EU competition rules.

Beyond Europe, competition authorities are yet to expressly focus on whether to allow collaboration for genuine sustainability purposes. However, this could change as the global recovery from the Covid-19 crisis gets underway and policymaker and regulatory attention can once again return to the climate emergency.

Simon Holmes, Centre for Competition Law and Policy at the University of Oxford, and a leading commentator in this area said:

“Competition law need not stand in the way of vital cooperation between businesses to fight climate change. The problem is more fear of competition law than competition law itself. There are many ways as to how that fear may be reduced. For example, competition authorities could set out clear guidelines to help companies understand better when action is likely and not likely to be taken. It is also essential that we learn the lessons from the Covid-19 global pandemic and apply them when tackling the climate crisis.”

To view the findings from the research, please click here.

Methodology

Linklaters commissioned Censuswide to carry out a survey of 200 sustainability leaders at large corporates in the UK, USA, France, Germany and The Netherlands in March 2020.