What you need to know:

• At Cannes, GroupM went all out on green advertising with a series of panels and workshops driving home the message that it aims to decarbonise media, fast.
• Media is by far the biggest chunk of WPP’s carbon footprint, because it includes the emissions from people watching ads across all digital screens, i.e. phones, laptops, TVs and billboards, plus programmatic pipes and wires, data centres and the like.
• WPP has committed to decarbonise those indirect emissions by 2030. It can’t do that if it buys ads from publishers that are net carbon emitters.
• There’s an “arms race” underway with holdcos and others all racing to build carbon calculators, which then enable advertisers to buy carbon offsets to claim ‘net zero’ emissions.
• Carbon offsetting involves buying a carbon credit, each of which offsets a tonne of carbon via things like tree planting or investing in renewable energy.
• But offsetting won’t cut it, because offsets do not result in businesses actually reducing their carbon emissions. GroupM Global Chief Innovation Officer Krystal Olivieri suggested offsetting is “an accounting game”.
• Meanwhile, disparate calculators throwing up different carbon values are “frustrating” and confusing advertisers, per Mindshare Global Chief Transformation Officer, Ollie Joyce.
• AppNexus founder and former CEO, Brian O’Kelley, now CEO at Scope 3, urged advertisers to make actual carbon savings by cutting out middlemen and middleware, with the bloated programmatic ecosystem a good place to start.
• Research spanning 12 years of brand and financial data suggests firms that are perceived as sustainable are driving “abnormal” financial gains, per Felipe Thomaz, Associate Professor Of Marketing at University of Oxford. “So the business case is there.”

The world’s biggest advertising investment manager has signalled further intent, urging marketers to reallocate ad dollars to decarbonise media and think beyond carbon offsetting to instead drive genuine emissions reduction.

GroupM Global Chief Innovation Officer Krystal Olivieri signalled WPP will ultimately only be able to invest in media channels that have eliminated their carbon emissions if it is to stand any chance of delivering “end-to-end” decarbonisation across the media supply chain.

The holdco has committed to decarbonise its own operations by 2025 and its indirect emissions, classed as ‘scope 3’ emissions, by 2030. For advertising, scope 3 includes the emissions generated by audiences viewing their ads across all screens.

The vast majority of WPP’s carbon footprint, more than 98 per cent, said Olivieri is classed as scope 3. “Of that 98 per cent, 55 per cent is media buying. It is the single biggest carbon output of WPP.”

While GroupM and other holdcos are racing to build carbon calculators that will enable advertisers to make choices on media channels by carbon intensity and offset via carbon credits in the medium term, Oliveri suggested offsetting is a sticking plaster and “an accounting game”.

“Estimating and offsetting is only the first step … It's made some progress. But we really need to get from offset to reduction. There's a massive difference. Offset doesn't really help the environment, it just stops incremental bleeding. We have to get to reduction. We have to push partners for net zero emissions,” she said. 

Hundreds of variables

Fully decarbonising digital media beyond offsets may ultimately require a net zero power grid, i.e. an economy fully powered by renewables and/or nuclear. But even calculating end-to-end emissions of advertising is proving harder than first thought, said Olivieri, admitting she thought she would “crush it” in a matter of months. That now appears optimistic.

“Even things like the colour of the ad can actually change the carbon output,” she added. Then “the data centers and what type of data is being used to make the decision about the ad to the network transmissions [all the way] through to that consumer view” must also be factored in.

“So you can start to understand why this can be so complicated, and it’s for every single channel in media – we're looking at it across 18 channels and we’ve figured out about 300 different variables,” Olivieri said.

Calculator arms race

Figuring out how to accurately measure emissions is essential to enable decarbonisation. But the “arms race” by holdcos and the broader ad supply chain to build carbon calculators risks backfiring, warned Mindshare Global Chief Transformation Officer, Ollie Joyce.

“All those calculators are actually adding up different things, so they're coming up with different numbers. They've been done with great intent and they're useful for a broad estimate and an offset. But we need to start driving reductions,” said Joyce.

The industry instead needs to work toward “common boundaries,” said Joyce. “If you get to common boundaries, you can get to common data sets – and then you can actually have a transparent calculation methodology. It's complex but that's absolutely something that's doable. It's probably a two or three year journey to get there.”

In the meantime, brands are getting “frustrated” by the inconsistent numbers being put before them by different calculators.

“If you keep getting different numbers that you can't rely on, then you're not going to be able to quantify reductions, and you're not going to be able to make informed judgments to enable you to move investment to lower carbon options.”

Joyce said advertisers are asking for two things: “Give me a sensible, reliable set of numbers and then show me how I can do this and drive big reductions that have no impact on the media performance.”

While industry must standardise its approach to carbon calculation, Joyce said advertisers should not wait to act.

Set a target. That target will change behaviour. Put a group of people together to work out how to deliver it and then be prepared to move money. Because money is what will change behaviour and drive lower emissions. Without wanting to oversimplify, I think if you do those three things, you will make significant difference."

Streamline to win

AppNexus founder and former CEO Brian O’Kelley thinks advertisers can rapidly make deep carbon cuts by streamlining their ad supply chains – while stripping out middlemen and middleware. He suggested brands start there rather than attempt to offset footprints based on unreliable numbers.

“There’s a lot of [carbon] waste, particularly in the programmatic ecosystem,” per O’Kelley.  He advised advertisers to push suppliers to deliver decarbonisation.

“Once you decide you want to buy carbon neutral media, you actually put the pressure on your suppliers to figure it out, because it's the supply chain problem to reduce carbon,” said O’Kelley.

“Very little of the carbon comes from the creative and from the agency. The carbon is in the media supply chain. If you have multiple suppliers and you say, ‘we're going to spend more if you cut your carbon’, you do have choices,” though he accepted search and social are more challenging, given the few major providers.

Australia a test bed?

While Telstra has committed to decarbonising supply chains, few other local brands have put their heads above the parapet with firm proposals around media.

“Not yet, but they will,” said O’Kelley, with telco, finance, FMCG, retail and automotive sectors showing most concrete interest in decarbonising advertising.

“Those sectors represent probably 70 per cent of advertising in Australia,” said O’Kelley. While the firm is yet to sign up any brands locally, “we haven’t tried,” he added.

That will change in the second half, he said, with Scope3 appointing an Australian lead. O’Kelley also thinks Australia can become a test-bed for global brands aiming to decarbonise media supply chains.

“I think this is something we can do today that we can change quickly. It is not going to cost [advertisers] a lot of money and it will have a significant long-term impact on the environment.”

“Abnormal” financial gains

Brands that are perceived to be sustainable are unlocking “abnormal” financial performance gains according to more than a decade’s worth of data analysed by Felipe Thomaz, Associate Professor Of Marketing at University of Oxford.

“We looked at twelve years of brand’s performance and their perception of sustainability in market. I was asked to model financial equity consequences,” said Thomaz. He had access to “all available BrandZ and BAV data, as well as financial data on those companies”, though the study only runs up until 2019, “because things got messy after that,” he added.

“We were able to explain all abnormal financial performance from every single company with perfect accuracy,” he claimed, “because marketing explains the growth of these companies. And perceived sustainability was the third most important variable after differentiation of the brand and performance of the brand. It accounted for anywhere from 7 per cent of the equity to 25 per cent of the equity in price,” said Thomaz.

“So if you want to have a conversation with a CFO, [ask them] ‘are you interested in having an abnormal 7 per cent gain this year? The caveat is that we are talking about perception. It would be very easy for you to make people think that [a brand] is sustainable when it isn't.

“But we're talking about actual, real change: you are driving stock performance because willingness to pay preference [for sustainable brands] is actually showing in the marketplace [from 2016 onwards]. So the business case is there.”