In the previous edition of these three articles, I explained the language around Net Zero Carbon Emissions.
In that first article, I translated into marketing terms, the standards and reporting requirements covering Net Zero Targets. It stated that there was good news around the term Net Zero Carbon Emissions becoming a global rallying cry helping corporations set a sustainable business strategy.
While good news, stating ambitions are one thing but setting a meaningful target is a complex business challenge.
The guides are broken into three parts:
- Explaining the language around Net Zero Carbon Emissions
- How Corporations are Structuring and Communicating their Net Zero Targets
- The Dos and Don’ts of Marketing Activity within Net Zero Targets
How corporations are structuring and communicating their Net Zero Targets
In this second article, I will explain what’s included in Net Zero Targets and what is not, the pitfalls and the way this affects marketing. And importantly, why marketing has a part to play beyond managing brand reputation and the possible outcomes your department should be aiming for. This will be done by showing examples of how corporations are speaking about their targets and what this actually means.
Examples of Net Zero claims and what’s omitted
Fortescue Metal’s release to the ASX titled ‘Fortescue strengthens its target for carbon neutrality by 2030’ dated 15th March 2021 is a commendable statement that clearly states what is included in this claim. They are focused on scope 1 and scope 2 emissions within their business while indicating trials aimed at reducing carbon in the external supply chain (scope 3).
The elephant in the room for any of the big miners is that the product they dig up creates large amounts of carbon emissions upstream in the product’s life. Including these emissions in Fortescue’s carbon neutrality claim would not send a good message to their shareholders and the public at large. It would also be extremely expensive to then meet their carbon neutrality target.
The only answer would be to leave the product in the ground but that is not the business they are in. Yes, iron ore exports are an important part of Australia’s economy, but a healthy balance of payments is not helping the rise in atmospheric greenhouse gases.
So I would classify this as a pragmatic carbon neutral target.
Let’s now return to the example touched on in the first article, being Mercedes-Benz Cars. On their sustainability website, we can read ‘Ambition 2039: Our path to CO2 – neutrality.’ This focuses on the manufacturing plant being less carbon-intensive and the actual vehicles running on batteries, not fossil fuel. All of which again is positive, and in this case, the downstream emissions, i.e., the emissions from the lifetime use of the vehicle, are being reduced by design.
But what about the embedded carbon in the building material used in these vehicles? Are they including the emissions from the conversion of Fortescue’s iron ore for use in the vehicle or is this left to the owners of smelters and foundries to report? And an important question for the car industry, what about the way they advertise and therefore sell these low emission vehicles? Someone must take ownership of these emissions if we are going to reduce them.
As you can see it isn’t straight forward when drawing boundaries for the measurement and then claims around Net Zero Targets.
What’s this got to do with Marketing?
In the Mercedes example, I would argue quite a lot, as a large expenditure item seems to be missing in their carbon neutrality claim. From a marketers’ viewpoint, it should be obvious what’s missing.
Mercedes, like other luxury brands, have a sizable percentage of their ‘cost of sales’ attributed to advertising, media, PR, promotions etc. i.e., a large marketing budget.
The emissions from these marketing activities would fall within their scope 3 downstream carbon emissions count so would need to be included in any claim of carbon neutrality as without this spend there are reduced sales and a much lower valuation for the company.
What do the Guidelines say companies should include in their Net Zero Targets?
We’ll get a bit technical once more with quotes from the SBTi guidelines. I’ll put this in marketing terms showing the importance of including carbon emissions from marketing expenditure in any Net Zero Target or carbon neutral claim.
- ‘Identify and understand the risks and opportunities associated with value chain emissions.’
The value chain is the external companies you engage with. Media is one of these who help you target customers in a cost-effective and engaging manner. By adding carbon weighting to the media channel selection process, it will help focus both the media agencies, the media suppliers and importantly the marketing team on delivering lower carbon as well as value.
- ‘Identify GHG (Greenhouse Gas Emissions) reduction opportunities, set reduction targets, and track performance.’
Identify GHG “hot spots” in any media planning and prioritise reduction efforts across the way you buy media. Track these targets and report GHG performance over time.
Marketing Carbon Emission Measurement does not have to be just another cost
A good example to explain how knowledge of carbon emissions in marketing is useful, it’s worth having a closer look at an old case study for the then Forster’s Group.
It demonstrates the importance of including carbon emissions from advertising expenditure in any claim of carbon neutrality or in today’s Net Zero Targets. It also shows that by measuring and interrogating these emissions that they can be reduced.
An issue arose when the company was claiming to have measured all the carbon emissions and then offset them from the production and distribution of a new ‘Green’ beer, ‘Cascade Green’, to claim the ‘Greenhouse Friendly’ accreditation.
The entire marketing strategy was premised on the claim that this was the first 100% carbon neutral beer. Unfortunately, while an initial boundary of carbon measurement was drawn around the production and distribution of the product covering all scope 1 & 2 and transport in scope 3, the marketing of this beer was excluded from this boundary. It’s very difficult to sell a new beer with a unique proposition (first carbon-neutral beer) without telling the beer drinkers of the land about it!
So, under the watchful eye of the ACCC (Australia’s consumer watchdog), there was a need to ensure all aspects of the product had been measured including the advertising.
We carried out a review of the media and production buy and applied the appropriate carbon measurements and reports. An independent auditor, who was helping the client comply with the strict guidelines oversaw this, verified our marketing emissions calculations adding them to the offset requirements to completely neutralise the beer.
While this enabled the client to be able to comply with the legislative requirements, the carbon offsets were a cost to the business. Fortunately, the value of measuring at a micro-level was the detail of understanding across the various media channels.
The creative idea for the campaign included lavish outdoor supersites which were covered in real plants and trees. Looked great but come sundown, to ensure the messaging could be seen 24 hours a day, these posters were floodlit. A standard and desirable requirement if the nocturnal beer drinkers of the land were going to see the ads.
Unfortunately, these posters were the highest emitters of carbon (other channels were TVC, Radio, Online, Magazine and Newspaper) and so a large percentage of the total carbon offset cost. Fortunately, when this was discovered during the carbon reporting, the outdoor company was approached, and solar panels were quickly installed, and the emissions plummeted.
So, a good outcome. The brand values looked better- solar panels to run the floodlights; the total emissions came down- again better for the brand and importantly, the physical cost of carbon neutrality was reduced.
You can see that drawing a carbon measurement boundary around your business activity for the claim of Net Zero is not necessarily straight-forward. Including marketing expenditure, if it is an important part of your sales and brand strategy is also required. Fortunately, it can be undertaken in a positive way to reduce carbon without costing the earth.
Stay tuned for the third and final article in this series where we will cover ‘The dos and don’ts of marketing activity within Net Zero Targets’.
This final guide will help marketing professionals ensure that marketing spends, and importantly, the engagement strategy is aligned to the company’s environmental sustainability targets.
We will conclude by outlining the opportunities that are available to all forwarding thinking marketing practitioners. There are some big cost and reputational problems if this is not approached correctly. This includes why understanding at a micro level then lowering carbon emissions in your supply chain will lead to better targeting and therefore better value from your budget.
Is your marketing strategy aligned to your company’s sustainability policy? Do you measure and optimise your carbon emissions? Find out how we can help
