U-turn, Ads, Credits, Bonds, & Goods
Giles Gibbons’ weekly insights are clear, concise and relevant so I’m delighted he’s taking part in a key panel on Nov 22nd, talking about Leadership, Transparency and holding investments to account. The first 12 of his LinkedIn readers can grab a free ticket and hear from him directly. Just click this link to grab your free ticket - but BE QUICK!
Here’ today’s post from Giles….
Giles GibbonsFounder and CEO, Good Business
1. A COP-out?
Last Thursday, Downing Street said Rishi Sunak did not expect to attend COP 27 "due to other pressing domestic commitments". However, on Tuesday his official spokesman declared the decision "under review", and on Wednesday, Sunak tweeted to say that he would attend after all.
This U-turn is likely due fears that Sunak’s initial decision not to attend would not sit well with the public. Alok Sharma, who remains COP president until Sunday, urged Sunak to attend COP 27, noting that one of the reasons for the recent election defeat of conservatives in Australia was because the public didn’t feel they took climate change seriously enough.
You might think that recent headline about the war in Ukraine – as well as the wider cost of living crisis – would distract. But in reality, these issues have only heightened public desire for politicians and businesses to prioritise solving the climate crisis, for example accelerating the shift to green energy to reduce reliance on Russian gas. The public is increasingly supportive of the green transition, with recent research finding that a majority of the UK public support seven out of eight key net zero policies. The evidence is clear that consumers want to see tangible progress towards climate goals, and businesses are no exception to the rule.
Businesses should view Sunak’s U-turn as a cautionary tale: crises aren’t an excuse for short-term thinking. Brands that make (and stick to) their climate commitments, and are not distracted by other issues, will earn the respect and support of consumers.
2. The most wonderful time of the year for ads?
The clocks have gone back. The days are getting shorter. And yes, Christmas is on its way. While there are still more than seven weeks to go, early November usually marks the start of the big-budget Christmas tv ad extravaganza. Indeed, for many of us, the arrival of the The Coca-Cola Company truck is the first sign that the festive season has truly arrived. But this year is likely to be different as brands and retailers try to navigate the difficult issue of how to market and sell their products while the world is burning, a war is raging, and people are struggling to put food on the table amidst the cost-of-living crisis.
Against this backdrop it is understandable that there is some anxiety in ad land. With 47% of shoppers worried about Christmas this year, only 18% strongly agreeing that they are looking forward to Christmas ads (down 5% from last year), and 50% planning to spend less, advertisers cannot risk appearing tone deaf to austerity. Brands cannot ignore the world we are living in and will have to work hard to strike the right balance between celebration and excess. Overtly consumerist messaging is unlikely to land well.
Some of the big hitters have reacted to the current crises by redirecting marketing spend to more important and impactful things, and for this we applaud them. John Lewis & Partners will undoubtedly release its highly anticipated Christmas campaign over the coming weeks, but this year the retailer has chosen to spend some of its marketing budget on free meals for staff struggling with the cost-of-living crisis. We would encourage businesses to follow in John Lewis’s footsteps, think about how their budgets are spent and finding savings which can be used to alleviate pressures where possible. But this doesn’t haven’t to mean no marketing at all.
We understand the predicament businesses and brands are in. However, we would argue that if you believe your product brings real value to people’s lives and is fairly priced then you have the right to tell people about it. Of course, this needs to be done in a sensitive way that acknowledges the world as it is, but this is exactly what you pay your ad agencies to navigate. Put yourself out there and let the people decide.
3. Credit where credit is due
Forest-based carbon credits, though popular, continue to generate controversy - how do you ensure the forest will still be there in a hundred years? What about the fact that a tree planted today will take years to make any real contribution to carbon removal? Are they the right trees, in the right place, supporting rather than damaging biodiversity? And trees are still worth more dead than alive. But that could be about to change. Enter, ‘sovereign credits’.
‘Sovereign credits’ can be issued by forested nations, providing financial assets to empower them to keep their trees standing and attract financing. The proceeds from sovereign carbon credit sales are used to further cut emissions and build climate resilient infrastructure.
Gabon, on Africa’s west coast, is 88% rainforest. It has recently completed the verification of 90m sovereign national carbon credits under the UN programme to reduce emissions from deforestation and forest degradation (REDD+). And Papua New Guinea will follow soon.
Sovereign credits trade on the global market, so unlike normal carbon credits, businesses are paying for an asset rather than incurring an expense. Even better, through purchasing soverign credits businesses and other investors can align their net zero targets with the Paris Agreement.
This initiative is even more important in light of a new analysis by the University of Melbourne, revealing that countries’ climate pledges are dangerously over-reliant on inequitable and unsustainable land-use to capture and store carbon. Stopping deforestation in the first place would help prevent this.
As we enter the COP27 launch weekend, Gabon’s announcement demonstrates climate innovations being led by governments of the global south. We cannot underestimate the pressure to cut down trees. Many countries rely on deforestation to support their economies, from oil drilling, timber to agriculture. Sovereign credits could offer a solution for voluntary markets to channel urgently needed finance to protect countries against the worsening climate and continue reducing emissions.
With Bolsonaro out, what if the Amazon could be next?
4. Money talks
In last week’s Friday 5 we focused on HSBC’s rap on the knuckles for greenwashing in its advertising, and this week the bank was heavily criticised for setting an ambitious commitment to contribute up to $1 trillion in sustainable finance while using funds raised to support highly carbon intensive activities. The world’s top 60 private-sector banks have poured $4.6 trillion (and counting) into fossil fuels since the Paris Agreement to limit global warming to 1.5°C in 2015, despite many of them making similar commitments to those from HSBC.
The Bureau of Investigative Journalism says that a relatively new financial instrument called ‘sustainability-linked bonds’ (SLBs) is at the heart of the problem, and that they are making it too easy for institutions (and let’s be clear that it is not just HSBC that is in the frame for this) to indulge in greenwashing and worse, and here’s why.
SLBs are promoted as a way for companies to raise money to help fund the transition towards a lower carbon economy, often for a reduced interest payment. However, the bonds are subject to very little regulation, beyond (usually) a requirement that the issuing organisation aligns with certain climate or broad ESG targets, rather than placing restrictions on what the funds can be used for. The head of market intelligence at the Climate Bonds Initiative has claimed that the SLB market is broken and warns we cannot "kid ourselves it is moving the needle on climate".
Bloomberg News analysed 100 SLBs worth approximately $70 billion and found that the majority of supporting targets set were weak, irrelevant or had already achieved. This means that under the banner of sustainable finance, companies can enhance their green reputation without implementing meaningful climate goals and find themselves subject to only the modest financial penalties if they don’t achieve the goals set, while funding all sorts of activities that undermine the net zero transition.
There is nothing intrinsically wrong with so called green finance bonds. With the right rules in place, they can effectively move the needle by allocating capital to those projects that support the green transition. But for now, a lack of transparency and framework is going to slow movement in the management of climate risk. Only strict frameworks and guidelines will evolve this market’s potential.
The Goods: Your waste is money
This week we are turning the Goods on its head, and telling you about a few brands who will pay you for things you own… Yes, you read that right! Will this be the year the concept of the circular economy will boom? In the face of the cost-of-living crisis, retailers are increasingly inviting consumers to exchange their old stuff for cash.
Currys is offering a £5 voucher every time you bring in electronic waste in store until the 15th of November, no matter how big or small the item. It may take a while to build up to a new TV, but every little counts this winter and it is an excellent way to dispose of this otherwise hard to recycle waste.
Although resale apps like Vinted have boomed recently, if you have some clothes that aren’t sellable (think badly stained clothes, holes, etc.), you can still divert them from landfill by going to your local H&M, Weekday, &Other Stories (brand agnostic) or Cos (Cos clothes only) store and drop them off. Not only does this ensure that the material will be recycled and reused, you will also walk off with a 10% off voucher for the next time you want to buy something new.
And finally on our radar, Jogon – a charity that looks to give a second life to your sports shoes. Although you don’t get any financial return, you do ensure that the shoes that may be too worn for your runs get to be used by someone who simply does not have any kind of footwear. Or keep an eye out at Runner’s Need, which at times has a shoe recycling offer that gives you £20 of your next pair of shoes (currently running until the 6th of November).
Amid the cost-of-living crisis, perhaps we have found the tipping point for a more circular way of consuming.
But, is he right?
