New sustainability rules suggest greenwashing claims soon subject to crackdown

The momentum around sustainability is reaching a new high. At Cannes LIONS this year, there was a “responsibility” hall that included sustainability initiatives, and each award asked for information about an ad entry’s sustainability. Companies want in on the action and are embracing Ad Net Zero and other sustainability groups. At the same time, many are making green claims. Tech companies might offer offsets for a media buy or be powered by renewable energy. Brands are touting the green elements of their products. 

The fever pitch around sustainability feels familiar. Our industry invented the concept of spin, we’re fiercely competitive, and we’ve experienced incredible growth for more than two decades. But a few new regulations in Europe are about to put all of this in check. How we react can unite our industry and reduce climate change, or set us on a more destructive path. 

First comes the sustainability stick

Soon it will no longer be enough to claim sustainability. A new rule in Europe will require companies to prove it. The predecessor to the Corporate Sustainability Reporting Directive (CSRD) applied only to the very largest companies operating in Europe. As early as next year, a vastly larger number of companies will have to report their ESG efforts in a way that is much more comprehensive and standard. This will apply not just to companies based in Europe. What’s more, brands will likely want their partners to provide information, as their partners are part of their Scope 3 supply chain. 

A number of reporting standards are already in effect, as well as best practices and frameworks, including GRI for sustainability, or GHG Protocol Corporate Standard for GHG emissions and SBTi framework for corporate net-zero target setting. The CSRD is a directive to enforce reporting and is most closely tied to current financial and corporate reporting standards. It is already gaining the attention of CEOs and CFOs in Europe. Advertising companies need to get familiar with the CSRD requirements to see if they will need to update their processes or hire a third party to audit their sustainability efforts. 

Greenwashing claims are also subject to crackdown. A proposed EU law would impose penalties on companies making claims that can’t be substantiated. The Green Claims Directive (GDC) will be broad in scope, applying to products and services both physically and digitally available in Europe. This is only one of a number of new rules being reviewed. Another is the Directive on Empowering the Consumers for the Green Transition, a long-winded title for a bill that seeks to give consumers more transparency and confidence in green claims.  Brands may not be the only companies liable; advertising companies and media companies may find that they need to monitor the claims of the advertisements that they help serve. 

Then comes the carrot

Just like the GDPR, new green rules will increase the amount of work we have to do, but there will be some major benefits if we are smart. First, and most obviously, the goal of these rules is to reduce the threat of climate change to our planet, an existential threat that goes well beyond the walls of the CFO’s office. If that is not enough, they also serve to unify our industry. With the level playing field created by standard reporting and greenwashing regulations, we will hopefully start to see how we are all intertwined and start to work hand-in-hand.

This is not a “hippie” approach; it’s a rational approach. We will get much further, much faster if we have a strong foundation of transparent measurement and honesty. In the past, many organizations approached sustainability as a potential cost or liability. Today, research and reality show that sustainability provides growth and innovation opportunities, creating a positive for organizations that embrace it. Advertisers will gravitate towards the companies that are making real gains in sustainability and consumers will gravitate towards brands that are truly sustainable. That is objectively good.

Time to eat carrot-and-stick soup

The reality is that there will be pain and gain as we work towards a more sustainable future. All of us will have to swallow our pride and deal with the unpleasant realities of auditing and reporting and focusing on transparent and credible claims. But we will also gain traction as we do it. My sincere hope is that we start to align around climate change itself, not just these regulations or frameworks.

Consider two scenarios. In the first, a tech company chooses renewable energy and relies on offsets to claim “carbon neutrality.” From a “carbon accounting” perspective, this might seem enough, but they are not really solving the bigger problem, nor are they complying with new interpretations of greenwashing regulations such as those in Sweden.

In a better scenario, that same company chooses renewable energy and reduces its resources, energy and data usage, as well as further emission drivers up and down its value chain, rather than relying so heavily on offsets. Perhaps, if they are smart about it, they not only reduce their footprint, they add a “handprint” — improving their positive impact on the climate. They might do this by, for example, reducing emissions throughout and outside their value chain through product and service innovation; investing in fair access to renewable energy and nature protection, especially in developing countries; or even repurposing “waste” like excessive heat.

Many of us closed our eyes to GDPR until it was right in our faces, and it was a painful transition, to say the least. We are just now starting to reap the benefits of relying more on quality first-party data. The climate can’t wait. If we open our eyes and step into the future, there will be more “carrot” and less “stick.” 

Gabrielle Persson is VP of product at SeenThis.