In a world increasingly focused on sustainability and corporate responsibility, Environmental, Social, and Governance (ESG) issues have taken center stage. However, recent developments suggest antitrust regulators are closely monitoring industry-wide collaborations on ESG initiatives.

The Rising Importance of ESG

ESG factors have become a significant consideration for businesses worldwide. They encompass a broad range of issues, from environmental impact and climate change policies to social responsibility and employee engagement, to governance practices like board diversity and executive compensation. As companies strive to improve their ESG performance, many have turned to industry collaborations as a way to develop best practices and common standards.

The Antitrust Concern

While these collaborations can drive positive change, they also raise potential antitrust concerns. Collaborations between competitors to set common standards or practices could potentially be seen as anti-competitive behavior. Antitrust attorneys are now warning that regulators are paying close attention to these industry-wide ESG collaborations. There is a concern that seemingly innocuous collaborations could inadvertently lead to antitrust violations.

Navigating the Regulatory Landscape

In light of this increased scrutiny, companies need to be cautious when participating in ESG collaborations. Stinson LLP Partner Jeetander Dulani provides some guidance for companies navigating this complex regulatory landscape.

Dulani suggests that companies should ensure that any ESG collaboration meetings with competitors are well-structured and documented. “Ideally, the meetings should include an antitrust compliance statement and be held with an antitrust lawyer present,” he said.

Furthermore, he emphasizes the importance of each company making a unilateral decision on whether to adopt any ESG policies or practices developed by the industry group. “Collaborations should avoid mandatory terms, with each participant allowed to make independent decisions on whether to adopt policies, benchmarks or other practices.” Dulani’s practice includes competition disputes, class actions, mergers and acquisitions, government investigations and other complex litigation.

The previously rescinded health care guidelines established a safe area for collaborations between competitors with market shares under 20%. The updated merger guidelines, however, do not define such a safe area, instead indicating that a company holding a 30% market share is considered dominant. This criterion encompasses a significant number of major companies.

“So now—if companies want to create new ESG standards, goals, or benchmarks—there is not any guidance on how to do that safely. And if competitors wanted to collaborate directly, the 20% market share safe harbor seems to no longer be valid because the policy articulating the principle has been withdrawn,” he added.

The Broader Implications

The intersection of ESG and antitrust law has broader implications for corporate governance. As boards continue to evaluate how ESG considerations factor into corporate operations, some lawmakers and regulators have raised potential antitrust concerns about coordinated efforts. 

While the drive towards better ESG practices is commendable, companies must be mindful of potential antitrust implications. As regulators increase their scrutiny, it becomes even more important for companies to ensure they are in compliance with all relevant laws and regulations.