ESG was the only game in town: Advertising Week Europe in review

Review

Whether they knew it or not, the crowds were treated to a non-stop showcase of all things environmental, social and governance.

“ESG is a scam. It has been weaponized by phony social justice warriors.” As seems to be the way of things in the Spring of 2022, a Tweet by Elon Musk has laid bare tensions within another debate within the media industry this week.

Musk was reacting to news that Tesla, his transformative auto manufacturer, has been dropped from S&P 500’s ESG list, one of the world’s most widely followed sustainability indices. The index recognises companies with a good environmental, social and governance record, and in an annual re-balancing Tesla has been delisted, along with Meta, Accenture and Berkshire Hathaway, among others.

But how can a company whose self-declared mission is to “accelerate the world’s transition to sustainable energy” not make the cut in an ESG index? Tesla, and its game-changing batteries and electric vehicles has grown into a $735bn company. Its own carbon footprint is a small fraction of its peers, and it has been an undoubted pioneer in moving the sector away from combustion engines.

The reasons are many, according to Margaret Dorn, a senior director at S&P Dow Jones and head of the ESG Indices, who explained the decision in her blog. Dorn highlighted Tesla’s lack of a low carbon strategy and issues around codes of business conduct.

In addition, S&P’s media and stakeholder analysis, a process that seeks to identify a company’s current and potential future exposure to risks from controversial incidents, identified two separate events centred around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of an investigation after multiple deaths and injuries were linked to its autopilot vehicles.

Dorn noted: “While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens.”

The only game in town

ESG matters to the world’s richest man because being on S&P 500’s ESG list, and indices like it, has major financial implications. It’s a shortcut to future-proofed businesses for time-poor investors looking to place vast sums of capital.

This is the often-overlooked financial backdrop to discussions at Advertising Week Europe this week, where ESG was the only game in town.

Whether they knew it or not, the crowds of people lining the corridors of Soho’s Picturehouse Central were treated to a non-stop succession of panels on all things environmental, social and governance. No fewer than 15 sessions were dedicated to exploring ESG topics on Wednesday alone, with many addressing it head on: Can Marketing Lead the Sustainability Agenda?; Can ESG Help Save the World?; How Can Advertising Help Build a Net Zero Economy? The Sustainability Imperative; and The Only Way is Ethics.

Unlike financial conferences, there was little talk of TPLs (the triple bottom line), GPIs (Genuine Progress Indicators), and the Circular Economy, but – terminology aside – it all laddered up to the same conversation.

Alice Moore (pictured, left), global purpose-led brand director and chief purpose officer at Reckitt, noted how the global population had doubled during her lifetime to 7.5 billion people, making sustainable business essential.

Reckitt is now asking “and” questions, she said: “How do we make money and reduce our environmental footprint? How do we satisfy our stakeholders and be more help every single day?”

People, purpose, profit

An increasing number of consumer and B2B brands are using the UN’s 17 Sustainable Development Goals to underpin their actions and to measure and improve performance.

“I think the advertising industry is really uniquely placed to have a big impact in this space because we touch every sector and we are really good at influencing and changing behaviour and driving innovative,” noted Tamara Lover, divisional director at Tag and leader of creative production for a portfolio of clients that includes Heineken, Mars, Unilever, BAT and Aria.

“The fact that the advertising industry is really getting behind this [net Zero movement] is absolutely critical,” Lover (pictured, right) added. “We can influence behaviour in two ways: as an industry, making sure we have programmes and educate people; but also if we think about how what we do impacts citizens. We want to make sure we are helping to communicate easy things that consumers can do on an everyday basis.”

The evidence is mounting that consumers are more likely to purchase, protect and champion brands that are purpose-driven, but not everyone’s direction of travel is transparent, or even convincing.

Greenwashing is so much part of ESG that it has become a verb,” warned Mordecai, founder of Day After and chair of ESG advisory at IV.AI. “At IV.AI we are committing to taking the AI models… to track business health and to focus on all public businesses ESG goals so that we can track how companies are progressing, adjusting over time and hopefully helping us all achieve a sustainable future.”

Andrew Tenzer, director of market insight and brand strategy at Reach, suggested a major disconnect between what the industry is talking about this week and “the real world”, where people are worried about paying their bills amid the highest interest rate rise in 40 years. He noted how more than 50% of bill payers are struggling to pay utility bills, according to research from water regulator Ofwat.

“The idea that people are sitting at home thinking about what a brand thinks or believes on a certain issue is not true,” challenged Tenzer. “As an inward-facing [company] thing it is important, but I question whether it is really going to help brands grow.”

Tenzer could have a point, especially for sectors like FMCG. The credibility gap is real and can be a catalyst for cynicism. Few will forget shareholder Terry Smith’s scathing attack on Unilever’s stated “Fighting against food waste” purpose for Hellmann’s mayonnaise earlier this year. “A company which feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot,” he said.

Elsewhere, Thomas Kolster, author of The Hero Trap and an advocate for meaningful brands, admitted he’s “started to question” his own belief in purpose-led brands due to overclaims of their ability to make an impact. “Every brand is talking about how God damn good they are; look at what we’re doing for the dolphins, for plastics and climate,” he said. “We need to evolve from purpose to spark action.”

But, so long as brands do not overstate their credentials, when questioned in the likes of Edelman’s annual Trust Barometer, mass consumers do increasingly indicate that they want brands to take an active lead role in how and what they produce.

Recognising the transformational journey

So, how can marketers and media partners ensure they are leveraging authentic messaging, and push back against brands wanting to tell stories that are not supported by their actions or current business models? Referencing the high-emitting oil and gas sector by way of example, Louisa Harris, head of sustainability and systems change at Brandpit, said it is not as simple as walking away from the business.

“If all the responsible, great people stopped working with all the companies that most need to transform we are also in a dangerous place,” she said. “There is a big soul-searching piece around ‘what is the transformational journey that you will do’, and when do you say ‘no’?”

Meanwhile, Sue Unerman (pictured, left), chief transformation officer at MediaCom, talked about the inclusive planning process being rolled out worldwide by the WPP network. This includes proactively partnering with media owners with deep understanding and expert knowledge. By way of example, Unerman cited the work the agency brokered around Tesco’s partnership with Gay Times.

For Musk and Tesla this week, the delisting from S&P 500’s ESG list could be viewed as an opportunity for some critical thinking within the company. How, and why, did they fall off the list? What are the proactive and transparent steps the company can make to address those concerns, and how can it work with the fund to get back in the rankings?

I suspect this will be the approach adopted by Berkshire Hathaway, which incidentally has become a major shareholder in Paramount, it was disclosed on Monday.

Or Musk could double-down on his Twitter volleys, calling the decision “insane” and insisting the ESG index lacks integrity. The criteria for such indices are evolving fast, and can certainly feel too broad at present. But the fact remains Musk discloses little information about his workforce or working conditions.

For those still questioning the validity of ESG criteria as a driver for growth, the message to the media and marketing industry at Advertising Week Europe could not have been clearer as far as John Rudaizky (pictured, left), global brand and marketing, EY is concerned.

“As suppliers – whether media owners or agencies – it is a huge part of our expectations. From a procurement point of view, we will always look to see what peoples DE&I approach is; the values of an organisation, the sustainability imprint… Across the [supplier] spectrum we will be looking at the make-up of teams and the company’s own purpose strategy.”

Marketers should be in no doubt that doing business today means taking an active interest in all things related to ESG. As Harriet Howey, the global lead for non-financial reporting and ESG at Diageo, framed it, by all means remove the woke sentiments, if you prefer, but you cannot deny it has become an imperative for everyone to own.

Howey cited Larry Fink, CEO of BlackRock, who admitted: “We care about these issues; not because we are environmentalists but because we are capitalists and fiduciaries to our clients.” 

Arif Durrani is a media consultant and freelance writer. He was previously Bloomberg Media’s executive editor for EMEA. @DurraniMix