Competing on sustainability

(by Peter Ormosi) Morrisons recently announced that all their food will be sourced from carbon neutral farms by 2030 (10 years before the 2040 net-zero commitment of the National Farmers’ Union). This has immediately triggered speculation as to whether, and how quickly, their rivals will follow suit. Although it may not be outright obvious, Morrisons’ move raises a number of interesting questions for competition policy, especially given that its announcement is not unique, and we are witnessing a growing number of markets where firms are increasingly competing not only on factors such as price, or quality, but on sustainability as well. As sustainability is gaining more central attention in competition policy, it is useful to ask how much of our conventional wisdom from competition economics we can use to understand the market incentives behind businesses’ sustainability investments. This thought experiment is useful for regulators to understand which are the industries where regulation may be necessary, and which are the ones where market forces and competition may be more effective in delivering more sustainable business behaviour.