Competition Law fears deter businesses working together to promote sustainability in supply chains

Competition Law fears deter businesses working together to promote sustainability in supply chains

The research reveals that cooperation between companies could benefit consumer choice and value, by improving quality, security of supply as well as bringing social and environmental advantages to the producers and farmers who grow the food we eat.

Businesses are often wary of working with rivals to strengthen supply chains as they fear falling foul of competition law. At the same time producers and farmers are facing an increasingly uncertain future caused by fluctuating prices and climate change.

The Foundation wants the government and Competition and Markets Authority (CMA) to do more to encourage private sector companies to work together to promote sustainability in their supply chains.

Specifically the Fairtrade Foundation is calling on the CMA to issue specific guidance outlining how cross-business initiatives for sustainability purposes would be assessed under competition law. This would help businesses navigate the existing rules better and remove artificial fears about how joint action can be taken forward. 

Additionally Fairtrade wants the CMA to work harder at embedding long-term sustainability goals in its operations, taking account of this and broader UK policy goals when it assesses how well markets are functioning. Fairtrade recommends that the CMA starts to formally report on how it is contributing to delivering long-term food security for the UK.

Such a move would help foster confidence in further cooperation in the private sector, and help to prevent businesses avoiding collaboration due to overly risk-averse perceptions of competition law.

As part of the report, commissioned by Fairtrade from the New Economics Foundation, a number of hypothetical collaborations were modelled to illustrate how they would work in practice and what the financial implications would be. In every instance the value to the consumer, through improved product quality and stability of supply, is greater than any additional cost.

The report showed that people are increasingly looking to business and government to solve this issue. A survey, commissioned as part of the research, showed that the public overwhelmingly (92%) believe it is the responsibility of retailers to ensure sustainable food production while 72% expect the government to ensure food is produced to high ethical and environmental standards.

Tim Aldred, Head of Policy at the Fairtrade Foundation said: 

“The world faces tremendous challenges in producing enough food to feed a growing population. Unstable supply chains are causing food shortages all over the world and this trend is set to continue unless we act.

“By working together businesses can take the lead in mitigating the fall-out from increasingly fragile supply chains and, at the same time, embed sustainability at the heart of their operations.

“We encourage the government and the CMA to do all they can to foster cooperation between businesses and companies to recognise the importance of collective action on this issue, in the long term interests of both UK consumers and vulnerable farmers and workers growing the food we eat.

“With climate change affecting our ability to feed ourselves, and the world’s population set to reach 9.7bn by 2040, this is a global food security crisis which needs strong policy responses.”

Read the full report