The ESG Audit: Dentsu

With Insulate Britain protests on the M25 entering their second week - inconveniencing tens of thousands of commuters as well as disrupting an essential piece of infrastructure - the environment hasn't been out of the headlines ahead of COP26.

However you don't have to be an irritant to bring environmental matters to the fore - positive change is possible and the advertising industry is doing its bit.

In the second of our audits on the top holding companies, Dentsu's global chief sustainability officer Anna Lungley - a member of Dentsu International’s executive leadership team - talked to us about its efforts in the environmental, social and governance (ESG) arena.

Dentsu has laid out a 2030 Social Impact Strategy that encompasses three focus areas responding to environmental and societal challenges: sustainable growth, fair and open society, and digital for good. The goals of this three-pronged approach include: a 46 per cent reduction of emissions by 2030; a target of 50 per cent of Dentsu senior executives to be female by 2025; and support fort 100,000 young people to become "empowered digital citizens".

Dentsu already claims to be the first company of its kind to achieve RE100 status by switching 100 per cent of operations to renewable electricity, and has reduced carbon emissions per full-time employee by 85 per cent in 2020. But there's more to do as Anna Lungley told us:

Environmental, social, and governance (ESG) criteria are becoming an increasingly popular way for brands and businesses to be evaluated. How much of a competitive advantage is it for a business like yours? Also how important is ESG when it comes to attracting both clients and talent?

“ESG is a recognition that business needs to take a long-term view of its role and responsibility in society, and the pandemic has only reinforced that. In addition, the reality of the scale of change required to achieve net zero is unprecedented and requires new skills, business models, underpinned by consumer and sector-wide transformation. That’s an opportunity for our people and clients. It’s not a competitive positioning, it’s the only credible growth strategy to attract and retain the best people and clients.

“Our people and clients, rightly, have high expectations of us, and increasingly our industry will see them make their own choices based on the progress companies are making. At dentsu, Social Impact is one of six pillars of our strategy and the lens through which we do business. We’ve consciously set our Social Impact ambitions high to lead in our industry - we have the highest carbon disclosure rating in our sector. That creates competitive advantages in attracting and retaining talent, and clients. 40% of millennials chose a job because of company sustainability and that number is even higher for Gen Z.”

WPP was recently quoted as saying that “Demand is off the scale” for ESG-related work - how significant is it when seen as a potential revenue growth in advising clients in areas such as climate change, racial equity, privacy and responsible marketing?

“Issues that society was facing before the pandemic have only being exacerbated. So it’s no surprise that demand is increasing. The events of the last year have created tipping points – climate change protests, the Black Lives Matter movement, the way that people rewarded or punished brands depending on their response to the COVID pandemic. You can’t separate brand reputation from social issues anymore. Our research shows that there will be greater consumer activism through purchasing decisions increasingly based on social issues. Consumers will consider brand inaction on climate change to verge on criminal negligence. That’s going to require a new type of relationship and trust between brands, consumers, regulators and our industry. ESG can provide a framework within which brands can measure, report and communicate on the key issues for their business.

“Every brief now includes an element of ESG although priorities do shift by region. In the Americas racial equity is a top priority for clients. In APAC we have seen an explosion of interest in climate change and sustainable food systems. Responsible media is a universal theme.

“But demand for ESG related work is also not a one-way street just led by clients – we see it as an opportunity. Every business and sector is facing exponential disruption. Clients are open to informed, data led insights that can help them navigate this change, create new business models and engage a more ethical and sustainable consumer. Increasingly people aren’t looking for more stuff, they want better interactions with brands that reflect their own values. We can help clients live up to this expectation through insights, transparency, creativity and innovation. And this is what our people want to be working on! We have this incredible opportunity to drive positive change, to shift consumer behaviour and inspire people to better and more sustainable ways of living. It’s why helping consumers make more sustainable is a key pillar in our 2030 Social Impact Strategy.

“We’re seeing more interest in creative solutions that can influence consumer behaviour and mindsets and create ‘pull’ towards different and more sustainable products. We’ve worked on an application to reduce food waste, support sustainable fishing: created interactive advertising to demonstrate the impact of air pollution and challenged attitudes to gender violence. Ten years ago these campaigns would have been unusual, now they are a core part of our portfolio.”

As a holding group what is your stance on ESG for your agencies, your clients and your shareholders? And does that preclude you from working with certain businesses?

“Our Social Impact Strategy is one of the most integrated and advanced for our industry so covers all agencies and work that we do. It’s a core pillar in our business strategy, we’ve embedded it in our KPIs, leadership reward, training, and our strategy for business transformation. We’ve established a global Sustainable Business Board chaired by our CEO Wendy Clark to drive our social impact strategy through everything we do, so there’s no doubt in our people and clients minds that this is not just a commitment, it’s a way of working, and a driving force behind our transformation and creativity.

“Tackling societal issues and climate change takes time, and everyone is at different starting points, so we need to look at each client individually. If they can evidence that they are embedding action on climate change, and tackling social issues, then we will partner with them. Our work can help accelerate their progress with creativity, innovation and new ideas – but we need to be on the same path. That said, we have a very clear set of business values and beliefs, and we won’t do work that conflicts with these.”