Incorporating Sustainability in Competition Laws

Source: The post incorporating sustainability in competition laws has been created, based on the article “Balancing competition and sustainability for India” published in “The Hindu” on 5th August 2024

UPSC Syllabus Topic: GS Paper 3- Economy and Environment

Context: The article discusses how market regulations are adapting to include sustainability goals. It mentions different countries and organizations updating their competition laws to support environmental sustainability, highlighting actions like issuing guidelines and adjusting competition policies to encourage greener practices in businesses.

For detailed information on Competition Law in India read this article here

What is the Impact of Climate Change on Markets?

Climate change affects the supply side of markets, causing supply-demand mismatches and impacting prices and consumer demand.

How Are Countries Incorporating Sustainability in Competition Laws?

1. India: The Securities and Exchange Board of India mandated companies to report their environmental impacts in 2023. The Competition Commission of India is exploring sustainability policies, as India aims for net-zero emissions by 2070.
2. Japan: Japan’s Anti Monopoly Act provides guidelines that support businesses in collaborating on environmental sustainability efforts without restricting competition.
3. European Union: The European Commission’s revised guidelines on horizontal agreements now include a section on sustainability. This allows companies to work together on environmental goals unless they significantly restrict competition or contravene Article 101(1) of the Treaty.

What Actions Have Been Taken During Crises?

1. COVID-19 Pandemic Response by CCI: During the COVID-19 crisis, the Competition Commission of India (CCI) issued advisories acknowledging supply chain disruptions. The advisories recognized the necessity for businesses to share information to manage and distribute essential products and services effectively.
2. Built-in Safeguards: The Competition Act, 2002 includes safeguards that protect businesses from sanctions for certain collaborations that address urgent public needs, specifically those arising during the pandemic.
3. Consideration for Exemptions: The advisory also highlighted that the CCI would consider exemptions for collaborations if they were necessary and proportionate to address concerns directly arising from COVID-19. This approach aimed to facilitate necessary cooperation among competitors while ensuring compliance with competition laws.

What are the benefits of incorporating sustainability in competition law?

1. Enhanced Transparency: The Securities and Exchange Board of India’s framework for sustainability reporting increases transparency and combats greenwashing.
2. Encouragement of Green Innovations: Guidelines like Japan’s Anti Monopoly Act help businesses collaborate on environmental goals, fostering green innovations.
3. Regulatory Support: The European Commission’s guidelines support sustainability without harming competition.
4. Crisis Management: During COVID-19, the CCI’s advisory allowed information sharing to ensure fair distribution, showing how collaboration can meet emergency needs.

What Should be Done?

1. Promote Studies: Conduct market studies on green initiatives, akin to the UK’s study on electric vehicle charging, to foster competition and innovation.
2. Policy Integration: Incorporate sustainability practices in national policies, like TRAI’s recommendations for the telecom sector, ensuring all economic sectors contribute to greener production methods.
3. Advocate and Educate: Utilize Section 49(3) of the Competition Act to promote competition advocacy and awareness, focusing on the benefits of sustainable business practices.

Question for practice:

Evaluate how countries are adapting their competition laws to support environmental sustainability.