The wheels of bureaucracy turn slowly. But, in the corridors of power in the European Union, they turn inexorably and immutable.

Update 28/2: Corrected to reflect that ASIC fined Tlou Energy, not the ACCC and clarified the ACCC’s role.

Three years ago, the 27 countries that comprise the union published the 2020 Circular Economy action plan. This year, the plan should come into action.

For an EU document, the action plan is short, running to just 24 pages plus annexes. However, its ramifications will be wide-reaching. One sentence, in particular, could turn advertising in Europe upside down.

“The Commission will also propose that companies substantiate their environmental claims using Product and Organisation Environmental Footprint methods.”

Three years after the action plan was published, the EU has finally created draft legislation to put companies on notice. The planned legislation would also require the countries to create a system to verify companies’ claims and impose penalties should they fail to meet their own marketing.

Of course, that’s the EU, not Australia. Last year, ASIC issued its first fine for greenwashing — slapping Tlou Energy with a $53,280 penalty for claiming the electricity it produced as part of development projects in Africa was carbon neutral. It has also issued several infringement notices to companies ranging from Super funds to investment companies.

The Australian Competition & Consumer Commission (ACCC) has investigations underway into packaging, consumer goods, food manufacturing, and medical device sectors for alleged misleading environmental claims. It is also proactively reviewing claims in ads from clothing, white goods, energy, car, packaging, and household cleaning brands. It has also fined some companies over their environmental claims.

But, with sustainability top of mind for Aussie consumers and high on the list of priorities for advertisers and agencies, is there enough scrutiny over the claims that are being made by brands? Does Australia need its own action plan? And, frankly, shouldn’t we be happy that adland is doing something, rather than nothing?

Turkeys, Christmas, and regulation

“The EU has gone down the regulation path. In Australia over the next few years, it will be self-regulation, to begin with until the government comes,” June Cheung, head of JAPAC for media and advertising decarbonisation company Scope3, told B&T.

“I like to relate it to the current privacy conversations. A spotlight has been shone on the adtech industry and it’s working on being transparent to the government. But, if it doesn’t do it correctly, that’s when it comes down to regulation. My ideal would be self-regulation because we know our industry best and we can augment or work within the nuances.”

Scope3’s June Cheung

Cheung’s view is popular across the industry.

“They’re definitely capable of self-regulating on environmental claims,” said Josh Faulks, CEO of the Australian Association of National Advertisers (AANA).

“The self-regulation system has proven itself to be very successful in Australia since it was introduced 50 years ago by us to all advertisers. We have a world-class independent complaint system where just one complaint [about an advert] is sufficient to initiate the whole process and it has an extremely high level of compliance.”

Famously, though, turkeys rarely vote for Christmas.

Last year, the AANA announced that it would bring forward the review of its Environmental Claims Code. As it stands, the Code extends to advertising or marketing communication but not labels and packaging and allows individual consumers to make complaints about any claims made within adverts.

“There’s no doubt that the community and regulators are increasingly shining a light spotlight on environmental claims. At the same time, you’re seeing government and regulators around the world reviewing and updating the rules and standards that apply to environmental claims,” continued Faulks.

“We brought forward our review of the Environmental Claims Code to make sure we meet community expectations and reflect international best practices. It’s going to have a broad impact across multiple industries, so we’re consulting widely.”

AANA CEO, Josh Faulks

A discussion paper was put out for submissions from the government, individual consumers, and the advertising industry. The deadline for submissions is the end of February.

“I don’t want to pre-empt the outcome, but we’re aiming for two things. The first is that the Code makes it clear what the standards are for advertisers in Australia when they make an environmental claim because, at the moment, I don’t think it is very clear,” added Faulks.

“The second objective is to give consumers and the government confidence in the environmental claims made in advertising.”

While the AANA does see high levels of compliance with it and a reviewed Environmental Claims Code would doubtless be helpful, it seems unlikely that consumers, in particular, would trust the claims made in advertising simply because the industry tells them they can trust the claims.

“Climate change is an issue that is taken seriously by many people. The real question is whether what is being proposed actually helps address it. This is a complex issue. The corollary of that is there is no single solution,” said Patrick Gibbons, partner at Rethink Everything, a climate change-focused offshoot of corporate advisory firm Orizontas.

Rethink Everything’s Patrick Gibbons

“Greenwashing is real – we’ve seen it. I view it in a slightly legalistic way, which is that greenwashing is basically deceptive conduct. Ultimately, companies should not be making claims that they cannot substantiate. Rather than being unhelpful, I think the anti-greenwashing rules are actually important for ensuring people can trust what is being claimed.

“We’ve seen examples in Europe and North America. We’ve got regulators in Australia now that are very much focused on the issue of people making claims that they do A, B, and C, but if you scratch the surface that’s not the case.”

Do the right thing

“I can’t remember a brief where we’ve been asked to push environmental credentials and we’ve been like ‘hmm, this doesn’t really feel like it adds up’,” said Michael Titshall, senior vice resident of creative agency R/GA.

“Clients and brands are aware of greenwashing and the negative impact it can have on their brand if they don’t fully match up to their claims. In my experience, people are only trying to claim them if they have actually got them.”

It would be a “PR disaster” if a brand got caught out for not living up to its own hype.

“From a brand value perspective, it’s not worth the risk.”

R/GA’s Michael Titshall

But, while Titshall maintained that it would not be worth the risk to a brand, why would the ACCC have launched a crackdown on environmental claims? Why would the AANA be reviewing its Environmental Claims Code? And why would the EU be drafting legislation to deal with greenwashing?

“I think we’re in a phase where being green, being sustainable, and companies doing the right thing is important and marketing teams are applying it,” said Cheung.

“Let’s talk money. If you look at investors such as Goldman Sachs, they are evaluating businesses based on their environmental sustainability governance (ESG). They know, and there’s regulation coming from the government, that consumers are changing the dynamics… It has an impact on share price.”

In Cheung’s experience, businesses are coming to Scope3 with genuine intentions about reducing the amount of plastic in their packaging and creating more sustainable manufacturing, for instance.

“It’s not advertisers being sustainable in their advertising… it’s within their corporate business ethos,” she added.

Google, Apple, Meta, and Amazon are all businesses that claim to have the environment at the heart of their operations. In its 2022 environmental report, Google, for example, said that its data centres were twice as efficient as a “typical enterprise data centre,” that it was delivering five times as much computing power as five years ago with the same amount of energy, and that all its cloud products were carbon neutral.

To be clear, this is a noble endeavour that should be admired.

But the problem runs much deeper. Research from the Climate Safe Lending Network, The Outdoor Policy Outfit, and BankFWD has made it possible to track the emissions generated by a company’s cash and investments. The results do not look good for any big business. According to their report, the carbon footprint of Google’s investments in 2020 was 38 times larger than its direct operational emissions between 2016 and 2020.

It’s not the only company. Microsoft’s financial footprint was 3.3 times as large as the emissions generated by the use of every Microsoft product and device in the world — including Xbox devices. Netflix’s financial footprint was 10 times as large as the emissions generated by all the power used to stream its content.

Paypal was the worst offender, with its financial footprint being 55 times larger than all its cumulative emissions — scope 1, 2, and 3. As a result, it would take until 2076 for PayPal to generate the cumulative emissions that the company’s cash and investments generated in 2021 alone.

With numbers like that, does it even matter if any company tries to do the right thing?

Join us for the second part of this series where B&T will dive into how greenwashing rules will impact adverts themselves.