Research from University of Sydney on ASX companies declarations of Scope 3 emissions from marketing spend. Commissioned by Christopher Sewell of Net Zero Media.
The research project we commissioned comes from a question I have posed before. ‘Why are companies with large marketing spends, in some cases much larger than the amount they spend on energy, not measuring and reporting these emissions?’
Carbon emissions from energy use are measured under scope 1 and 2 by most organizations. This understanding has led to buying lower emission power sources. Why isn’t the same logic being applied to marketing spend? Both are required to drive a successful business yet only one is being studied and strategic business decisions made to improve outcomes.
Summary of Findings
While we recommend reading the full report below, for those who do not wish to read an academically written paper these are some of the findings we think will be of interest.
· Kyna Chang at the University of Sydney, under their Post Graduate Masters of Sustainability Programme, undertook a research project supervised by Christopher Sewell of Net Zero Media.
· While $13 billion was reportedly spent in Australia on marketing, the definition for the need to report emissions is vague enough that only internal marketing activities need to be included.
· Australia’s Climate Active Carbon Neutral Standard for Organisations (Commonwealth of Australia, 2020) defines scope 3 emission reporting guidelines, stating that an emission source is considered material if it constitutes at least one percent or more of the company’s total carbon account.
· External Marketing activities should be included in Scope 3 emissions under the category ‘purchased goods and services’ as this is clearly what they are.
· SBTi (2021) framework does recommend that companies (in this case advertisers) whose scope 3 emissions surpass 40% of their total emissions have a scope 3 emission reduction target, so more companies should (and will) be setting scope 3 emission reduction targets.
Top 100 ASX Companies
· Of the top 100 ASX companies reviewed, 61% include noncommittal Net Zero claims such as “supports the objective of the Paris Agreement to transition to a net zero emissions economy.”
· Only 58 of the 100 ASX companies reported its scope 3 emissions.
· Whilst scope 3 emissions reporting may be incomplete and inconsistent currently, the reported scope 3 emissions still accounted for an average of about 49% of these 58 companies’ total emissions
Media Companies within ASX top 100
· Of the top 20 Media companies by market capitalisation, only 25% have a semblance of a net-zero or carbon neutral target.
· While just 20% of these Media companies had an actionable or explicit target.
The Neglected Footprint of Marketing Activities.docx
1. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
The Neglected Footprint of Marketing Activities in Corporate Emission Reporting
Kyna Chang
University of Sydney SUST5007
Partner Organisation: The Gaia Partnership
Workplace Mentor: Christopher Sewell
2. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
Table of Contents
What are companies currently reporting?......................................................................4
Net-zero......................................................................................................................5
Carbon footprint of corporate marketing activities........................................................6
Should companies be calculating and reporting the GHG emissions from their
marketing activities?..................................................................................................................7
Conclusion .....................................................................................................................9
References....................................................................................................................11
3. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
Global warming due to anthropogenic greenhouse gas (GHG) emissions has caused
irreversible impacts on natural and human systems, and continued emissions at current rates
will exacerbate disastrous climate risks to environmental, social, and economic systems
(IPCC, 2022). Australia, along with 195 other Parties, adopted the Paris Agreement in 2015
and committed to “holding the increase in the global average temperature to well below 2C
above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5C
above pre-industrial levels, recognising that this would significantly reduce the risks and
impacts of climate change” (Paris Agreement, 2015). Australia updated its Nationally
Determined Contribution (NDC) under the Paris Agreement in 2021 to reaffirm its target of
reducing economy-wide emissions by 26 to 28 percent below 2005 levels by 2030 and
adopted a target of net zero emissions by 2050 (Australian Government Department of
Industry, Science, Energy, and Resources, 2021).
Corporations play a large role in their contributions to economy-wide emissions, and
effectively managing and limiting their GHG emissions to align with national net zero targets
will foremost require the accurate measurement and reporting of emissions. This also
necessitates consideration of all impactful activities in a company’s supply chain. Despite the
substantial financial expenditure on marketing by companies, it is a commonly neglected
activity in corporate emission reporting. This paper seeks to analyse the comprehensiveness
of corporate emission reporting of large and medium organisations in Australia, as well as to
conclude whether the magnitude of emissions from marketing activities warrants corporate
calculations and reporting.
4. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
The Neglected Footprint of Marketing Activities in Corporate Emission Reporting
Despite the already irreversible impacts caused and the exacerbated impacts on
natural and human systems to come due to anthropogenic GHG emissions, there is an
absence of comprehensive emissions reporting and reduction target setting regulations in
Australia at the federal level to drive effective change in the private sector. The National
Greenhouse and Energy Reporting Act (NGER) 2007 mandates companies that meet a certain
threshold to disclose their scope 1 and 2 emissions, which are emissions from operations that
are owned or controlled by the company, and emissions from the generation of purchased or
acquired energy respectively (GHG Protocol, n.d.). Scope 3 emissions, which are emissions
not included in scope 2 that occur in the value chain (GHG Protocol, n.d.), reporting remains
voluntary. Although scope 3 sources contribute on average more than 75% of an industry
sector’s carbon footprint (Huang, 2009), corporate scope 3 reporting remains widely
incomplete and inconsistent due to the different approaches and boundaries that reporting
companies use to calculate and report their scope 3 footprint.
What are companies currently reporting?
To determine how transparent and comprehensive corporate sustainability reporting
is, a business literature review was conducted of the most recent publicly available reports of
the top 100 ASX-listed companies by market capitalisation, excluding mining and energy
companiesi
. These reports include the Financial Year 2021 Annual Reports, Sustainability
Reports, and Climate Active Public Disclosure Statements. The 100 companies have a
combined market capitalisation exceeding A$1.778 trillion (ASX, 2021). Of these top 100
publicly traded ASX companies, 80 publicly reported its greenhouse gas emissions, while
only 58 reported its scope 3 emissions. Whilst scope 3 emissions reporting may be
incomplete and inconsistent currently, the reported scope 3 emissions still accounted for an
average of about 49% of these 58 companies’ total emissions. Similarly, a business literature
5. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
review of the top 20 ASX-listed media companies was conducted, as media companies are
both the creators and distributors of marketing media. Just 35% of media companies publicly
disclosed their GHG emissions, and only 20% reported their scope 3 emissions.
Net-zero
There is currently a lot of inconsistency amongst corporate net-zero discourse, largely
due to emission reduction target-setting remaining widely voluntary and the consequent
usage of net-zero as a marketing buzz word. The IPCC (2018) defines net-zero as “when
anthropogenic CO2 emissions are balanced globally by anthropogenic CO2 removals over a
specified period”. Thus, companies habitually use net-zero and carbon neutral
interchangeably to refer to offsetting all their emissions. However, the Science Based Targets
Initiative defines net zero as (SBT, 2021):
Reducing scope 1, 2, and 3 emissions to zero or to residual level that is consistent
with reaching net-zero emissions at the global or sector level in eligible 1.5°C-aligned
pathways
Neutralising any residual emissions at the net-zero target year and any GHG
emissions released into the atmosphere thereafter
At present, a company can claim all they want about supporting net-zero targets or
committing to net zero targets, but the claims are futile unless the targets align with climate
science and include reductions of scope 1, 2 and 3 emissions. In October of 2021, SBTi
released a global framework for corporate net-zero target setting in line with climate science
that requires near-term science-based target, long-term science-based target, beyond value
chain mitigation, and lastly—neutralisation of residual emissions. Hopefully, companies will
begin to use the SBTi Corporate Net-Zero Standard to strengthen their emission reduction
targets to align with climate science in subsequent sustainability reports.
6. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
A bit of semantic analysis is required to discern which companies have science-
backed targets or if they are just using intentionally misleading, or greenwashing, verbiage to
seem like they are committed to achieving net-zero. It was concluded with discretion that of
the 100 companies, 61% have a semblance of a net-zero or carbon neutral target, which
includes noncommittal claims such as, “supports the objective of the Paris Agreement to
transition to a net zero emissions economy” (Seek Ltd, 2021). However, just 54% have
actionable or explicit net zero targets, and just 18% explicitly included scope 3 activities in
their emission reduction target boundary. Of the top 20 media companies by market
capitalisation, 25% have a semblance of a net-zero or carbon neutral target, while just 20%
had an actionable or explicit target. SBTi (2021) framework does recommend that companies
whose scope 3 emissions surpass 40% of their total emissions have a scope 3 emission
reduction target, so more companies should be setting scope 3 emission reduction targets.
Carbon footprint of corporate marketing activities
Corporate marketing activities include merchandising, public relations, telemarketing,
website, mail, content, printing, direct mail, and all forms of advertising (Net Zero Media,
n.d.). Companies spend hefty sums on their marketing activities; digital advertising
expenditure in Australia alone was estimated to near $13 billion in 2021 (IAB Australia,
2022). 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. Of the fifteen standardized scope 3 emission categories
set out by the GHG Protocol (n.d.), marketing may potentially fall under the ‘purchased
goods and services’ category. Physical marketing collateral may be easier to categorise as a
purchased good, but digital advertisements and marketing services may fall through the
cracks unless a company explicitly counts marketing services as a “purchased service”.
7. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
Consequently, the environmental impact of marketing activities is often neglected despite
their sizeable carbon footprint and the large expenditure spent on marketing.
A life cycle assessment conducted for an Italian consumer cooperative concluded that
its 182,000 fortnightly printed advertising folders have a global warming potential ranging
from 21,000 to 31,000 kg CO2e. However, the digital footprint of advertising is sizeable as
well, although it may be often neglected due to its “invisible” footprint. GreenFrame, a tool
developed to compute the carbon footprint of web applications, has been used to estimate that
advertisements and website trackers contribute up to 70% of the energy consumption from
visiting French media sites in their case study (Schneider & Le Biez, 2022). Furthermore, an
environmental impact assessment estimates the total energy consumption of online
advertising in 2016 to be a median of 106.59 TWh [20.38 min, 282.75 max], with a median
of 60.28 million tonnes of CO2e emissions expected [11.53 min, 159.93 max] (Pärssinen et
al., 2018). To put the magnitude of 60.28 million tonnes of CO2e into perspective, the whole
country of Austria emitted 63.18 million tonnes of CO2e in 2018 (World Bank, 2018).
The 46 companies of the largest 100 ASX-listed companies (excluding mining and
energy companies) that publicly disclosed how much they spent on marketing and related
activities had a total marketing spend of A$10.061 billion and an average of A$218.73
million per company. This equates to roughly 6.36% relative to total revenue for the 46
companies. Despite the sizeable footprint and large expenditures on marketing activities, just
three of the companies explicitly included marketing activities in their scope 3 emission
boundary.
Should companies be calculating and reporting the GHG emissions from their
marketing activities?
In the GHG Protocol’s Corporate Value Chain Accounting and Reporting Standard
(n.d.), the top criteria for determining whether the reporting company should include an
8. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
activity in their scope 3 emission boundary is whether the activity “contributes significantly
to the company’s total anticipated scope 3 emissions”. The Protocol does not give
quantitative thresholds, which leads to inconsistencies in the interpretation of the criteria and
allows companies to decide which scope 3 activities they deem to be relevant. Consequently,
companies may report emissions for scope 3 activities in which it is easy to collect data even
if it has a relatively insignificant footprint, such as business travel (SBTi, 2018). Australia’s
Climate Active Carbon Neutral Standard for Organisations (Commonwealth of Australia,
2020) sets more definitive scope 3 emission reporting guidelines, stating that an emission
source is considered material if it constitutes at least one percent or more of the company’s
total carbon account.
Both GHG Protocol and the Australian Government recommend using input-output
methodologies as a diagnostic screening tool to determine whether a scope 3 activity meet the
materiality threshold for emission reporting. Based on the reported marketing expenditure
from the 46 companies who publicly disclosed their marketing expenditure, the average
spend was A$218.73 million per company. Using an emission factor for advertising services
of 0.11 kg CO2e/$AUD derived from environmentally-extended input-output models of the
Australian Economy (Industrial Ecology Laboratory, n.d.), the average carbon footprint the
companies’ advertising services is about 24 kilotonnes CO2e.
Table 1: Case study comparison of marketing emissions relative to total reported emissions
Company Industry
Marketing
Emissions
(t CO2e)
Total
Reported
Emissions
(t CO2e)
Percentage of
Marketing Footprint
to Total Reported
Emissions
Exceeds 1%
Materiality
Threshold?
Aristocrat
Leisure Ltd
Gaming
81,429 40,700 200.07%
Yes
Coles Ltd Retail 27,293 1,845,972 1.48% Yes
Commonwealth
Bank
Bank
45,320 151,861 29.84%
Yes
CSL Ltd
Pharmaceuticals,
Biotech, and life
services
145,733 276,100 52.78%
Yes
News Corp
Media and
entertainment
83,881 2,628,153 3.19%
Yes
9. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
Figure 1: Case Study Comparison of Marketing Emissions to Scope 2 Emissions
Because not every company who reported its marketing expenditure also reported its
emissions, a case study was conducted on five ASX-listed companies from different
industries. As illustrated in table 1, the marketing emissions calculated using the expenditure-
based emissions factor exceeds Climate Active’ one percent materiality threshold for all five
companies. It also demonstrates, most noticeably with Aristocrat Leisure Ltd, that scope 3
emission reporting remains largely incomplete and variable. Furthermore, the marketing
emissions of the five companies were compared with their scope 2 emissions as depicted in
Figure 1. These companies demonstrate that companies from different sectors have sizeable
footprints from their marketing activities that could be comparable to more obvious emission
activities, such as purchased or acquired energy, which should warrant more companies to
consider the environmental impacts of their marketing activities.
Conclusion
It is becoming increasingly urgent and imperative for nations and corporations to
adopt net-zero emissions targets that align with climate science to reduce the impacts of
anthropogenic global warming. This will foremost require the transparent and comprehensive
reporting of emissions by corporations. This report has concluded that corporate emission
0
50000
100000
150000
200000
250000
Aristocrat
Leisure Ltd
Coles Ltd Commonwealth
Bank
CSL Ltd News Corp
GHG
Emissions
(CO
2
e)
Marketing Emissions Scope 2 Emissions
10. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
reporting and net-zero target setting must be strengthened to align with climate science, and
that marketing is a commonly neglected activity in emission calculations despite sizeable
financial expenditure on marketing and its substantial carbon footprints. Organisations should
consider their marketing activities when calculating their footprint and setting emission
reduction targets, which could lead to large emission reduction opportunities beyond from the
more obvious, easily reportable activities.
11. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
References
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Commonwealth of Australia. (2020). Climate Active Carbon Neutral Standard for
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Greenhouse Gas Protocol (n.d.). Corporate Value Chain (Scope 3) Accounting and Reporting
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12. THE NEGLECTED FOOTPRINT OF MARKETING ACTIVITIES
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ue
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Disclaimers:
Market capitalisation figures were retrieved from https://www2.asx.com.au/ on 18 April 2022. Monetary figures
reported in a foreign currency were converted to Australian Dollars on 6 April 2022. Annual Reports,
Sustainability Reports, and applicable Climate Active Public Disclosure Statements were retrieved from the
2020-2021 financial year. Despite precautions and thorough cross-checking to ensure the report is current and
accurate, omissions or inaccuracies may occur. A limitation of environmentally-extended input-output
modelling is that the methodology assumes that monetary flows fairly correlate with the physical flows within
an economy and assumes that different products and services supplied by the same sector have the same
environmental impact; therefore, the modelling was just used for emission estimation and screening purposes.