Ad tech firms are lagging far behind brands and big tech in setting decarbonization targets in the advertising and marketing industry, according to Ad Net Zero's first annual report.

The report focuses on Ad Net Zero’s global supporters, which are now up to around 200 and range from holding companies including WPP and Omnicom Group to tech companies such as Google and brands including L’Oréal. Ad Net Zero, which opened its U.S. chapter in February, looked at what targets these companies had set as of September 2023 to reach zero carbon emissions.

“What we’ve done here essentially is look at the data of all our supporters and say, ‘OK, who set science-based targets? And what kind of targets have they set?” Ad Net Zero Chair Sebastian Munden said. “We see advertisers and tech platforms, in our supporter base, have done that and we see agencies and production companies in the process of doing that.”

Ad Net Zero is mandating that its supporting companies set targets by June 2024 if they have not already. It’s not clear what will happen if they don’t.

“We’re obviously very hopeful and confident that people will have set it by then,” Munden said. “Our job at Ad Net Zero is to encourage and support the companies across the industry to set targets and then to create action plans against those targets. Our focus is really making sure that once targets have been set, there are real concrete programs and activity systems that companies can put in place to reduce their carbon footprint.”

Long-term and near-term targets

The group looked at both net zero targets that will take longer to achieve as well as more immediate, near-term targets companies have set.

The report found that tech platforms are leading the charge with 100% of these supporters setting net zero targets, followed by 88% of marketers setting these targets.

“We are seeing progress particularly amongst advertisers because they understand the importance of reporting,” Ad Net Zero U.S. Director John Osborn said, adding that their momentum will drive others to act. He said marketers are already asking about these types of commitments when assessing which agencies to work with in account reviews.

More: Leaders working to reduce the industry’s carbon footprint

The long-term, science-based decarbonization targets Ad Net Zero looked at are based on the definition of the “Science Based Targets Initiative,” which essentially mean companies are making commitments to reduce their carbon footprint by 90% by 2050, “in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement,” according to the firm. Companies typically have set these targets to be achieved by anywhere from 2030 to 2050.

Ad Net Zero has also partnered with The World Federation of Advertisers’ Global Alliance for Responsible Media (GARM) to outline certain near-term targets that advertisers can take over the next five to 10 years before setting the larger 90% reduction goal. One example would be reducing their carbon emissions by a lesser percentage by 2025 by taking steps such as decreasing the number of ad tech partners involved in media buying or even reducing the size of the videos advertisers put out digitally.

Agencies, ad tech, media and production

The findings show more work has to be done on the agency side. Just 35% of agencies have set net zero targets and 54% have set certain near-term targets, per the report. Osborn said he’s encouraged by how many employees are starting to push their companies to act and is seeing conversations shift from the sole focus of chief sustainability officers to the entire C-suite.

Meanwhile, only 10% of ad tech firms have set net zero targets and 23% have set near-term targets, the report found.

One possible reason why ad tech firms could be so far behind is that many are new and small-to-mid-sized businesses, without as many resources as the conglomerate tech platforms or brands supporting Ad Net Zero, according to the report.

Only a quarter of media owners in the supporter base have set net zero targets so far. As the report pointed out, “this sector is one of the largest contributors to the footprint of the industry overall and is therefore a key priority, with recent estimates published by WPP suggesting that media planning and buying could account for up to 54% of their total emissions across all scopes.”

Production companies also lag and are “under-reporting” their progress, according to Ad Net Zero. The report only found 37% to have set net zero targets and there is no data on how many others have set near-term targets.

Inspiring change

Just because a company did not publicly report net zero or near-term decarbonization targets does not necessarily mean they are not doing sustainability work, Munden said.

“In many cases, people started doing the work and then realized that, actually, it would really help to set some targets,” he said.

After targets are set, companies are encouraged to report their progress annually. Ad Net Zero will be keeping track of that reporting going forward as part of its larger five-step action plan, which begins with reducing emissions in business operations. The next steps are reducing emissions through producing advertising campaigns; reducing emissions through the media and buying process; reducing emissions through industry awards and other events; and then harnessing the power of advertising to inspire consumer behavior change.

“There’s the decarbonization of the process but as that starts to get into an orderly rhythm, there’s the impact that the advertising industry can have at driving better choices by customers and citizens,” Munden said of the group’s ultimate goal of inspiring change. “The advertising industry has a multiplier effect on all the other industries; the move towards electric vehicles, the move towards renewable energy.”

It’s already clear that younger consumers are driving change by choosing to buy from brands that are working towards sustainability. Younger employees are also pushing their companies to act on reducing their carbon footprints.

Companies can also stand to boost their profits by becoming more sustainable, Osborn said. Companies are “finding that you can be purposeful and drive higher profits at the same time. They’re not mutually exclusive,” he said.