Carla Moraru
Under a picture of the Smurfs in the Brussels city centre lay the words “No poverty (SDG 1)”. Regardless of the ironic collusion between this compassionate pledge and the cartoon characters from Sony, the corporation recently accused of monopoly pricing, the display fosters hope. It reminds the people of Brussels that society has a collective responsibility to create a world where every individual has access to a dignified life. Still, academics, NGOs, environmental scientists, and other stakeholders have often highlighted flaws in the UN’s sustainable development goals– the SDGs lack clarity, accountability mechanisms, synergy, financing, etc. Yet, despite its often elusive targets, the UN’s plan outlines a relevant, long-term global vision focused on sustainability, inclusivity, and equity, with a common language and framework that stakeholders can rally behind. Notably, the SDGs have informed the European Union’s Green New Deal and subsequent policies. They have granted the EU’s Commission an authoritative foundation, agreed upon by all nations, to address and call out the negative externalities of individual production and consumption. They have empowered Europe to respond to failures of its traditional market mechanism. Most recently, the Commission has produced new Horizontal Guidelines on sustainability agreements, which aim to guide companies in assessing their cooperation agreements with competitors under Article 101, to promote green and digital transitions. Within the Guidelines, ‘sustainability agreement’ refers to any arrangement between competitors that genuinely pursues one or more sustainability objectives. Such objectives include addressing climate change, eliminating pollution, limiting the use of natural resources, respecting human rights, fostering resilient infrastructure and innovation, reducing food waste, facilitating a shift to healthy and nutritious food, and ensuring animal welfare.
The 2023 Block Exemption Regulations on Research and Development (‘R&D') and Specialisation agreements (‘HBERs'), accompanied by revised Horizontal Guidelines, can play a pivotal role in addressing market failures through collective action. In line with the new parameters, companies can align their efforts, leverage their strengths, and create a collective impact beyond individual actions. They can exchange knowledge, experiences, and best practices, allowing for the dissemination of innovative approaches, technologies, and strategies that can drive sustainability across industries. Specifically, the horizontal guidelines enable businesses to transition into compliance with international regulations more easily. In section 9.2 of the text on “Sustainability agreements that are unlikely to raise competition concerns,” the guidelines approve of “agreements to set up a database containing general information about suppliers that have (un)sustainable value chains,” as well as “agreements that aim solely to ensure compliance with sufficiently precise requirements or prohibitions in legally binding international treaties, agreements or conventions…”. This, in turn, facilitates faster and more impactful systemic change toward climate-conscious business policies. Also within section 9.2, the text enables competitors to reach agreements “relating to the organization of industry-wide awareness campaigns…raising customers’ awareness of the environmental impact or other negative externalities of their consumption.” This provision is key in advancing a proactive approach to sustainability, as it enhances the competitive element in terms of climate-consciousness among firms; the amplified awareness among buyers can lead companies outside of the original sustainability agreements to alter their practices based on customer request. In fact, the guidelines explicitly state, in section 6.2.2.2 on “Anti-competitive foreclosure,” that standardization agreements in the sustainability field must be “transparent and all interested competitors can participate in the process leading to the selection of the standard.” Consequently, firms could gain powerful incentives to comply with or become involved in setting standards of sustainability agreements, creating powerful momentum in the green movement.
In section 6.2 on “Assessment under Article 101”, the guidelines outline factors for assessing the effects of sustainability agreements on competition. They include market power, decision-making independence, and the exchange of commercially sensitive information. The guidelines also rightly emphasize the importance of considering broader impacts, such as changes in output, variety, and innovation. Passing on benefits to consumers is another essential aspect of sustainability agreements. It means that, when reflected in the product or service, the advantages resulting from sustainable practices, such as economic progress, improved product and supply chain quality, or reduced environmental impact, can override the rules on anti-competitive agreements. However, some specialists, such as Professor of Economics Mr. Maarten Pieter, Policy and Strategy expert Inge Bernaerts, and legal director Annaleen Straeremans, note that while the facets mentioned above provide a useful starting point, their application in practice may require further clarification and refinement, especially in terms of evidence requirements for demonstrating efficiencies. Indeed, companies engaging in collaborative sustainability initiatives may need to provide evidence that the agreements result in improved efficiency, innovation, or cost savings. Consequently, legislators must find appropriate criteria and benchmarks to assess and validate these factors. For example, some organizations argue that one tool for measuring the impact of sustainability agreements in the agricultural sector could consider the effect on plant health and invasive species. Cooperative organizations Copa-Cogeca’s response to the European Commission's open consultation on the agreements proposed that it is essential for policymakers to consider aligning sustainability agreements with existing EU legislation on plant health and invasive species, such as Regulation 1143/2014, to address the prevention and control of harmful varieties. This initiative would align with the broader objectives outlined in Article 210a, which emphasize landscape preservation, biodiversity protection, and reduction in pesticide use.
Despite the potential benefits of the new guidelines, commentators have also brought up the need for more specific instructions on agreements pertaining to the evolving digital medium. Regarding the practice of information exchange, while this approach has the potential to bring numerous social and economic advantages, Pieter, Bernaerts, and Straeremans also argue that the regulations should offer more guidance in determining what constitutes horizontal exchange in contexts of digitalization, particularly regarding the adoption of pricing algorithms. Pricing algorithms are computer programs companies use to automatically set prices for their products or services based on various factors such as demand, competition, and costs. These programs analyze information and make decisions without direct human involvement. As companies access and utilize data through various platforms and tools, the boundaries between competitors can become blurred. The main issue arises as firms use identical software to collaborate on pricing decisions without adequate safeguards. In turn, information exchange in this context can harm consumers and stifle competition. The three specialists underline a need to understand how information exchange through data sharing and analytics platforms should be evaluated from a competition law perspective, noting the relevance of data pooling, collaborative data analytics, and other data-related cooperation between companies.
As human impact on the environment becomes increasingly prominent, society may gradually reject the doctrine which equates self-serving pursuits to benefit the collective. However, to address the pressing issue of climate change and achieve bold proposals such as “no poverty,” authorities and the general public need to rethink their approach to corporate governance, from the role of shareholders to how industries measure success. Despite certain shortcomings regarding specificity and insufficient consideration of emerging technology, the European Commission has taken a significant step in this direction by issuing new Horizontal Guidelines. The regulations on sustainability agreements acknowledge the importance of cooperation. For once, they decentralise the adversarial view to business management. Hopefully, they support and normalise a culture of collectivism that prioritises various stakeholders, among which nature itself, over profit.