Banks in the Netherlands allowed to cooperate in developing ESG reporting standards

The cooperation is intended to increase the comparability of institutions’ reports on environmental, social and governance (ESG) considerations, and to allow investors to make more sustainable choices.

Banks are increasingly obliged to report about the sustainability of their investments, including under the EU’s Corporate Sustainability Reporting Directive (CSRD). However, the CSRD and its delegate acts do not make entirely clear how businesses should report on their sustainability, especially when it comes to calculation methods and sources of data.

In a pilot project by the Dutch Banking Association (NVB) for the transport, agricultural and real-estate sector, banks are working together on a data project seeking to explain some of the ESG criteria on which they need to report. The project involves checking what data is required and what calculation methods are suitable and reliable, among other considerations.

The NVB had asked the ACM to examine whether that kind of collaboration is allowed under competition rules. The ACM said it does not see any negative consequences such as price increases or quality reductions with regard to the collaboration.

According to the ACM, the collaboration has been informally assessed in accordance with the ACM’s policy rule on oversight over sustainability agreements. The ACM has not found any objections. Participation in the collaboration is on a voluntary basis and open to any bank. The participating banks do not exchange any competition-sensitive information, such as client data. The banks base the common interpretation of the ESG criteria on objective sources, which they list in the data scheme, thus ensuring transparency. Also, each bank draws up their own reports, decides for themselves on what ESG criteria they report and is free to deviate from the common interpretation in the data scheme.

The ACM said that businesses are allowed to collaborate in order to realise sustainability objectives. According to the ACM’s communication, “sustainable products and consumption are important in the transition to a more sustainable society. ACM wishes to create the right conditions for promoting the transition to a more sustainable economy. ACM eliminates impediments, and offers opportunities where possible.”

Dr. Michael Reich, a competition law expert at Pinsent Masons, said: “This is a very good indication of how competition law compliance and ESG requirements can be brought in line. In its 2023 horizontal guidelines, the European Commission specified in para 425 that sustainability is an efficiency gain that can justify an information exchange between competitors. The European Commission stated: ‘Pooling data on producers supplying sustainable products or producers using sustainable production processes may help undertakings fulfil their sustainability obligations under EU or national law.’ The Dutch authority’s approach is very much in line with the approach of the European competition law.”

The Dutch ACM is considered a pioneer in sustainability and competition law. However, sustainability cooperation initiatives throughout the EU have an increasingly good chance of being approved by the national competition authorities.

In 2023 the European Commission’s long-awaited revised Horizontal Block Exemption Regulations (HBERs) on research and development (R&D) and specialisation agreements were adopted.

A brand-new chapter in the horizonal guidelines on sustainability agreements clarifies that EU antitrust rules are not intended to prevent cooperation agreements between competitors that pursue a genuine sustainability objective. The new guidelines clarify how sustainability agreements can be exempted from potentially infringing competition law by describing the types of efficiencies or benefits that can be taken into account and how these should be assessed to offset any potential restriction of competition. The new guidance contains a broad definition of sustainability objectives, based on the UN Sustainable Development Goals. 

The new chapter on sustainability agreements also contains hypothetical examples illustrating the application of Article 101 TFEU and reminds companies wishing to enter into a sustainability agreement that they can request informal guidance from the Commission to ensure their compliance with EU competition rules.

In Germany, the Federal Cartel Office (FCO) has also had to scrutinise several sustainability initiatives and their impact on competition. In 2022, the FCO approved an initiative by German retailers and the German Association for International Cooperation on living wages in the banana sector, as there were no antitrust concerns. The initiative aims to agree common standards and strategic goals along the supply chain for private label bananas on a voluntary basis against the backdrop of the German Supply Chain Act. The initiative is intended to help improve the wages of workers in banana production and raise social standards. However, there is no exchange of purchasing prices, other costs, production volumes or margins between the participating retailers as part of the initiative. Nor will any mandatory minimum prices or price mark-ups be introduced at any point in the supply chain.

The FCO also had no serious competition law objections to an agreement in the German dairy industry that is intended to improve animal welfare in milk production. According to the BKartA, the programme includes the introduction of a label for products that meet certain animal welfare criteria and the financing of the additional costs incurred through a so-called animal welfare surcharge paid to farmers.

However, the FCO took a different view when it had to access a cooperation agreement between German milk producers that aimed to achieve nationwide price premiums for milk products. The BKartA categorised this as anti-competitive and said sustainability goals were not sufficiently pursued. In particular the FCO considered that  securing higher incomes for German farmers does not qualify as a sustainability goal.

Dr. Mathias Greupner, competition law expert at Pinsent Masons, said: “Companies should be mindful that not every ESG context can justify an information exchange between competitors. In particular, the information exchange must be indispensable to achieve an ESG goal and may not have the effect of eliminating competition.”