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CMA launches “Green Agreements Guidance” to Support Environmental Collaboration Among Businesses

Chesta Singh
By Chesta Singh
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CMA launches
Image credit: Source: Gov[Dot]UK

Estimated reading time: 3 minutes

The Competition and Markets Authority (CMA) of the United Kingdom has introduced the Green Agreements Guidance, designed to clarify how competition law pertains to environmental sustainability agreements among firms operating at the same level of the supply chain. The objective is to enable these businesses to collectively address climate change and environmental sustainability.

The guidance, officially titled ‘Guidance on the application of the Competition Act 1998 to environmental sustainability agreements,’ outlines the core principles that apply in such scenarios. It provides practical examples that businesses can leverage to make informed decisions when collaborating with other companies on environmental sustainability initiatives. Importantly, the CMA does not anticipate taking enforcement actions against agreements that adhere to this guidance. Additionally, a dedicated section details the evaluation of agreements aimed at mitigating climate change.

This guidance follows the environmental sustainability recommendations that the CMA offered to the UK government in March 2022. During this process, the CMA identified the need for greater clarity on what is legally permissible when businesses work collectively toward environmental sustainability objectives. The CMA conducted a public consultation on a draft of this guidance earlier this year, and the final version reflects valuable input from a wide spectrum of stakeholders and businesses.

As part of a broader awareness campaign, the CMA has also unveiled a roadmap that categorizes different risk scenarios to assist businesses in their initial considerations before delving into the full CMA guidance document or legal advice.

For instance, consider the fashion sector, which decides to establish targets for incrementally increasing the use of sustainable materials in its clothing lines. The CMA’s guidance explains how this should be executed, providing businesses with confidence that their agreement aligns with competition law.

For businesses uncertain about their specific circumstances, the CMA maintains an open-door policy. This allows companies, as well as representative bodies like trade associations, non-governmental organizations, and charities, to seek informal guidance from the CMA concerning proposed environmental sustainability initiatives.

Sarah Cardell, CMA Chief Executive, expressed the agency’s commitment to supporting businesses in addressing climate change and promoting environmental sustainability. The Green Agreements Guidance provides firms with clear guidelines on creating environmentally conscious agreements while remaining compliant with competition law. The open-door policy offers tailored guidance for collaborative efforts aimed at advancing the green economy.

The release of the Green Agreements Guidance forms part of the CMA’s broader effort to provide comprehensive information on agreements between businesses within the same supply chain, often referred to as ‘horizontal agreements.’ This initiative builds upon the recommendations of the CMA’s Sustainability Taskforce, which presented environmental sustainability advice to the UK government in March 2022.

Source: Gov[Dot]UK

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