What you need to know:

• Blue chip firms are racing to decarbonise to meet 2030 sustainability targets. They can’t hit them if their suppliers, partners and customers do not also cut emissions.
• So they are starting to align the contracts they award on that basis. “If you haven’t got [emissions reduction] baked into your business,” per Telstra CMO Jeremy Nicholas, “we are not going to shortlist you – it’s just not going to happen.”
• “There’s $16bn sitting within the Australian advertising industry in terms of media spend. That is significant market influence,” said Gloster Advisory principal Sunita Gloster. “So look at your partners and put some of that $16bn into action.” 
• Microsoft Chief Sustainability Officer Brett Shoemaker said every firm he has spoken with has made business gains on the back of sustainability investment. But unless businesses massively ramp up investment, the technologies required to hit net zero will not scale.
• The trio suggested marketers can drive change within their organisations – starting with product, packaging, ecom delivery and returns – and by highlighting carbon choices to customers on the products and services they buy.

Telstra and Microsoft have urged greater collaboration from business partners to accelerate economy-wide decarbonisation. Microsoft Australia’s Chief Sustainability Officer said firms that have made sustainability investments are universally reporting business growth as a result. Telstra’s CMO warned laggards will ultimately lose contracts. Businesses must therefore prepare for both carrot and stick – and marketers have a key role in driving change.

Crunch time

Businesses globally and locally are making commitments to decarbonise their operations – with many making significant progress in reducing the elements within their control, classed as scope 1 and 2 emissions.

The challenge is reducing scope 3 emissions – those coming from up- and downstream supply chains. These make up 97 per cent of Microsoft’s footprint and 83 per cent of Telstra’s. So their ability to hit looming net zero targets hinges on suppliers and consumers making major reductions in emissions that arise from doing business with them or using their products and services.

For marketing, an industry built to sell more stuff to more people, that presents a fundamental challenge. But Telstra CMO Jeremy Nicholas, Microsoft Chief Sustainability Officer Brett Shoemaker and Gloster Advisory principal Sunita Gloster outlined practical steps for brands and the marketing supply chain at last week’s Mi3-LinkedIn B2B Next conference: Commit to action now, measure and manage carbon footprints to determine and deliver on quickest wins, and start giving customers carbon choices.

Investment, regulatory challenge

“We’ve got 2000 days before 2030” the point at which Australia has committed to cut emissions by 43 per cent relative to 2005 levels. “We're at the point where every company and every industry is going to either transform, close – or face acute survival problems in getting to what is going to be a very bumpy 2030 and a very bumpy 2050,” warned consultant Sunita Gloster, a former CEO of Australia’s peak advertiser body, the AANA.

She said the two biggest challenges facing business and brands are regulation, with markets clamping down on how businesses report climate related financial disclosures and the ACCC gunning for greenwash; and access to capital, with massive investment required to decarbonise the economy. “Investment is the underlying issue – money talks,” said Gloster. “This whole agenda needs clarity of investment, clarity of regulation, and that will be the driving factor for all of us to change.” 

Microsoft Chief Sustainability Officer Brett Shoemaker is “less worried about policy and regulation”, given business and markets will ultimately “have to respond to policy that is already being enacted elsewhere – that is inevitable”.

But he agreed capital investment in carbon removal is a major challenge. 

“Last year Microsoft purchased 1.3 million metric tons in carbon removal offsets. In doing so, we feel we've purchased the vast majority of the world's high credibility supply,” said Shoemaker, pointing out that there are “probably only 15 or so” companies providing robust 100 per cent carbon removal solutions. “Many of these industries and solutions are in their infancy. If we're not investing today… then there won't be a solution that can scale to meet the requirement.”

On the flip side, he said businesses that invest in sustainability now are deriving material gains.

“I have yet to have a single client or anybody in this space and say that the investments they've made from a sustainability standpoint haven't also paid dividends in terms of their business growth … it's the economic opportunity that affords us the most chance of advancement.”

Act or face action

Telstra CMO Jeremy Nicholas urged brands not to use fear of falling foul of regulation “as an excuse” for inaction. “Don't let regulation scare you off. It's there to keep us on the straight and narrow and make sure we all do the right thing, but make sure it drives you forward.”

He said the Federal election was the “biggest market research event” in determining public demand for action on climate change. “So if our market is there, we have to meet them,” said Nicholas. “We've finally got a bit of political leadership and now is the time to do something about it. At Telstra, we're doing a lot … and it's incumbent on us all to do more.”

As the likes of Salesforce launch net zero supply chain calculators that rank potential suppliers based on carbon emissions, Nicholas said businesses now face increasing pressure, especially within business-to-business and enterprise markets.

“On the B2B side of our business, when we are selling Telstra to big enterprise, you need those [ESG] credentials, particularly if you are dealing with European companies, a lot of the big US firms – and certainly dealing at government level – you won’t get onto the procurement list,” said Nicholas.

“We have to meet our climate targets at Telstra, so we are looking at our supply chain and saying 'if you haven’t got those things baked into your business, we are not going to shortlist you – it’s just not going to happen'. So it’s becoming increasingly like that in both directions.”

Nicholas reiterated that mandate applies to the media supply chain: “I think we can put that requirement within briefs. And once the client’s money starts to shift, the media owners tend to change their behaviour as well.”

Sunita Gloster echoed that call. “There’s $16bn sitting within the Australian advertising industry in terms of media spend. That is significant market influence that can shape scope 3 emissions. Who you choose to be part of your supply chain, how you shape behaviour, is within marketers’ control. So look at your partners and put some of that $16bn into action.” 

Product, packaging, planning

While there are questions over how much marketing can influence sustainability mandates beyond media and advertising, Nicholas said Telstra's marketing team is driving major cost savings – upwards of 50 per cent – by taking leading initiatives including packaging. The firm has also developed a “smart modem … which is probably in about 2 million people’s homes, working with the supplier to make the components 95 per cent renewable” as well as recyclable, he added.

Meanwhile Telstra’s telemetry business is working with enterprise fleets to route more efficiently, reduce journeys and take vehicles off the road, while its forthcoming energy business launch will leverage the telco's major investment in windfarms and solar to decarbonise its broader business to supply renewable electricity at no additional cost to consumers – which will ultimately help reduce Telstra’s downstream emissions.

Microsoft, which has pledged to go carbon negative by 2030 – and has a “moonshot” goal to remove all the emissions it has ever produced by 2050 – has incentivised its business units by introducing internal carbon pricing and budgets to influence decision-making. The upshot is that continues to reduce scope 1 and 2 emissions, which fell by 17 per cent in 2021. But scope 3 emissions last year ballooned 23 per cent, partially due to an unforeseen explosion of Xbox sales, gaming and data centre demand as the world locked down and switched to remote working.

Sunita Gloster suggested demand volatility compounded by uncertain political and regulatory frameworks requires exponential scenario planning by boards and marketers. But she said the pandemic also serves as an example of how quickly, government, business and consumers can change.

“We went from working in the office to remote working almost overnight. That is proof that when we put our minds to it, we can make change fast.  We learned that we can collaborate globally when our lives depend on it.”

Carbon choices, hard returns

Gloster said businesses should harness that pandemic mindset to decarbonise at pace.

“The truth is we’re going to get to a point really soon where businesses are going to have to make decisions for planet before profit … and investors and shareholders are going to have to wrestle with that.”  

She suggested the pandemic-fuelled ecom boom might be a good place for brands and retailers to start adjusting both corporate and consumer attitudes.  

“Are we ready to turn off free returns on online retailing? Because if we want to drive behaviour change, we may have to do that – and communicate to consumers that they have a role to play. How about we take a week to deliver that parcel and from now on, there are no free returns? They are some of the conversations we need to actually start having and the choices we need to make, rather than just sitting and talking about purpose and profit.” 

Telstra’s Jeremy Nicholas thought that approach could begin to move the needle.

“Even just offering people the choice on deliveries – so if you want same day or overnight, communicating that the carbon impact is high, but a one week delivery may be low or neutral. If we give people that option … make people think about that [carbon impact] within the customer experience … there are definitely opportunities there … and it doesn’t have to be perfect.”

Microsoft Chief Sustainability Officer Brett Shoemaker said marketers also have a critical role to play in driving broader network effects.

“I think of my marketing partner as my voice, to tell not just the story of what we are doing and why we are investing inside the organisation and to our partners, but also [to harness] their knowledge of the client and the consumer.

“[The marketing function] is such an important partner for me in terms of their ability to sell-in the opportunity, but also to continue to propagate that opportunity out into the market,” said Shoemaker.

“Those that have the ability to do more, should.”