Risk and compliance: Carbon footprints, ESG and sustainability

Jason Pollock
By Jason Pollock | 14 December 2022
June Cheung; image supplied by Scope3.

This is the fourth article in a miniseries about risk and compliance. Read the first article here, along with perspectives from DoubleVerify, InfoSum, Quantcast and The Australian Data and Insights Association about what risk and compliance means to them.

AdNews spoke with June Cheung, head of JAPAC for Scope3, about the need for brands to work towards sustainability, the way ESG can impact brand reputation and why setting clear and measurable goals is key for compliance in this space.

What are the risks to brands if they ignore their carbon footprint and don’t work to combat emissions? 

"Reducing carbon emissions and increasing sustainability is typically promoted by the marketing department. However, the impact and risks are not isolated to marketing and can be felt across the entire business. 

"Brands that are not currently focusing on a strategy to reduce their carbon footprint and increase sustainability measures face reputational and financial risks, in addition to creating an imbalance of values with their most important stakeholders: investors, consumers, and employees. 

"Investors today place higher value on businesses that take action to drive a more sustainable future for people and planet. For example, BlackRock, the world’s largest asset manager with investment funds valued at ~$7trillion, announced in January 2020 a shift in strategy to focus on sustainable investing (Source: Sustainable Marketing 2020).

"Carbon and associated keywords were mentioned more than 1,600 times in quarterly earnings calls last year (source: Financial Times, 2021) and corporations with strategies to reduce their carbon footprint have seen an increase share price by up to 6 per cent (source: IO Sustainability, Kline, 2018) 

"Consumers vote with their purchase choices and value brands that are genuine in their activity to reduce impact on the planet. Sustainable brands are being rewarded with long-term revenue growth as nearly half (43%) of all consumers are now willing to pay a premium for socially conscious or environmentally friendly brands (source: GlobalWebIndex Stankovi, 2019). 

"And in a world where “quiet quitting” is trending, employee engagement and satisfaction is at an all-time low. By creating purpose-led values from a sustainability perspective, businesses can improve staff retention and employee engagement. In fact, companies who have corporate social responsibility programs reduce employee turnover by 50% (source: The Project ROI Study, Barney, R., 2020)."

How can companies effectively address ESG concerns to maintain brand reputation? 

"Firstly, it’s important that your leadership is fully aligned on the business strategy and demonstrates these shared goals in their interactions with the brand and its stakeholders. Equally critical is being genuine in those endeavours rather than being seen as ticking a box or yet another corporate PR exercise that can be tainted as “greenwashing”. 

"Setting clear and measurable goals will enable you to track and report on progress in a meaningful way. Being transparent on how you are measuring progress and utilising a third party for verification unlocks more brand trust while validating your actions as authentic. 

"Continue iterating as climate research evolves, new data becomes accessible and new technology resources are available to support your sustainability strategy and goals. ESG is not a set it and forget it approach and there’s always room for improvement. 

"Finally, conduct a thorough vetting of all corporate partners and technology or data providers. It’s not just about your brand’s direct impact on the planet but your supply chain as well. Aligning your business with values-driven organisations will further propagate your ESG strategy and positive brand perception. 

"We often work with brands to not only independently measure and validate the impact of their digital footprint but to also compensate some or all their end-to-end impact by supporting high-quality carbon removal projects."

How have you seen the attitudes change towards compliance and risk over your time in the industry?

"I remember a time where data compliance and risk were minimal, and bad practices like email spamming were an acceptable way of reaching consumers. We’ve come a long way since then with initiatives like the Spam Act 2003 to ensure there are clear rules and heavy fines for corporate companies that do not comply.  

"Discussions on updating the Australian Privacy Policy, which has remained unchanged since 1988, were already on the cards before the recent Optus cyberattack and the subsequent leakage of over 9M customers’ personal identification details. Whilst not the only incident of late, the visibility and magnitude will only speed up discussions and failure for compliance will soon subject corporations to large financial risk in the form of heavy fines. 

"From a carbon emissions perspective, the Climate Change Act 2022 set in legislation Australia’s commitment to be net zero by 2050. This is a very clear signal for corporations that compliance now extends into their carbon footprint, which includes their digital and supply chain environmental impact as well."

What sort of compliance and risk issues should be front of mind now for organisations?

"Brands need to consider the environmental impact across all their digital touchpoints and a build a comprehensive strategy to reduce their environmental footprint. Compliance and reduction in the risks associated, as noted above, should be front of mind for any organisation as much as their data and privacy policies. 

"Almost every brand today promotes at least some of their business online, be it with a website, various social media channels, programmatic or digital advertising or levering emerging media opportunities like product placement or promotions within the metaverse or the in-game experience. 

"It’s also worth mentioning that while measuring end-to-end emissions and building a plan to reduce and compensate are important from an ESG perspective, they’re also part of how industry will evolve because it’s common-sense economics. Putting less crap on the internet, having more efficient systems, and doing better for our people and planet are universally agreeable."

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