12/08/2023 - Corporate Climate Disclosures - Net Zero Commitments

A Note on Corporate Climate Alliances and Legal Risk

by Abby Husselbee, Sara Dewey

Antitrust and competition law is an increasingly important factor for companies to consider when deciding whether to participate in a climate alliance. In most countries, antitrust laws aim to promote competition, protect consumers, and ensure that resources are allocated efficiently. Governments enforce these laws to prevent anti-competitive collaboration; however, the design and implementation of these laws may affect how businesses collaborate on issues that serve a social good. Governments are still considering how antitrust laws should apply to climate collaborations. In the US, Republican members of Congress and state attorneys general have started investigating whether companies participating in climate alliances have violated antitrust laws. By contrast, the EU and the UK recently released guidance documents intended to ease antitrust burdens on climate alliances.

This Climate Alliances and Antitrust Risk Note by Sara Dewey and Abby Husselbee first discusses potential legal risks for climate alliances stemming from antitrust law and policy, with a focus on the US, the European Union, and the United Kingdom. It then discusses potential greenwashing legal risks related to joining a target-setting alliance, with a focus on US federal and state law. The legal developments in the US, the EU, and the UK may have a significant impact — research suggests antitrust frameworks can chill participation in climate alliances. For example, one study concluded that concerns about antitrust legal risk may discourage up to 60 percent of companies from participating in climate coalitions. Similarly, companies increasingly cite “greenwashing” as a risk on their 10-K annual reports to the Securities and Exchange Commission (SEC), and these risks could chill the adoption of net zero commitments.

A Note on Corporate Climate Alliances and Legal Risk (PDF)