Sustainability

Advertising: A Missing Link in Successful Corporate Climate Action Plans

Advertising is a $700B industry that has been overlooked as a source of significant carbon emissions. To achieve sustainable advertising, we must make it easier for companies to calculate their Scope 3 emissions. Here's how some of the world's largest brands, agencies and ad-tech companies will benefit from new innovations.

Just 2 of 55 largest US companies have scope 3 emissions goals in line with 1.5°C target

Last week, leading shareholder advocacy group As You Sow issued a first-of-its-kind report analyzing the emissions-reduction progress of 55 of largest companies in the US. The report shows that emissions-reduction efforts of some of the world’s largest companies are falling short and that only two of the 55 (< 4 percent) have set a goal to reduce their Scope 3 emissions in line the global warming target of less than 1.5°C.

One of the biggest contributors to low scores is the lack of Scope 3 emissions from disclosures. Of the 55 assessed companies, only 20 companies reported all relevant Scope 3 emissions, compared to 90 percent reporting Scope 1 and 2 operational emissions.

Overall, the trend of incomplete or non-existent Scope 3 reporting has persisted for more than a decade, despite growing calls for increased visibility and transparency. Indeed, only two companies — Apple and Microsoft — have set a goal to reduce their Scope 3 emissions in line with 1.5 degrees.

Climate risks hidden in corporate value chains

One reason behind this trend is that Scope 3 emissions are difficult to measure, report and offset because they include many emission-intensive sources across the corporate value chain. Yet these emissions can represent up to 95 percent of a company's overall footprint.

Without Scope 3 measurement standards and consistent, reliable and comparable disclosures from companies, it's nearly impossible to determine if they are living up to climate commitments. And for organizations seeking to make carbon-aware business decisions, a lack of reliable and trustworthy standards makes it difficult to take Scope 3 emissions into consideration when comparing vendors.

Advertising: An addressable carbon hotspot

Advertising is a $700B industry that has to date been overlooked as a source of significant supply chain emissions.

Yet digital advertising has a substantial carbon footprint — largely from the electricity used by the millions of servers that provide search results, news feeds, multiplayer games, real-time bidding, machine learning and the myriad other functions of the internet it employs.

Amongst the 55 companies assessed in As You Sow's report, 21 were included in Ad Age World's Largest Advertisers (December 2021) list.

Across the digital advertising sector, companies in every category stand to benefit from measuring and reporting Scope 3 emissions. It's a problem that can be solved —and sustainable advertising can meaningfully contribute to the fight against climate change.

To get there, however, requires new methodologies and standards that make it easier for companies to calculate their Scope 3 emissions. Here's how some of the world's largest brands, agencies and ad-tech companies will benefit from new innovations.

Brand enablement (agencies and brand safety)

Agencies that embrace climate-friendly business practices find renewed purpose and energy. A common, industry-wide standard for measuring and offsetting Scope 3 emissions has the potential to be an industry game-changer. Agencies that adopt new Scope 3 measurement and offsetting capabilities can embrace the power of prevention via differentiated products and services, and more actively participate in the fight to slow climate change.

Technology

Today, ad-tech players such as trading desks and ad networks are exploring new business models and markets in response to the movement to decarbonize.

These models require Scope 3 telemetry across the value chain to improve design, innovation, collaboration and engagement with suppliers.

Ultimately, visibility into Scope 3 emissions will inform carbon-aware investment strategies and allow providers to reorient around low-carbon projects and suppliers, accelerating transition to a low-carbon economy.

Brands

As the leading source of revenue for the ad-supported Internet, brands that are committed to reducing Scope 3 emissions have the power to change how the industry measures, manages and ultimately reduces its carbon footprint. To do this, brands must demand visibility, data and strategies to help them factor emissions into every campaign decision they make.

Soon, brand marketers will not only require their agencies and ad-tech providers to provide campaign success metrics, but also insights into what steps were taken to run effective campaigns while using the least amount of energy. In the long run, this kind of thinking will reduce the impact of not just digital advertising, but every digital initiative on the planet.

Publishers

Because most websites depend on digital advertising as their primary source of revenue, the energy burden to support their business models is significant. Web publishers leverage rich graphics, animation and video — which are CPU-intensive processes that use more energy than content they deliver.

No advertiser stands a chance of reducing Scope 3 emissions without working closely across their value chain; therefore, publishers must align their energy consumption efforts to meet the goals of their industry partners. This can be achieved by validating emissions contributions and identifying new ways to reduce energy consumption.

The upside for publishers is new monetization opportunities and getting ahead of brand mandates for sustainable advertising.

As the As You Sow report shows, major corporations are falling short in their efforts to rapidly cut emissions. And no company can credibly claim they are progressing towards their Paris Agreement goals if they don't have a strategy to measure and offset their value chain emissions.

The good news is, sustainable advertising can become a reality with rapid and meaningful cuts to Scope 3 emissions. The answer is an accurate model of the supply chain, a deep understanding of the relationship between vendors and suppliers, and participation from a large portion of the ecosystem.

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