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The ESG Review: Agencies to become responsible for client emissions under new standard

Pressure on the advertising industry to prevent greenwashing through client work has been increasing, yet that criticism has focused largely on the paid media world rather than earned.

But after updated standards were unveiled by the United Nations and the Cannes Lions festival this week, there is now the prospect of not just creative agencies but communications consultancies needing to take responsibility for emissions caused by their clients’ business activities and the information presented around them.

The UN-based Race to Zero campaign amended its inclusion criteria so that agencies are compelled to take responsibility for emissions that relate to the outcomes of clients’ marketing activities. The specifics of that, and the question of where to draw lines contractually over aspects of marketing delivery, truthful disclosure and indemnification, will doubtless come under much greater scrutiny.

In announcing the changes, the new guidance set out expected levels of responsibility for ‘serviced emissions’, for consultancy and advisory firms, and ‘advertised emissions’, for the marketing, creative and advertising sector.

As The Drum covered, the campaign “urged” the agency world to consider and set measurable targets for the downstream emissions created by clients’ activities, and even report on revenue splits by sector. Measuring that though, and understanding precisely what agencies could or should conceivably take responsibility for, is a minefield. And the fact that this is urged, rather than mandated, perhaps reinforces that difficulty.

The consequences of not striving to comply with the standard may include campaign membership being withdrawn, which would impact a consultancy’s claim to be taking a lead on climate matters. While that may be of little concern to agencies that are not involved, and regardless of the practical mechanics of the standard, it does throw down a new marker for agencies that they shouldn’t just adopt policies, apply values and adjust business models to reduce environmental impact through the consequences of their client work, but take some form of direct responsibility for it.

And regardless of how it’s applied, it stands to turn the screw further on greenwashing, with Race to Zero’s existing members responsible - presumably, representing clients that account for - 50 per cent of global GDP.

With all of the recent business media negativity around ESG as-it-stands, this bid to draw a direct line of responsibility between consultancies and their client’s business impact is interesting in another way, as several stories have this week outlined that ESG funds have been outperforming others during the current economic slump.

That’s all relative and subject to definition of course, but this Bloomberg piece points to the resilience of those who have backed firms with positive ESG ratings.

And Investment Executive covered a Fitch Ratings report that points to value gained, even in these troubled times, through competitive differentiation around ESG factors, with greater advantage projected as standards develop and “sustainable” takes on more assured meaning.

Agencies and advisers may decry the premise of the new standard as unworkable and unrealistic. But as ESG-derived value becomes clearer through standardisation, a measure that can both attempt some loose level of accountability and dissuade others from deliberate subversion of sustainability can expect to have a place in the battle against greenwashing.

The ESG News Review is written by Steve Earl, a Partner at BOLDT

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