An emergency or is it just change?
The City of Sydney in June this year declared a climate emergency, the second state capital after Hobart. Some news media, citing scientific evidence, now also refer to an emergency rather than change in climate.
The climate system is a complex one but the fallout for business, no matter any debate over scientific estimates on the pace of change in the weather, is already being driven by consumers who see the corporate world as a platform for action.
The advertising industry is taking pressure from all neck-bending directions — clients, staff, regulators, investors, and activists — to take a leadership role on climate change:
- Brands have woken to activism and want to be seen as good global environment citizens.
- Employees, and potential employees, ask: what are you doing for the environment? Millennials especially want to know they’re working for a business that is a force for good.
- Investors are wary of those with a big carbon footprint and, by association, those who do business with them.
- Regulators are demanding risk management assessments of climate change and of the real “material” impact on business
- And activists now see the advertising industry as a collective manipulator responsible for the consumer excesses which led to carbon pollution and climate change.
Forrester, the global market research company, says: “It may not seem like it yet, but climate change is altering the world so drastically that all enterprises will need to undergo a transformation to avoid going extinct.”
The heat from climate change is a reality for the business world.
Agencies contacted by AdNews agree the industry collectively could do a lot to help raise awareness and drive action for change.
Clients
Volvo won’t deal with an advertising agency which doesn’t have similar views on the environment and climate change.
“It would be illogical of us to be with an agency that didn’t share our values,” says Nick Connor, the Managing Director of Volvo in Australia.
“We expect all of our suppliers to share our values and that is also ethical behaviour. We’ve always been recognised as one of the most ethical companies in the world.”
The car maker is acutely aware that its industry has also contributed to climate change.
“We can’t get away from that,” says Connor. “The fact of the matter is that the car industry has provided almost unique personal freedom over the past hundred years but the downside is that we put a lot of carbon dioxide into the atmosphere that has an effect on global warming.”
That put a responsibility on Volvo to act on climate change and to do so without destroying the car’s key benefit — freedom of movement.
“We were the first car manufacturer in the world to say we only produce four cylinder engines,” he says. “We did that about ten years ago, long before it was fashionable.
“All of our new cars will have some degree of electrification. And we set ourselves a vision that we’ll have 50% of all our cars globally as fully electric vehicles by 2025. That’s only five and a half years away, so it’s pretty imminent.
“I think as manufacturers, we can only put the offer out there and then it’s the consumers who will decide what they want to drive and buy.”
In Australia, Volvo’s agency whiteGREY created the Living Seawall project on Sydney Harbour to measure the growth of sea life on experimental tiles, which mimic the roots of mangroves, for the car maker. The work won a Silver Lions in the Design category at Cannes Lions.
Cannes Lions this year for the first time had a Sustainable Development Goals section. Clemenger BBDO Melbourne and production company Finch won a Grand Prix and Silver Lion for The Lion’s Share created with foundation partner Mars Australia. The Lion’s Share is an initiative that sees brands commit 0.5% of their media spend for any ad featuring an animal into funding that goes towards the conservation of wildlife and animal welfare.
Meat and Livestock Australia, representing an $18 billion industry, has a target of zero emissions by 2030 based on 2005 levels.
The industry, known for its long-term brand campaigns for red meat, has a relatively high carbon footprint compared to other foods, mainly due to methane production from cattle, sheep and goats.
The zero emissions target comes with a market opportunity – an increasing desire for environmentally sustainable products, and in particular low-carbon. “The target’s really driven by meeting consumer expectations, as well as customer expectations,” says Pip Band, Manager – Sustainability Strategy & Stakeholders at Meat and Livestock Australia.
“As well as consumers wanting lower carbon products, clearly big companies, whether they’re retail chains or big quick-service restaurants, are all looking at how to reduce carbon in their supply chain.”
Authenticity
As environmental consciousness grows, brands need to position themselves in a way which is authentic to consumers.
“It’s no longer just talk, but rather the need for brands to start walking the walk,” says Bronwyn van der Merwe, General Manager Asia Pacific for Fjord, part of Accenture Interactive.
“I expect there will be much discussion on earning the trust and loyalty of customers who are beginning to make decisions based on more than just price and product benefit but on the impact a company and its products have on the planet.
“The next couple of years we won’t just see green campaigns, but green businesses – agencies that are adopting sustainable practices from the front door to deliverables.” Environmental consciousness will be woven through work and culture in a way that will make a real impact.
Advertisers are waking to the opportunities. Alan Jope, CEO of Unilever gave a string of interviews at this year’s Cannes Lions about the injection of social purpose into advertising.
“Purpose is one of the most exciting opportunities I’ve seen for this industry in my 35 years of marketing,” he says. “Done properly, done responsibly, it will help us restore trust in our industry, unlock greater creativity in our work, and grow the brands we love.”
However, he warned about woke-washing – brand campaigns promising to improve the world but failing to take real action.
“There are too many examples of brands undermining purposeful marketing by launching campaigns which aren’t backing up what their brand says with what their brand does,” he says.
“Purpose-led brand communications is not just a matter of ‘make them cry, make them buy’. It’s about action in the world.”
He urged advertisers and agencies to hold each other to account. Agencies should reject campaign briefs from brands that don’t walk the talk on purposes.
“Unilever will not be part of false purpose and will not work with those who are,” he says. “But – we will celebrate and reward the brilliant work and power of creativity that can be unlocked by putting issues that matter at the centre of what our brands do and what they say.”
Belief-buying is now mainstream
According to the 2018 Edelman Earned Brand study, 64% of consumers buy on belief, a surge of 13 points since 2017.
These buyers – now the majority in every market surveyed by Edelman across all age groups and all income levels – will choose, switch, avoid or boycott a brand based on where it stands on the political or social issues they care about.
“Reminding consumers of the brand’s stand when they are about to buy is crucial: 60% say brands should make it easier to see its values and its position on important issues at the point of sale,” says Edelman.
“A brand can choose its stand across a spectrum of action, from defining a clear purpose, to connecting to culture, to engaging in full-throttle activism. People’s belief in brands as a force for social good provides marketers with an opportunity, and an obligation, to help their customers live their best lives.”
The pay off
Brands recognised for their strong commitment to purpose have grown twice the rate of others, according to research, data and insight company Kantar.
Brands with a high sense of purpose have seen their brand valuation increase by 175% over 12 years compared to a median growth rate of 86%. Brands with a low sense of purpose had a 70% growth rate.
“Many brands now have more power than elected leaders, and there is a clear expectation from consumers that this power is used for positive change,” says Robert Jan d’Hond, Kantar’s Global Lead, Brand Practice.
Agencies talk of millennials, those aged between 23 and 38, and the economic engines of the near future, who arrive at job interviews with questions: what are you doing to help the planet? What about your climate change policies?
Many studies show these consumers will buy from brands they consider to be sound, those with a point of view who stand for something
Doing no harm isn’t good enough
A business today is judged by what it stands for, or stands up against, as well as what it sells.
A 2016 Ipsos study across 23 countries found 63% of the public tend to buy brands that reflect their own values. This was up from 54% in 2014.
Sally Braidwood, Ipsos Corporate Reputation ANZ Head, says large corporates have an increasing ability to do good in the world, sometimes more so than governments given their wealth of resources and ability to act outside the bounds of diplomacy and bureaucracy.
“This absolutely reflects changing expectations of corporates from a corporate citizenship perspective; we’re in an era where doing no harm is no longer enough and expectations are now that corporates will find ways to make the world a better place, to create social value,” she says.
“And given the increasing importance of the environment and sustainability more broadly to the public, it makes good business sense for corporates to declare a position.”
Unilever, L’Oréal and Coca-Cola are among 250 signatories pledged to eliminate problematic or unnecessary plastic packaging and move from single-use to reusable packaging by 2025. Starbucks has made a commitment to phase out single-use plastic straws from its stores globally by 2020, an announcement that left nearly 50% of 18-34 year olds feeling more favourably towards the brand.
“We know favourability leads to trust which is correlated with consideration and usage,” says Braidwood.
Australian players
The Australian arms of the big holding companies feed into the global policies of the parent companies.
WPP says the biggest impact it can have is through working with clients on sustainability-related briefs and shaping a culture that embraces the transition to a lower-carbon future. Globally about 13% of WPP revenues come from clients who have engaged with WPP on sustainability and as more sectors are impacted by climate change this will increase.
“It is through these collaborations that we can use our creativity to help bring about the shift in attitudes and behaviour needed to tackle some of the greatest challenges of our time,” says WPP.
WPP has an internal target for a 50% cut in carbon emissions by 2030 through reducing energy use and purchasing renewable electricity.
“We support urgent action to tackle climate change through the Paris Climate Agreement.”
WPP says its 2018 campaign for the United Nations, The People’s Seat, with Sir David Attenborough, which reached more than 1.3 billion people worldwide, demonstrates the impact the advertising industry can have.
Paul Williams, CEO of BWM Dentsu, says there are many examples of wide-reaching social movement programs driven by agencies.
Among them are Dentsu’s plastic pollution program Whale, MAC’s Viva Glam partnering with Lady Gaga to raise money and awareness for HIV, Levi’s Water
“In terms of our industry, using the communication skills, media engagement capabilities, and industry participation connections to drive social change is a fundamental opportunity,” Williams says. “I genuinely believe that our industry actually excels at using our creativity to change people’s beliefs and behaviours. We not only have an opportunity but an obligation to use that talent and our creativity to change people’s behavior around some of the bigger issues facing the world.”
Sustainability is a key theme for many clients rather than climate change, he says. But this is linked strongly to climate change and the mitigation of the global impact.
Agencies also have created their own internal goals. Dentsu Aegis Network has a goal of reducing its carbon footprint by 40% on average per person by 2020, measured on a 2015 baseline.
Omnicom Group last year re-launched its global environmental policy with targets to minimise its environmental footprint. The targets: reduce energy use by 20% per person globally by 2023, using a 2015 baseline; increase use of electricity from renewable energy sources globally by 20% by 2023.
PHD says there’s so much more the industry could collectively do to help raise awareness and drive action for change.
“Given current legislation and proposed policies, it feels like it needs to be a bottom up approach from companies and individuals to help drive the necessary improvements required to try to reduce climate change,” says PHD.
“The fact that an increasing number of cities from around the world are declaring a climate emergency tells you that change absolutely needs to happen and we all need to help drive that.”
PHD believes agencies are in a powerful position to influence attitudes and behaviours.
“The key to any lasting behavioural change is creation of the right motivation (societal pressure), the right ability (utility or ease) coupled with the right triggers (context),” it says. “At PHD we strive to influence all of these factors by helping clients to understand and act upon the consumer attitudes and trends.”
An example of this is PHD’s work with Corona and Parley. Corona is on a mission to protect Australian beaches and waterways from the growing marine plastic pollution epidemic.
Principals has clients in food, agriculture and mining for whom this is a central issue because their core business directly interacts with environmental and social issues.
Hot topics include dietary health, environmental impact and local economic impact through sourcing and employment.
“For companies in these kinds of industries, social license to operate can actually be a competitive advantage as they compete for access to resources, capital, influence and talent,” says Tim Riches, Group Strategy Director at The Principals.
“Social license becomes a brand issue not only a corporate reputation issue. A sword that can enhance long term value, not just a shield to protect what we have now.”
These risks are sometimes seen to pull in different directions or across different timeframes.
“Obviously, today’s commercial pressures to hit financial targets versus investing ahead of the emerging regulatory risk/positioning opportunity coming from shifting community expectations,” says Riches.
“My experience is that companies really struggle to properly align these objectives and reconcile the timeframes.”
The big banks are a good example.
Westpac and to a lesser extent ANZ have historically performed very well on the Dow Jones Sustainability Index. Both have dabbled over the years with consumer marketing based on that.
“Neither brought sustainability to the core of the brand though, in terms of sticking to it over time and finding a way to translate it across enough customer messages and experiences,” says Riches. “So neither achieved any sustained brand level advantage, despite their demonstrably good performance.”
Riches thinks this comes down to having a strategy that brings brand and corporate reputation stakeholders together around a common agenda – shared goals, measures and activities.
“Getting alignment between what they’re doing and what they’re saying in a way that delivers differentiation and authenticity,” he says. “And agreeing on an appropriate way to communicate about your policies, activities and investments to achieve the brand and reputation outcomes without accusations of greenwashing.”
There are also practical questions about how to brand parts of the business associated with these issues.
“We have had a couple of clients who have an ‘old’ business (typically large cash cow operations that are more exposed to regulatory risk based on old technology) and ‘new’ businesses (emerging operations that are investment heavy and commercially risky),” he says.
“So is it better to create a separate brand for the new business that distances it from the old business, and does doing that prevent the brand as a whole being seen as moving with the times?
“Like most things in branding, the answer is ‘it depends’. But I note that the arguments are increasingly persuasive around a degree of brand separation, for example creating a sub-brand, because it enables both a cultural distinction for the new business and a more compelling investor relations story, which for many is the main nut to crack.
“Think an R&D lab or an ESG foundation that rolls up a bunch of individual, often grassroots activities as a substantial initiative that’s better connected to the brand narrative.”
Host/Havas, the creator of this AdNews issue’s cover, is launching a new offering geared towards helping clients rethink the way they do business to reverse their impact on the planet.
“Many agencies do a great job at creating great front-end consumer experiences and ideas,” says Host/Havas. “But our goal is to tackle the more systemic challenges through product life-cycle analysis and helping to imagine more sustainable business models, products and services that tackle the sources of our global issues.”
Smaller players also take action within their backyards. Digital agency Luminary, formerly Get Started, marked its 20th anniversary on 1 July by attaining carbon neutral certification.
“As a digital agency, we recognise that the work we do impacts the environment,” says Luminary CEO Marty Drill.
“We recently undertook a full assessment of our carbon usage, through an accreditation agency called Carbon Neutral, and the results were staggering. In the past year alone, we produced 110 tonnes of carbon dioxide. Our impact stems from computers, offices, fridges, flights, staff travel to and from work, and web servers that run 24 hours a day.”
The main focus of the agency’s new environmental program is planting trees in Western Australia and Victoria. Other initiatives include a recycling program, a policy of sourcing and engaging ethical suppliers, minimising unnecessary travel through the use of teleconferencing, and encouraging staff to walk, run or ride to work.
“Our recycling program includes the recycling of coffee grounds from our coffee machine through a Melbourne-based company called Reground, which collects and redistributes coffee grounds to community gardens for compost,” says Drill.
“We’ve stopped purchasing plastic bottles in our offices and installed filtered water taps instead, and many of our old computers are donated to the Jodie O’Shea orphanage in Bali. To celebrate our 20th birthday, we’ve also provided our team members with reusable water bottles and coffee cups.”
Investors
If you’re not convinced about climate change, you should know that it is already affecting business.
Larry Fink, CEO of BlackRock, the world’s largest asset manager with $US6.5 trillion under management, in his annual letter to CEOs, lists climate change as a factor in building a company’s strategy as a path to financial performance.
“To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends, from slow wage growth to rising automation to climate change, affect your potential for growth,” he wrote.
Australian investment banker Mark Carnegie, who has advised on some of the biggest media deals, says some industries are having to pay a premium when raising capital because they are seen as contributing to greenhouse gas.
“Institutional investors (INSTOs) hate it,” he says. “If you look at the investments in coal recently, they’ve all been individuals rather than institutions. If you are managing third-party money, the fund managers have basically put a pencil through it. The INSTOs just don’t want to be in this sector anymore.”
The risk is that Australia as a country will be seen the same way, as a bad bet where members of managed funds don’t won’t to be.
“Australia has ended up being a global recalcitrant, to steal a phrase of my old chairman (former prime minister) Paul Keating, in this area and this clearly is one of the biggest risks for us as a country,” says Carnegie.
The investment world could turn around and say: “You’re a global pariah state for what you’ve done on climate.”
And that, says Carnegie, is a huge investment risk.
“If you’re looking at it from an investment point of view, or promoting Australia to the world for tourism, this is a big deal.”
And that flows through to every investor in Australia.
“For Australian investors, the biggest, biggest risk is the national risk. If you think about it, everybody in Australia who is an investor is overweight (has a large proportion of their shareholding) in Australia.
“The way that I think about it is we’ve painted ourselves out of being one of the leading countries at adopting climate efficient stuff. That’s a big deal on a national basis.”
Company directors also need to be watchful for the impact of climate. The Australian Institute of Company Directors says climate change has at times been viewed with scepticism in Australia and directors’ attitudes have been somewhat ambivalent.
“Yet this is changing as Australian businesses are increasingly compelled to respond to the growing focus on sustainable development and climate action,” it says.
The institutions collectively owning 10% of the Australian Stock Exchange — the members of the Australian Council of Superannuation Investors managing about $2.2 trillion in assets — say investor focus on climate has increased sharply in the past couple of years.
About half of the ASX200 companies, the biggest exchange-listed entities in Australia, have a climate change policy, according to an assessment by the Australian Council of Superannuation Investors. One in five have emission reduction targets.
Company directors, in the latest sentiment index from the Australian Institute of Company Directors, put climate change as the number one long-term priority for the Federal Government to address.
Banking regulator APRA says the risks from climate change “are material, foreseeable and actionable” right now. It surveyed 38 large banks, insurers and superannuation trustees, finding a substantial majority taking steps to increase understanding of the threat. A third believe climate change is a material financial risk to their businesses now.
In Australia, superannuation funds, and many managed funds, offer investment options to screen out companies linked to fossil fuels. AustralianSuper, the largest industry fund, says: “We believe investing in companies with good Environmental, Social and Governance (ESG) management provides better long-term returns for members.”
The 2019 Global Risks Report from the World Economic Forum listed the top three risks: extreme weather events; failure of climate-change mitigation and adaptation; and natural disasters.
Activists
Australia’s advertising industry could take a stand and lead the world, says David Ritter, CEO of Greenpeace Australia Pacific and the author of The Coal Truth (UWA Publishing, June 2018).
“Fossil fuel use is the number one driver of global warming. Any business that supplies the coal, oil and gas industry with commercial services is implicated in driving the climate emergency,” he says.
“The time has come for the advertising industry to say ‘enough’. Any advertising firm that takes work from the coal, oil or gas sectors is doing PR for the greatest threat to life on earth.
“Instead, the advertising industry in Australia could take a stand and lead the world, using all the skills of public communication to help shift us on a path to wise stewardship of our shared home.”
Stephanie Balaouras, a Research Director at Forrester, says companies can easily become hacktivist targets.
"Individual sentiment has changed rapidly when it comes to climate change, so companies that fail to take a leadership role in limiting greenhouse gases or advancing sustainability or fail to be authentic (firms whose corporate social responsibility messaging is discordant with their actual practices) run the risk of making themselves a target of social or political hacktivists.
“These days, hacktivists can martial the multiplying effect of social media, automated bots, and almost limitless computer resources to launch a devastating reputational attack/influence campaign on a brand with misleading content (or by highlighting true content, in the case of ethically rudderless polluters).
“When your brand takes a hit, it’s a long journey to recovery.”
Extinction Rebellion, the international activist group which occupied parts of London in April to raise awareness of climate change, has turned its attention to the advertising industry, staging a beach protest at the Cannes Lions.
The group is known to be setting up a local Australian group and recruiting new members.
Extinction Rebellion’s message to the industry: “One of the reasons we’ve got here is because you’ve been selling things to people that they don’t need. You are the manipulators and architects of that consumerist frenzy.”
Extinction Rebellion wants the advertising industry to use its talent for shifting “mass behaviour”.
“Imagine what would happen if you devoted those skills to something better,” it says.
This article first appeared in the AdNews August 20019 magazine. Support AdNews by subscribing here.
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