What you need to know:

• New analysis shows marketing, advertising and loyalty contributed to an estimated 29 per cent of Commbank’s emissions in 2021, and generated a major proportion of emissions across other blue-chips.
• Net Zero Media has compiled the marketing spend, emissions and resulting proportion from the top 100 ASX-listed companies, arguing marketing should be included in more emissions reporting. Currently, few brands break out marketing spend.
• Marketing emissions can be roughly calculated using a figure from Industrial Ecology Virtual Laboratory, a modelling research platform. It estimates every dollar spent on advertising services equates to 0.11kg of carbon dioxide.
• Extrapolated across a $17bn advertising industry that equates to 1.87 million tonnes of carbon annually. And that is just the tip of the broader marketing iceberg.

Marketing CO2

The marketing function of some of Australia’s biggest, ASX-listed businesses contributes a sizeable percentage of the company’s overall carbon emissions, new analysis shows.

Marketing accounted for more than 10 per cent of ANZ, NAB, Westpac and Bank of Queensland’s emissions, and almost 30 per cent of those reported by Commonwealth Bank of Australia, last year’s financial and emissions figures, compiled by Net Zero Media, demonstrate.

For Coles Group, marketing accounted for just 1.44 per cent. For REA Group and Seek, marketing spend would constitute more than 90 per cent of their emissions. For Xero and JB HiFi, marketing should, per this analysis, generate more emissions than they report.

The results vary by industry and company, as well as the scope of each business’s reported scope 1, 2 and 3 emissions. Scope 1 and 2 emissions are those owned or controlled by the company, while scope 3 includes emissions that are a consequence of the company’s activities – paying for advertising and its production and distribution footprint from point of origin to end consumer, for example.

Decisions about the carbon impact of advertising are likely to become more prominent, as global agencies like GroupM develop carbon calculators to measure the impact of digital ad campaigns. But it also poses the question, raised by new Dentsu Media CEO Danny Bass, about whether media effectiveness or carbon impact are the priority.

“If you're Commbank and you're trying to be a good corporate citizen and 30 per cent of your overall carbon footprint is marketing and advertising, then you're kind of over a barrel. It's so significant, you're going to have to include that in your decision-making, otherwise you're ignoring 30 per cent of your business's carbon problem,” said Phil Benedictus, co-founder of Net Zero Media. “It’s just that simple.”

Banks face billions in liabilities, the Australian Financial Review reported earlier this week, over the size of their reported scope 3 emissions. Commbank’s scope 3 emissions were reported as 2,300 times higher than its scope 1 emissions – and far higher than estimated.

The how

The calculation comes from a modelling system known as Environmentally-Extended Input-Output Analysis. Input-Output analysis is the way the Australian Bureau of Statistics calculates the country’s Gross Domestic Product – it looks at what is sold to consumers and works back through the transactions and supply chains. The ‘Environmentally-Extended’ version works the same, but emissions are tagged to transactions as they progress through supply chains so that it's possible to see which final products drove demand.

“For instance, say you buy $1,000 of advertising sector service. For every $1,000 in sales, the advertising sector will have spent money on real estate (say $10), electricity ($1), services ($400), products ($100) etc.,” said Janet Salem, a former UN Environment Programme officer and Founder of FootprintLab.

“Those sectors in turn have inputs from other sectors. Those sectors have more inputs. In input-output analysis, the supply chains keep branching out, practically infinitely, until the $1,000 has been traced back along its entire supply chain. All of this is done by the Australian Bureau of Statistics.”

The Industrial Ecology Virtual Laboratory, a modelling tool developed by universities including the University of Sydney and UNSW, as well as the CSIRO, takes this further by adding environmental statistics. It calculated that every dollar spent on ‘advertising services’ has driven 110g of CO2-equivalent.

‘Advertising services’ includes all physical and digital advertising, sales promotion, credit card marketing and promotion, publicity, telecommunications promotion and agency services – this is the standard sector classification from the ABS, said Salem.

"The advertising sector is not a very carbon intense sector, on a per dollar basis, compared to other sectors in Australia. But once you spend a lot, it starts to add up," she added.

"It's not unusual for scope 3 emissions to be much higher than a company's scope 1 and 2 emissions, particularly in the service sector. In fact, it's the norm. That's why scope 3 emissions are increasingly under scrutiny under new frameworks like the PCAF (the Partnership for Carbon Accounting Financials). Getting these numbers right will be critical for businesses to correctly manage their carbon emissions and avoid penalties for leaving important parts out."

Commbank, for example, reported spending $412 million on “advertising, marketing and loyalty” in 2021, which would equate to 45,320 tonnes of CO2.

Buying high quality carbon credits to offset marketing’s impact would cost about $47 a tonne, Christopher Sewell, another co-founder of Net Zero Media, said. That would make it more than $2.2 million for Commbank to offset its marketing function’s output. And offsetting is increasingly being seen as a cop out.

“Buying an offset doesn't solve anything. If you think about the big picture, what we want to do is take these emissions out of the atmosphere,” per Sewell. “Buying an offset to then wave the green flag is not what the end goal is here.”

In a recent white paper looking at marketing emissions in Australian listed companies, Net Zero Media states: “Companies spend hefty sums on their marketing activities; digital advertising expenditure in Australia alone was estimated to near $13 billion in 2021. However, marketing does not fall under the scope 1 or scope 2 parameters because the reporting companies do not directly own or control the end-to-end medium in which the marketing materials are consumed… Consequently, the environmental impact of marketing activities is often neglected despite their sizeable carbon footprint and the large expenditure spent on marketing.”

The companies in the table above are a selection of those that report their rough marketing spend and provide a figure for scope 1, 2 and 3 emissions.

“At least these companies are reporting, so they should be congratulated,” Sewell said. “Look at all the others that are on there that didn't report.”