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Companies' Joint Efforts to Promote Sustainability and Competition Policy

Many companies across industries have been involved in various sustainability steps in order to run their businesses sustainably for a while. Companies’ efforts seem to have increased after COVID-19. Especially in EU countries. Many of European companies are transfering resources to replace their portfolio with environmentally friendly products or socially responsible sourcing. Yet, it is understood that a ‘system change’ can not be achieved with only the help of unilateral initiatives. In many fields, it is seen that international cooperation is necessary to achieve United Nations’ Sustainable Development Goals (SDGs) and the European Green Deal. Collective action plays significant role in this process.

Reasonable. So how can this collective action be created while strict competition law rules stand on one side (especially if there is even a slight chance that such cooperation may raise end-user prices)?

At this point, defining the relevant legal framework (regarding sustainability precautions and activities) is important to eliminate the uncertainty and hearsay information about sustainability. Competition policy plays a vital role since it has the potential to encourage or disincentivise the collective action that I have mentioned here. It may replace voluntary self-commitments of companies with collective, standard and sustainable applications. Unfortunately, competition law has been a factor that creates lack of motivation in companies until today. Nowadays, we can see many studies emphasizing the need for competition law that supports sustainability efforts, not the one that constitutes an obstacle.

Briefly, the competition rules regarding collective initiatives promoting sustainability in supply chains should be clarified by the Commission. For example, for the sake of legal certainty (and of course for the benefits of companies), Commission should clarify its interpretation of Art. 101 TFEU in relation to sustainability agreements. This would also contribute to the sustainability debate that is currently taking place (during the revision of Guidelines on Horizontal Co-operation Agreements).

Providing an abovementioned clarification on how European competition law applies to sustainability agreements between the competitors, will contribute to legal certainty in this field and eliminates the discourage and reluctance of companies to step further in sustainability issues. The world needs a more predictable and progressive competition law framework.