Interview Episode 146

Sustainability has left the press office. It now lives in the P&L. And data moves decisions, never people.

Interviewed by Justin Cooke

Published

Richard Davis, Co-Founder & CEO, 51toCarbonZero

Richard Davis is Co-Founder and CEO of 51toCarbonZero, a venture-backed climate technology company he started in 2021 to bring transformation discipline, data and governance to decarbonisation in media, marketing and advertising. He works with agencies, advertising technology companies and publishers on measuring and reducing the carbon in the media supply chain, and is known for arguing that climate is now a profit and loss question rather than a corporate responsibility one.

The press release phase is over, the plumbing phase has begun

The setup.

The industry loves to talk about what is new, what is progressive and what could be done in future. Sustainability has been on the agenda for a few years now, and we have seen progress from ambition to action. A small example: we came down to Cannes by train from London. You cannot do that from the States, obviously, but every little helps, and we saw quite a few people from the industry on the same train. There is genuine intention to take the small actions that make a difference personally and in the business.

On business as usual mode.

A couple of years ago there was almost a rush to the press release. Everyone wanted to say they were doing amazing things, or planning to. Then the hard work begins and you go into business as usual mode. There is no new shiny story to tell because you are implementing things and changing the pipes in the business. That is where we are today: less press office, much more inside the operations.

Three days without fresh milk, and the media budget feels it

On climate as a P&L risk.

Look at the wider business world, where sustainability is moving across to the entire board as a key business challenge. Climate affects operations, sourcing, logistics and travel, so it has a real effect on profitability. Take the heatwave in the UK last month. Tesco, M&S and Sainsbury had fridges and freezers go off because the condensers on the supermarket roofs could not cope with the heat. For three days you could not buy a yogurt, fresh milk or your favourite meal deal. The knock-on reaches media, marketing and advertising budgets, so agencies, advertising technology and publishers all feel it. Because this is where marketing budgets come from, companies want their media partners to take the same approach. If we do not decarbonise, they cannot decarbonise their own operations.

On the new risk agenda.

People have moved from let us make a big splash to what is the risk and what is the opportunity. How does this hit the bottom line? Where are our data centres located, and is flooding or drought going to affect how our data is stored and available to clients? Does it affect the day to day of servicing campaigns? Do we need to put pressure on the big technology companies as an industry so that they are sustainable and therefore we are sustainable? Climate has become part of the risk management agenda in every business.

Good intentions, and not one line of process, plan or governance

On the gap he saw at Dentsu.

Before starting 51toCarbonZero I was chief of business strategy for the global media business at Dentsu, essentially corporate development, with ESG in my remit. What I observed was a lot of good intention about setting and hopefully achieving net zero targets, and no process, plan, governance or data technology of the kind you would use in any transformation programme anywhere else in corporate life. The inception of the business was about bringing transformation best practice into climate for media and advertising, with technology at the heart: a platform that makes the process and data management fast, repeatable, scalable and audit ready, and brings the data to life for stakeholders inside and outside the business.

On the ecosystem.

We founded the business in 2021 and we are venture backed, with Fuel Ventures as our main institutional investor. We have offices in London and the US and work with companies in any geography, because the data coming into our system comes from more than 56 different markets at the latest count. We work with agencies from Havas to Horizon Media, advertising technology companies like Magnite and Equative, and publishers like The Guardian. We are trying to bring the ecosystem together and make the data flow across it, because in technical terms your scope three is my scope one and two. You are part of my supply chain, so I have to account for your carbon inside mine.

Marketing is a big line in the P&L, and nobody's bonus depends on its carbon

On marketing's leverage.

Marketing spend is a big line in the P&L of major companies, so the moment a company looks at its enterprise emissions, media and marketing is something it will want to examine. There has not been a lot of care or attention paid to our industry. Companies solve their cocoa beans first, and their logistics. But how they work with the Googles and the Amazons of the world matters just as much, and that conversation is now coming to life. If all the advertisers came together and put pressure on big technology companies, they would have to move, because their revenue model is advertising at the end of the day.

On the missing incentive.

We run a survey every year, and we just asked 200 senior marketers in Europe and the US about their views on sustainability. One of the key barriers they identified is the disconnect between the enterprise sustainability strategy and marketing. The advertiser might have a decarbonisation plan and target that does not yet reach marketing. More importantly, there is no KPI for the chief marketing officer on sustainability. Incentives drive behaviours, and without them this does not get prioritised.

Inclusion became the cool thing to do, sustainability stayed cold and data driven

On normalising the brief.

Sustainability needs to become normalised behaviour in every creative brief. Rather than running a separate campaign about refilling your water bottle, every campaign should have a reusable bottle on the table instead of a plastic one, and an electric vehicle instead of a combustion engine car. It becomes part of any brief and it becomes the norm, and at that point it is an accepted and a desirable behaviour. A customer asked us exactly that earlier today: how do we move this from a hygiene factor to a desirable topic?

On moving hearts.

What worked with inclusion is that it was positioned and communicated as desirable. It is not just the right thing to do, it is the cool thing to do, with benefits for the business and for the people involved. With sustainability we took a colder, data driven approach. Data move decisions, but data do not really move people. You need to move hearts as well, and I think we have missed that trick.

Common rules first, then stop trying to crack the whole chain at once

On pre-competitive standards.

By nature our industry is very competitive, so pivoting to a pre-competitive mindset is quite a change. Even so, bodies like Ad Net Zero and the Advertising Association are setting minimum standards for what sustainability means in advertising, and those standards are being created with all the different players at the same table, which is something of a first here. It is what has happened elsewhere. If you do not have a common playground in food or construction, you cannot play the game, because you do not have the same rules. Advertiser bodies like the WFA are setting standards too. We cannot achieve this unless we do it together.

On starting with your own operations.

As an industry we have a tendency to overcomplicate things. There are simple ways of looking at the impact of a marketing services company, from agency to advertising technology to publisher. We have been culpable in trying to crack the whole thing at once, wanting the full view immediately. Start with your own operations. Then look at your tier one suppliers and ask them to do the same journey and meet the same credentials. They will ask their suppliers, one step removed, and that creates the effect we have seen in food and beverage, where you work one step at a time until you reach the person growing the crop. You do not get there on day one.

Stranded assets, 15 year leases and a client portfolio that may not survive

On the commercial argument.

In media and advertising it is new business, new business, new business, so the question is always how to use this to differentiate and win pitches. That is fine, but there is another reality: how this hits the P&L today. There are places in the US where flood risk has risen significantly because the models feeding insurance premiums now price in climate change, which means assets can become stranded assets and a liability on the balance sheet. Other industries think about this daily. We do not. Data centres matter, but so do 15 year office leases near a waterfront, business travel disruption, and the client portfolio mix: which sectors are exposed, and should new business be pointed at more future-proof industries, especially on long-term deals? My advice to any leader is to think about how this affects your client's business, your business and your personal future. Once you look at the big picture, there is no escape.

On the two kinds of call.

There are two main drivers when we get a call. One is firefighting: a client or prospect has asked a question about what they are doing in this space, sometimes very basic, sometimes quite progressive, and they need a solution now. The other is an internal trigger: we have heard about this, it is probably important, can you come in for a chat. If they become convinced it matters, you build a plan in a more orderly way. Those plans may have big ambitions, but you start small and build over time, because you cannot disrupt the business or drive people away from their day to day. You do it in a paced, responsible and informed way.

Greenwashing is better than green nothing

On the geopolitical stress test.

The geopolitical change has forced us to be more practical and more business driven, and to take the ideology out, so it is the right thing to do for the business. We are rebalancing our geographic footprint, playing defensively where the conversation is in retreat and offensively where there is opportunity, and diversifying beyond climate and carbon into responsibility and purpose more widely, which is a warmer framing. Stress testing a hypothesis is good, so I welcome the challenge. There is a media reality, the headlines, and there is a reality in what people think and do. An election does not change global sentiment overnight. People still believe in the same values, they just talk about it less vocally, so the language has changed or been put on pause.

On greenhushing and green claims.

We live in a trust poor era, and sustainability plays into that wider question of people not knowing what to believe. Companies have gone from greenwashing to greenhushing: I will not talk about this because I am afraid I might get it wrong. A bit controversially for my industry, I take the view that greenwashing is sometimes better than green nothing. At least you are saying something and promoting the discourse. The new EU green claims regulation is not helping the caution, so I expect six to eight months of brands working it through with lawyers and educating themselves on what they can and cannot say, with a level of subjectivity because it comes down to what the customer perceives. Then things turn around. My advice is always to invest when the market is low. If nobody is talking about this, that is your time to talk about it.

AI costs energy now and should pay it back by 2035

On the IEA numbers.

AI has an environmental impact: data centres are energy intensive, and building them is energy and materials intensive. The IEA study on the projected energy costs and savings of AI between now and 2035 says that in the short term a lot of energy goes into building data centres and running models, but applying AI to industry, logistics and building management, the three key emissions hotspots, delivers efficiencies that outweigh what AI consumes. Net net, less carbon. It is a 10 year prediction, so accuracy is uncertain, but long term I believe AI is a positive game changer. Short term we take responsibility: smaller models for simple queries, not using it for everything, asking data centres for renewable tariffs or on-site renewables, reducing tokens in the input. The good news is that the environmental cost also equals a financial cost. We are moving from AI for the sake of AI to AI for a reason, where there is an ROI.

On batteries and idle video.

From a sustainability point of view I am excited about the improvements in capacity and cost efficiency of energy storage. Battery costs are falling significantly, which means we can probably have a fully renewable energy system without rebuilding the grid. If batteries sit in every real estate asset and every car is electric and plugged into the grid and your house, you store energy in a distributed way. That is a game changer for the environment and for energy security, because we would produce energy on site. For media and advertising, the next phase is applying AI to more sustainable development, production and storage of creative assets. I read a statistic that 50% of video assets sit idle on servers somewhere in the world, still available and never used. The capacity to churn through that data and find the inefficiency in the ecosystem will be a game changer.

The board question

If marketing is one of the largest lines in our P&L, why does no one in our marketing leadership carry a carbon KPI, and what would change next quarter if they did?