Consumers are increasingly concerned about the impact their consumption – including the food they eat – has on the environment and animal welfare. Being a consumer myself, I know I am. At the same time, climate change and other environmental threats are at the core of European Commission’s efforts to transform the EU into a “resource-efficient and competitive economy”.
Clearly, the green transition requires not only appropriate measures, but also solidarity. Concretely, this means that the financial burden of the green transition must not fall on consumers alone but be shared by the whole supply chain.
Agriculture’s role in meeting sustainability goals
A more sustainable agri-food supply chain can make a significant contribution to achieving the EU’s environmental and climate goals. Initiatives to promote real and substantive sustainability gains in the agriculture sector – like restoration of biodiversity or pollution prevention – are therefore welcome.
Agreements between different operators in the food supply chain could help achieve these environmental goals. Examples include soya farmers agreeing to reduce pollution and protect water systems by no longer using chemical fertilisers, or cereal producers agreeing with processors to adopt improved landscape features to protect and restore biodiversity.
To this end, the Commission will, by the end of 2023, issue guidelines on how to apply a recent derogation from EU competition rules in agricultural product markets.[1]
Need to meet higher sustainability standards
The wording of the derogation seems clear and straightforward. To benefit from a derogation from competition law’s ban on cartels, the agreement must involve a higher sustainability standard than an existing mandatory standard. This means that operators, for example, in the pork meat sector could collaborate to increase animal welfare beyond the requirements of the law.
However, the Commission’s draft guidelines offer a rather liberal interpretation, suggesting that in the absence of an existing mandatory sustainability standard, any agreement that claims to attain a sustainability standard may still qualify for a derogation.
The current draft guidelines could lead to insignificant sustainability improvements as a pretext to restrict competition
This risks lower sustainability standards, with possible negative consequences for the green transition, the environment and society.
The current draft guidelines could lead to insignificant sustainability improvements as a pretext to restrict competition, thereby harming consumers with unjustified price increases or hindering innovation. The ‘Chicken of Tomorrow’ case in the Netherlands serves as a good example of an agreement which would have led to a minimal improvement in animal health and welfare had it been allowed, whereas market forces ultimately led to higher standards without this agreement.
As the Commission’s Executive Vice-President for Competition Margrethe Vestager has stated, “the last thing Europe needs is cartels using sustainability as a cover for illegal collusion.”
Risk of greenwashing
The draft guidelines also seem to ignore the evident risk of greenwashing. For example, the agricultural label in France “Haute Valeur Environnementale” creates a false impression of offering environmental excellence and being trustworthy. With our members across Europe, we identified other types of misleading green claims, such as suggesting that foodstuffs are ‘carbon neutral’.
I was myself dismayed when I learned that my favourite juice brand also uses a misleading carbon neutrality claim
Statements in the draft guidelines such as “the more people that produce in a sustainable way and use the corresponding logo, the more likely it is that retailers and consumers will perceive that logo as trustworthy”[2] ignore the underlying issue. Trust in the information businesses provide – and to justify sustainability price increases by offering clarity on whether these are the result of genuine sustainability improvements and not simply greenwashing – must be ensured.
Consumers need reliable, comparable and verifiable information on the labelling of such standards.
Recently, I was myself dismayed when I learned that my favourite juice brand also uses a misleading carbon neutrality claim. Making sustainable choices must be more accessible to the average consumer.
Businesses are well aware that sustainability has become a “selling point” and a competitive parameter of its own. But industry itself has a role to play in helping consumers to be more confident about making a sustainable choice.
Finding the right balance
The achievement of more sustainable food systems is an urgent need for the wellbeing of consumers and our planet. At the same time, we must reduce the risk of greenwashing cartels leading to long-term competition distortions and consumer harm – i.e., unjustified price increases or reduced quality, choice or greener innovation.
More consideration should also be given to the risk of deterring those making genuine sustainability efforts by allowing unfair competition from those using greenwashing claims.
Farmers and other operators in the agri-food supply chain should be encouraged to adopt truly more sustainable practices, which must lead to a meaningful change for both the green transition and consumers.
It is therefore essential that the interpretation of the derogation from EU competition rules leads to genuine sustainability improvements rather than sustainability cartels.
[1]Article 210a of Regulation 1308/2013.
[2] Para 93, draft guidelines.