The power of active ownership: How Inyova’s community is pushing to help end greenwashing ads

Over the last 40+ years, the fossil fuel industry has become increasingly concerned with its public image as a polluter. To counteract this perception, it has hired advertising and PR firms, like Publicis Groupe, to build a more favourable image of itself. Evidence shows that for companies like TotalEnergies, who contracted Publicis Groupe for their rebranding, only about 25% of new investments actually go towards renewable energy – yet 62% of their marketing claims are based on the company moving towards renewables. (Source)

Besides Total Energies, Publicis Groupe have also represented Saudi Aramco and currently work for Abu Dhabi National Oil.

With about 80,000 employees in more than 100 countries (2022), Publicis Groupe is one of the “Big Four” advertising and communication agencies in this world. The company is positioned at every step of the value chain: from creation to production, digital marketing to strategic communications and influence.

Rebranding ads by Carré Noir, a company of the Publicis Groupe, from June 2021. Source

Why should Publicis Groupe stop working for fossil fuel companies?

Representing our shareholders, we believe that Publicis Groupe is exposing itself to unnecessary and outsized reputational, regulatory and legal risks.

Regulatory, business risks

1. The risk of regulation banning fossil fuel advertising is increasing, with first authorities having published such bans and others considering following suit. A ‘Ban Fossil Fuel Ads’-campaign by renowned NGOs like Greenpeace and the World Wildlife Fund is calling for a tobacco-style ban on advertising for oil, car and aviation companies. (Source) While noteworthy limitations and loopholes remain, a ban like this has already been implemented in France and in cities like Amsterdam, while other cities like Liverpool, Stockholm and Sydney are considering it. (Source , Source , Source , Source)

Legal, litigation risks

1. There is also an increase in scrutiny by public authorities into investigating claims of greenwashing. In October 2021, a US House of Representatives panel questioned the CEOs of oil companies about their role in spreading climate change misinformation and subpoenaed them for documents related to spendings on PR agencies. According to Reuters, the investigation is expected to also include these third party companies. (Source)
2. In addition, various forms of climate litigation are used by activists to push companies towards more climate action. There are several lawsuits accusing major oil and gas companies of greenwashing, citing advertising and marketing campaigns that allegedly make unsubstantiated claims about the environmental impacts of their products. Among others, a lawsuit has been filed against TotalEnergies for using misleading advertising to convince consumers it can become carbon neutral by 2050, despite continuing to promote and sell more fossil fuels. (Source) While PR and advertising firms are not yet directly named as defendants, they usually are subject to the investigation, which poses a potential future risk for Publicis.

Reputational, brand risks

1. There is a clear risk to Publicis’ ability to be able to attract the right talent in the future if it continues to work for fossil fuel companies. Talent is the most valuable resource in the PR and advertising industry. As recent studies by Deloitte and McKinsey have shown, the majority of the younger generations, namely, millennials and Gen Z, are interested in working in a purposeful, value-aligned environment. (Source , Source , Source , Source)  This is even more true in the creative industries. An industry-specific survey by NGO Comms Declare on under-30 communications professionals in Australia found that 73% are hesitant to work with fossil-fuel clients, while 67% think their agencies should take a stronger stand against fossil-fuel clients. (Source). This risk to talent is not hypothetical: One major example of loss of talent occurred in 2015 at Edelman, another major PR company, when four executives left, citing its involvement with fossil fuel clients as the reason. (Source)
2. Companies are under increasing scrutiny to understand their value chain – and the vendors that are a part of it (Source). As a result, we believe that companies choosing a PR and marketing vendor will increasingly look to understand who else these vendors work for and we believe that Publicis’ continued work for fossil fuel companies may compromise its ability to attract business from other companies in the future. Large consumer brands are especially exposed to this risk and will need to take it into account when selecting its partners.

What will the engagement with the company chosen in our initiative look like?

First, we will send Publicis an official letter which addresses the issue of working for fossil fuel companies. We would like to learn more about how they view the contradiction of reducing their own CO2 emissions, whilst promoting companies that fuel the climate crisis with their emissions. And we would like to understand their view on the risks arising from the fossil-free movement – and whether they have measures in place to mitigate them.

Depending on their response, we will consider different measures. These measures can range from questioning them publicly at their annual general meeting to filing a shareholder resolution.

The ultimate goal is to help Publicis understand that there is more opportunity in declining future work for fossil fuel companies as it has the chance to become a role model for climate action in the advertising industry.

Who are other supporters of the initiative to ban fossil fuel ads?

The UN-Secretary General, WWF, Greenpeace, and many more have called out the advertising industry’s practices. See a list of supporters below: 

1. A November 2021 study by researchers of Brown University found that PR firms are a key organisational actor in climate politics.
2. These results were reiterated by the Intergovernmental Panel on Climate Change (IPCC) in their most recent report and by UN Secretary-General António Guterres in his speech in September 2022. (Source , Source , Source) Calls for an end to the fossil era are not only getting louder but are also receiving support by officials like the UN Secretary-General.
3. A global ‘Fossil Free’ movement of activists, NGOs, politicians and scientists is looking to cancel fossil fuels in various arenas – from fossil divestments in the Finance sector to ending university funding to targeting law firms representing fossil fuel clients. (Source , Source , Source , Source)
4. Nations most affected by climate change, namely Vanuatu and Tuvalu, have called on other states to develop a Fossil Fuel Non-Proliferation Treaty.
5. In October 2022, the European Parliament and the World Health Organisation joined their call, which includes ending all new exploration and production as well as phasing-out existing production of fossil fuels in line with the 1.5° C global climate goal. (Source)
6. The Fossil Free movement is now also targeting the PR and advertising industry. In January 2022, more than 450 scientists called via letter on the executives of major advertising and public relations firms to drop their fossil fuel clients. (Source)
7. A ‘Ban Fossil Fuel Ads’-campaign by renowned NGOs like Greenpeace and the World Wildlife Fund is calling for a tobacco-style ban on advertising for oil, car and aviation companies. (Source)
8. While noteworthy limitations and loopholes remain, such a ban has already been implemented in France and cities like Amsterdam, while other cities like Liverpool, Stockholm and Sydney are also considering it (Source , Source , Source , Source)

There are also two relevant initiatives from within the creative industry: Clean Creatives, which asks agencies to take a pledge to decline any future contracts with fossil fuel companies, and the Creative Carbon Disclosure which seeks to increase transparency on potential climate conflicts by providing a template to disclose business relations with so-called ‘high-carbon clients’. Besides fossil fuel companies, this also includes beef and plastics producers. (Source, Source)

How Inyova’s impact investors can create meaningful change

At Inyova, we believe it should be easy for people to exercise their shareholder rights. And we believe that one of the chief ways of shaping a better tomorrow is to lobby and engage with the world’s leading companies, setting them on the right path for more sustainability.

To support impact initiatives like these, Inyova has launched a new, state-of-the-art Active Owners Service. This new service allows Inyova’s impact investors to easily vote to support impact initiatives and even enables them to buy shares with the purpose of shareholder engagement with the simple click of a button.

Shareholders can take action as we leverage our impact team to research and compile evidence about the companies in our Inyova universe that have the biggest potential for impact. In fact, that’s what impact investing is all about. It’s not just about investing in the few companies that are doing everything right; but rather about identifying the companies that – if set on the right path – can have a meaningful impact.

What is active ownership?

Owning shares in a company makes you an owner of the company. Becoming an active owner simply means that you use your ownership rights to engage with and influence the company that you are invested in.

Here are some ways in which you can become an active owner:

1. You can make use of your shareholder rights like the right to vote, attend or speak at an AGM.
2. You can also engage with a company, which is just a fancy way of saying you can start a dialogue with these companies. Here, the aim is usually to address your concerns with the company and to influence their direction.

 

Why not just remove Publicis Groupe from the Inyova universe?

There are three reasons we don’t want to simply remove Publicis from our universe:

1. There are good reasons why Publicis is included in the Inyova universe. We believe it’s a strong company as it rates highly for gender equality. In addition to WPP, Publicis also has the most ambitious climate goals of all industry players. That said, we believe that through its size and stature in the industry, it has the potential to role model change by stopping to work for fossil fuel companies.
2. Impact investing is about finding companies where shareholders can make an impact by lobbying for change. We believe that Publicis Groupe, if set in the right path, can have a major impact – not just by no longer deploying its creative services on behalf of fossil fuel companies, but also by acting as a pioneer and role model for the industry.
3. We think this campaign is a great opportunity for Publicis! The company has the potential to become an industry leader by discontinuing its work for the fossil fuel industry. We believe this will not just help it mitigate downside risks in terms of its reputation as well as regulatory and legal exposure, but that it actually presents a major opportunity for the company in terms of industry leadership and talent retention.