Decarbonisation In The UK Food And Drink Sector – Regulatory Food For Thought

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The food and drink sector can make a substantial contribution to the UK's decarbonisation and net zero objectives. In this article, Scott Rodger examines three opportunities and risks...
UK Food, Drugs, Healthcare, Life Sciences
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The food and drink sector can make a substantial contribution to the UK's decarbonisation and net zero objectives. In this article, Scott Rodger examines three opportunities and risks arising from regulatory policy and legal developments in the UK for the sector.

1. Greenwashing – A new enforcement risk

The Competition and Markets Authority ('the CMA'), the UK's competition authority, has a core duty around the protection of consumers. Currently, it has limited direct enforcement powers to enforce consumer protection law.

That is all set to change, with the anticipated passing of the Digital Markets, Competition and Consumers Bill. The 'consumers' component of this law will significantly enhance the CMA's powers to enforce consumer protection law, putting it on the same footing as the CMA's competition law powers. That means the prospect of intrusive investigations and 10% global turnover fines.

Accusations of greenwashing and misleading environmental claims towards consumers is a core focus of the CMA – with reviews of the Fast-moving consumer goods sector and Unilever being formally investigated. Fast fashion has also been a focus, with major players recently committing to the CMA to change their behaviour.

The draft law is expected to be passed in Parliament in 2024. Businesses in the food and drink sector should review the 'green' claims they are making to consumers about their products and services in light of this new compliance risk.

2. Funding and policy for decarbonisation

The UK Government, as with a range of other jurisdictions globally, has made significant commitments and support available to the development of hydrogen and Carbon Capture, Utilisation and Storage ('CCUS'). Both technologies have the potential to facilitate the decarbonisation of processes and supply chains in the sector, with the Government offering various funding streams across the value chain.

For instance, the UK Government's first Hydrogen Allocation Round saw funding under the Hydrogen Production Business Model and Net Zero Hydrogen Fund awarded to 11 projects, including a JV between ScottishPower and Storegga to support the decarbonisation of distilleries in Cromarty in the North of Scotland.

The second Hydrogen Allocation Round is now underway, and the Government intends to run further rounds in the future as part of its hydrogen strategy.

Operators looking to utilise hydrogen and CCUS technologies to decarbonise their processes should keep a close eye on the development of the UK's hydrogen market.

3. Opportunities – collaboration

Collaboration, sometimes with competitors, is often seen as key in developing decarbonisation initiatives. Competition law can be seen as a barrier to effective industry collaboration.

Recognising this, the CMA has developed its approach to supporting businesses looking to collaborate to achieve environmental benefits.

The Green Agreements Guidance, published late 2023, provides helpful guidance to companies looking to determine whether their proposals might fall foul of competition law.

There is also the possibility of seeking informal 'approval' from the CMA through its Green Agreements 'open door' policy. This new initiative and approach to getting regulatory comfort for initiatives has not been available in the UK for many years.

A key advantage is to reduce enforcement risk – a positive assessment from the CMA means that it will not take enforcement action against participating companies (subject to some caveats).

Two initiatives have been published by the CMA, involving WWF and Fairtrade. Both relate to the food and drink / groceries sectors.

Businesses operating in the food and drink sector and exploring collaboration opportunities should utilise the CMA's new guidance in developing these initiatives and consider approaching the CMA for informal guidance on competition law risk if appropriate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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