Context-

Markets are the centre of the economy, evolving from the barter system to today’s digital marketplaces. The forces of supply and demand are primarily responsible for price determination and consumer preferences. However, climate change disturbs the supply side of the market, leading to a mismatch between supply and demand, which in turn impacts consumer demand and the overall economy.

SEBI’s Framework for Sustainability Reporting

In 2023, the Securities and Exchange Board of India (SEBI) introduced a framework for reporting actions towards sustainability by corporates. The revised framework for the Business Responsibility and Sustainability Report (BRSR) requires companies to account for their value chain’s environmental impact. This aims to enhance transparency, combat greenwashing, and ensure that sustainability benefits permeate through the value chain.

●     Enhancing Transparency

The revised BRSR framework mandates companies to disclose their environmental impact across the value chain. This level of transparency helps stakeholders make informed decisions and holds companies accountable for their sustainability practices.

●     Combating Greenwashing

Greenwashing, where companies falsely portray their products or operations as environmentally friendly, is a significant concern. SEBI’s framework aims to combat this by requiring detailed and verifiable disclosures from companies.

●     Ensuring Value Chain Sustainability

By focusing on the entire value chain, the BRSR framework ensures that sustainability efforts are not limited to a company’s direct operations but extend to its suppliers, partners, and customers.

Global Perspectives on Sustainability and Competition

Globally, competition authorities have expressed doubts about the necessity of incorporating sustainability goals within competition frameworks. However, several regions have begun to integrate these concepts, recognizing their importance in addressing climate change and fostering innovation.

●     Japan’s Approach

Japan’s Anti-Monopoly Act includes guidelines to help private businesses navigate horizontal collaborations aimed at achieving a green society. These guidelines suggest that most activities seeking environmental sustainability are unlikely to restrict competition and may have pro-competitive effects that benefit consumers.

●     European Commission’s Revised Guidelines

The European Commission recently published the draft of revised guidelines on horizontal agreements, which now includes a specific section on sustainability agreements. These agreements will only raise concerns if they entail serious restrictions of competition or produce appreciable negative effects on competition contrary to Article 101(1). The objectives are to address climate change, reduce pollution, limit the use of natural resources, and promote resilient infrastructure and innovation.

India’s Stance on Competition and Sustainability

India, having pledged to achieve net-zero emissions by 2070, is exploring the integration of sustainability within its competition policies. The Competition Commission of India (CCI) is at the forefront of this initiative.

●     CCI’s Current Framework

During the pandemic, the CCI issued an advisory acknowledging that COVID-19 had caused disruptions in supply chains. It noted that information sharing might be required by businesses to ensure fair distribution of products and services. The Competition Act, 2002, has built-in safeguards to protect businesses from sanctions, considering businesses necessary to address concerns arising from COVID-19.

●     Potential for Sustainability Integration

The CCI chairperson has indicated that the CCI will look into sustainability policies for markets. The CCI can consider releasing advisories where enterprises can be exempted if collaborations are for sustainable goals or greener technological innovations when necessary and proportionate.

●     Promotion of Competition Advocacy and Awareness

Under Section 49(3) of the Competition Act, 2002, the CCI may take measures to promote competition advocacy and awareness. It may also participate in formulating economic policies that touch upon competition and sustainability. The CCI can emphasise sustainability policies and enterprise collaboration for greener innovations, releasing guidance notes on sustainability agreements and exemption methods under the Competition Act, 2002.

●     TRAI’s Sustainability Practices in Telecom

In 2011, the Telecom Regulatory Authority of India (TRAI) released recommendations suggesting that sustainability practices should be part of the National Telecom Policy. This promoted an environmentally friendly telecom sector. The CCI can consider including sustainability practices in the National Competition Policy in the future.

●     Integrating Sustainability into Competition Policy

Competition cannot remain insulated from sustainability. Combating climate change requires adapting and adopting newer technologies that reduce resource consumption and increase innovation through sustainability policies. For India to reach its pledged state of net-zero emissions, every economic sector must contribute to greener means of production.

●     CCI’s Role in Promoting Innovation

The CCI can enforce competition policies that improve innovation while considering environmental concerns. Competition policy should integrate sustainability economics while addressing market failures and collective action problems. Through actions like issuing guidelines, the benefits of sustainability will outweigh the potential negative effects on competition.

●     Guidance on Sustainability Agreements

Including sustainability considerations in assessments of cooperation among competitors can significantly benefit sustainability in markets. The CCI can release guidance notes on sustainability agreements, outlining how businesses can collaborate on sustainability goals without breaching competition laws.

●     Advisories and Exemptions

The CCI can consider releasing advisories where enterprises can be exempted if collaborations are for sustainable goals or greener technological innovations when necessary and proportionate. This would encourage businesses to innovate and invest in sustainability without fear of sanctions.

Conclusion

In conclusion, balancing competition and sustainability is crucial for India to meet its environmental goals and foster economic growth. The introduction of SEBI’s BRSR framework and the potential integration of sustainability policies by the CCI are positive steps towards achieving this balance. Drawing lessons from global practices and adapting them to the Indian context can ensure that sustainability and competition coexist, ultimately benefiting consumers, businesses, and the environment.

For India to reach its pledged state of net-zero emissions by 2070, every economic sector must contribute to greener production methods. The CCI’s role in promoting competition and sustainability through policies, guidelines, and advocacy will be pivotal in this journey. By embracing sustainability in competition assessments and encouraging collaborative efforts among enterprises, India can make significant strides towards a sustainable future.

Source- The Hindu