Why competition laws frighten firms away from co-operating on projects to drive up environmental standards – Dakers

Writing for the Guardian Sustainable Business Andrew Dakers, founder of The Cooperatition Incubator, said:

“Many corporations have discovered that [weak global governance] leads to a “race to the bottom”. That can be to their detriment as natural resources and the ecosystems on which they depend continue to be depleted. Filling the vacuum is a vast spectrum of voluntary corporate responsibility initiatives and standards from Community Mark to Investors in People and ISO 14000.

“These have made great strides. They provide companies with a fairly rapid return on their investment – perhaps through increased resource efficiency or better people management – and the wider community often benefits too. The same cannot be said, however, when a business has substantial external social and environmental impacts – a “non-win-win” situation.

“The latest government-sponsored voluntary agreement, the public health responsibility deal, has received a distinctly mixed response, largely due to this problem. The British Medical Association and the Royal College of Physicians complain that substantial external impacts of business, such as alcohol misuse and obesity, have been ignored.

“Research by Business in the Community and the Cooperatition Incubator over the past three years has revealed that competition law is a substantial barrier to companies collaborating on voluntary standards that would deliver greater public benefit. Given the increasing levels of regulation already around climate change – at least in the UK and EU – this is preventing new voluntary agreements that internalise external costs on social issues and natural resources.

“More meaningful agreements have the potential to increase costs to producers, suppliers and consumers. To develop substantial self-regulatory changes might involve competitors in a given sector discussing pricing and coordinating the timing of a step-change in improvements. Companies taking part in such discussions risk being accused of collusion or price-fixing by the UK Office of Fair Trading (OFT), despite the public benefit they are seeking to achieve.

“Tesco has promised to review its alcohol pricing if its rivals do the same; it believes it would be commercial suicide to act alone. But Tesco points out that it is trapped by an approach to competition law regulation that prevents competitors discussing anything to do with price…

“Despite [the Office of Fair Trading introducing Short Form Opinions], Robert Peston said on his blog in November 2010 that the problem remained: “Britain’s biggest banks are talking to each about whether and how they can reduce the total amount of bonuses they would pay in the upcoming bonus season . . . [Yet] one great fear of bankers is that they’ll be seen to be colluding on a competitive issue and could be prosecuted by the Office of Fair Trading.”

“The prime minister, David Cameron, responded: “I get the message loud and clear, and we will do everything we can to tackle those barriers head on – whether it is the red tape you face, whether it is being able to collaborate as businesses without having the competition authorities throwing you in jail. I understand the barriers. We are going to work with you to get rid of them.”

“Work is now under way on the problem between Business in the Community, the Department for Business, Innovation & Skills and the OFT.

“For too long corporate responsibility has focused on the laws governing individual company practices. By revisiting how competition authorities regulate public interest collaborations between firms, the UK has the potential to become a global exemplar. Reform in this area will build the solid foundations for the new people and planet-friendly era in capitalism we need.”

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