A company has ESG scores of AA with MSCI, A- from CDP, and a nice 11% low-risk rating from Sustainalytics. It has also committed for its operations to be net zero by 2025 and supply chain by 2030. This all sounds fine and dandy, and the company’s stock does indeed sit within large ESG-screened institutional investment portfolios such as those of Norges Bank Investment Management (NBIM) and AP7. So what is the problem? NordSIP’s Laundromat does not waste time on the good guys after all. We are becoming familiar with the concept of financed emissions, but welcome to the new world of advertised emissions.
The company in question is WPP, one of several major advertising firms highlighted in new research by DeSmog, a non-profit organisation that campaigns against climate disinformation. Although companies like WPP have a relatively small carbon footprint that can help them achieve positive environmental ratings, their choice of client can arguably render the greenness of their own operations fairly irrelevant. DeSmog estimates that as from 2022 WPP maintained as many as 61 contracts with fossil fuel cients. These include Laundromat regulars Shell, BP, Chevron and Saudi Aramco, as well as the American Petroleum Institute (API). The latter lobby group is notorious for its vigorous efforts to slow down or eradicate meaningful climate action. WPP is not alone in this, with fellow well-ranked ESG leaders Omnicom, IPG, Publicis, and Dentsu also identified in DeSmog’s research.
The getaway drivers
These advertising and PR companies are all members of an initiative called Ad Net Zero, which should be a sign that they are on the right track climate-wise. However, despite the presence of Science-based Targets Initiative (SBTi)-approved emissions reduction targets for company operations, supply chains and events, they are only ‘encouraged’ to promote sustainable consumer behaviour in their advertising campaigns. The impact of multi-million-dollar promotional campaigns run for fossil fuel industry clients is described as a serious blind spot by DeSmog. By not taking their clients’ emissions into account, these companies effectively benefit from a ‘free pass’ within ESG investment circles. In what might be a bit of an extreme analogy, they could be described as the getaway drivers of the oil companies – not directly committing the crime but certainly not innocent.
Aside from the contradictions inherent in these advertisers’ net-zero commitments and their choice of client, DeSmog draws attention to the risks associated with these fossil fuel contracts. These include reputational risk from regulatory clampdowns on greenwashing, the potential avoidance of such firms by young, well-qualified potential employees, and even the risk of climate-related litigation.
Although it appears slow to take hold, awareness of this issue among institutional shareholders is growing. Various initiatives are looking into the issue of ‘serviced’ emissions associated with consultancies, law firms, and advertising firms. The intense lobbying and greenwashing efforts of the fossil fuel industry on multiple fronts have been well covered in this column. For those asset owners interested in scanning their portfolios for advertising and PR firms with an unhealthy association with fossil fuels, DeSmog maintains a database for that very purpose. What with greenhouse gas emissions, biodiversity loss, plastic pollution, human and workers’ rights, and now advertised emissions, the life of stewardship teams is not getting any easier.
