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| 2 minutes read

ESG - Sustainability Agreements DOs and DON’Ts

The inclusion of a new chapter dedicated to sustainability agreements in the European Commission’s (EC) new Horizontal Guidelines is a welcome and long-anticipated development in EU antitrust law. The new chapter gives valuable guidance to businesses which want to collaborate with their competitors in their pursuit of sustainability objectives, allowing them to self-assess the compatibility of their agreements with EU competition law.

We have listed below some key takeaways for competitors, based on the EC’s new Horizontal Guidelines.

Competitors that want to engage in sustainability agreements should:

  • Clearly identify the sustainable objective(s) being pursued and identify their beneficiaries (i.e., direct customers, residents of a local area, etc.)
  • Think about alternative measures that could be used to achieve those objectives, which would not restrict competition, such as through purely internal and unilateral actions (i.e., limiting the volume of internal document printing).
  • Consider whether the agreement affects prices, quantities, innovation, product quality or variety and, if so, limit the impact of the agreement on these as much as possible since these are the key parameters of competition between competitors.
  • Ensure that participation in agreements regarding sustainability standards is voluntary and that competitors are not prevented from adopting higher sustainability standards.
  • Keep in mind that the process to develop sustainability standards must be transparent and accessible to all interested competitors.
  • In case the agreement concerns the establishment of sustainability standards, consider the use of a monitoring and enforcement system that ensures compliance with the standard.
  • Be able to objectively demonstrate the efficiency gains of the sustainability agreements, such as through reduced costs or increased product variety.
  • Consider and collect evidence to substantiate the sustainability benefits of the agreement, such as studies, market surveys and academic reports.
  • Keep exchanges of commercially sensitive information to a minimum.
  • Seek legal advice in case of any concerns, and especially when the agreement affects prices, quantities, innovation, product quality or variety.
  • In case of any novel or unresolved questions regarding a specific sustainability agreement, consider approaching the EC for informal guidance.

Competitors should NOT:

  • Enter into any agreements that affect prices, quantities, innovation, product quality or variety unless this is necessary to achieve the sustainability benefit being pursued.
  • Agree on how to pass-on to consumers the costs of meeting the sustainability requirement.
  • Eliminate competition through their agreement by removing uncertainty over key competition parameters.
  • Impose any restrictions on competition that are not necessary to achieve the intended sustainability benefits.
  • Set discriminatory standards or prevent competitors from adopting higher sustainability standards.
  • Exchange commercially sensitive information that is not necessary.

With its new Chapter dedicated to sustainability agreements, the EC has given the green light to a variety of agreements between competitors that pursue sustainability agreements. By following the above and by seeking legal advice in case of uncertainty, ESG conscious businesses can ensure that they comply with EU competition law while pursuing their sustainability objectives.