Many corporations worldwide have put environmental, social, and governance (ESG) initiatives at the forefront of their agenda. However, when these initiatives involve agreements between industry competitors or the sharing of competitively sensitive information, antitrust agencies get wary.
While United States antitrust enforcers have not put forth extensive parameters separating legitimate business collaboration for ESG from collusion, their stance towards ESG initiatives is clear. In 2022, US antitrust enforcers declared that there was no antitrust exemption for ESG-related agreement in their public statements and testimony. Despite the intended positive social impact of such initiatives, companies have been warned that they are at risk of breaking antitrust laws.
Such firmness has triggered further reactions, as seen by the concern of 19 state attorneys general towards Blackrock’s Climate Action 100+ initiative. House Republicans have followed suit, criticizing ESG efforts as potential antitrust violations and subpoenaing information from Climate Action 100+ members. A letter was also sent to over 50 US law firms reminding them of their legal duty to inform their clients about the antitrust risks associated with ESG initiatives.
European Union (EU) has a different standpoint. The EU’s Green Deal aims to ensure that ESG initiatives and antitrust law coexist. Recently, the European Commission added a new section that defines a “sustainability agreement” to its block exemption regulations and guidelines. The EC maintains the stance where agreements that restrict competition, even when under the garb of ESG purposes, will face severe penalties. It presents a stark contrast to the Dutch Authority for Consumers and Markets, which encourages businesses’ ESG initiatives and offers guidance to exempt cooperative efforts that meet its sustainability criteria.
In the UK, the Competition and Markets Authority has issued its Green Agreements Guidance in 2023. The guidance aimed to ensure competition law didn’t hamper legitimate ESG collaboration between businesses, taking a more permissive stance towards climate change agreements between competitors.
Regardless of the approach taken by jurisdiction, global companies involved in ESG initiatives can still employ various best practices to minimize potential antitrust issues. These include seeking legal guidance before engaging with competitors, evaluating jurisdictional interests, tailoring company conduct to prevent exposure to scrutiny, and constantly updating compliance training to include risks regarding ESG collaboration.
Ultimately, until there is global alignment on enforcement policies, companies must tread cautiously when involving competitors in efforts to meet ESG goals, to avoid inviting antitrust scrutiny.
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