On 28 February 2023, the UK's Competition & Markets Authority ("CMA") published its draft guidance on environmental sustainability agreements ("Draft Guidance"). Environmental, social and corporate governance ("ESG") has become a critical element of businesses' operations in recent years, with some businesses seeking to collaborate to achieve broader ESG goals. At the heart of any such potential collaboration is a fundamental tension between the desire to advance commendable ESG objectives and the risk of anticompetitive collusion, which is a fact that regulators globally are becoming increasingly alive to.

The Draft Guidance provides added clarity as to the potential antitrust risks that competing businesses may face should they collaborate on ESG objectives, identifying types of arrangement that may and may not infringe the competition rules as well as those that could benefit from an individual exemption from the Chapter I prohibition on anticompetitive agreements. The Draft Guidance covers two types of agreements – environmental sustainability agreements and climate change agreements, with a special exemption for the latter. The CMA encourages businesses to proactively approach it and seek informal guidance on their proposed ESG collaborations. Additionally, the Draft Guidance indicates that the CMA will not take any enforcement action against arrangements that closely correspond to examples provided in the Draft Guidance and the CMA will not impose fines against arrangements that raise no antitrust concerns or where concerns were addressed.

Currently, the welcome signs are that the CMA is looking to take a flexible and relatively permissive stance on sustainability collaborations.

Interested parties now have until 11 April 2023 to comment on the Draft Guidance.

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