Sustainability Disclosure Requirements: What it means for brands.

Put simply (because everything on this topic gets complicated quickly) this means that the corporate world is going to have to publicly disclose its climate impact through Sustainability Disclosure Requirements (SDRs). As a brand consultant I find this interesting because brands have been making all sorts of sustainability claims for years, without anyone really checking their homework. They’ve built brand platforms and messaging around saving the planet to gain competitive advantage over their competition. They’ve talked the talk. Very soon they’re going to have to walk the walk too.

So, what’s the legislation?

The UK Treasury has published a document that sets out its vision. Greening Finance: A roadmap to sustainable investing. 

This is focused initially on the world of finance and investing, but it’s clear that the legislation is planned to reach across all sectors of the UK economy. This is just the start.

In the document, The Treasury outline the new SDRs which mean that organisations will need to set out the environmental impact of the activities it finances.

It’s not yet clear when the new rules will come in as there is a period of public consultation, but The Treasury and Rishi Sunak have been explicit on what they’re looking for and have set out a framework in the report that offers some hints as to how the reporting might work.

UK Green Taxonomy

This is the meat and drink of the report. The Green Taxonomy will define what counts as ‘green’ for UK businesses. The report recognises that there is not a currently accepted definition of what economic activities count as environmental sustainability. This makes it difficult for companies, investors and consumers to clearly understand the environmental impact of their decisions and can result in greenwashing. To combat this, the government wants to set out the criteria that specific economic activity must meet to be considered sustainable. The UK Green Taxonomy is designed to do this and I think it will be helpful in defining how UK corporates choose to integrate sustainability into their brand messaging. Its aims are three-fold and are refreshingly straightforward:

1. Create clarity and consistency for investors:

Investors will be able to easily compare the environmental performance and impact of companies and investment funds to inform their financial decisions.

2. Improve understanding of companies’ environmental impact:

Taxonomy disclosures will facilitate an understanding of companies’ contribution to environmental sustainability.

3. Provide a reference point for companies:

The Taxonomy will provide companies with an informative performance target. For example, they can also, on a voluntary basis, use the Taxonomy to develop and communicate their net zero transition and capital investment plans.

The taxonomy has six environmental objectives that stake out a clear territory for brands to get to grips with – not just how they operate, but how they can start to frame the message for the climate impact of their operations. 

So, what does it look like?

No 1. Climate Change Mitigation

Stabilisation of greenhouse gas emissions consistent with the Paris Agreement and net zero by 2050.

No 2. Climate Change Adaptation

Reducing the risk of adverse impact of current or future climate change on an economic activity, people, nature, or assets.

No 3. Sustainable use and protection of Water and Marine Resources.

Contribution to the good environmental status of bodies of water or marine resources or preventing their deterioration.

No 4. Transition to a Circular Economy.

Maintaining the value of products, materials and resources for as long as possible, thereby reducing the environmental impacts of their use.

No 5. Pollution Prevention and Control.

Including preventing and reducing emissions or adverse impacts on health, improving levels of air water and soil quality.

No 6. Protection and Restoration of Biodiversity and Ecosystems.

Protecting, conserving, or restoring biodiversity or to achieving the good condition of ecosystems, or preventing their deterioration.

These six objectives will each be underpinned by a set of detailed standards (Technical Screening Criteria) which identify how a company’s activity can contribute to each environmental objective. These disclosures are going to make for very interesting reading for lots of stakeholder groups - from shareholders to consumers alike - giving them an indicator of a company’s current environmental performance, as well as its investment in sustainable activities.  So, organisations are going to have to be very careful about what they say they believe in and aspire to versus what they do. This Green Taxonomy could spell the end of greenwash and that’s got to be a good thing.

Just as an aside - it’s interesting that there’s not a single mention of the word ‘carbon’ in any of these objectives. Don’t know if that’s deliberate, but there has been quite a bit of research that outlines how difficult a concept ‘carbon’ is for consumers to wrap their heads around. From negative to positive to net zero; it can all get a bit much. So, hats off to them if these are deliberate decisions. It’s just easier to talk about pollution prevention (at the top level) than getting into the weeds around specific types of carbon reduction straight off the bat.

This legislation is focused entirely on a company’s operations and their climate impact. However, I think that there are likely to be three marketing relevant second order effects driven from it:

1. Common Terms

Standardising the criteria will create a set of common terms for reporting and labeling. For the taxonomy to take root, I’d argue that this is of fundamental importance for consumers to be able to make comparisons and purchase decisions. The danger of lack of adoption is that we end up with a fresh logo soup of proprietary environmental style kite marks. And this will just confuse people even more.

2. Confluence of Messaging

The setting of criteria to report performance will push marketing messages into the same areas. Companies will inevitably want to spin their progress to their various audience groups, which means many businesses will end up saying very similar things, to similar audience groups in a similar manner. This creates a new challenge: how to do this distinctively if everyone’s doing the same thing? However, the transparent nature of the reporting may help to end the process of greenwashing. And we all say amen to that.

3. Catalyst for Review

Full brand reviews often need a catalyst and this is a big trigger. It’s the ideal time for brands that aren’t sure how to integrate sustainability into their brand to take it all apart and start to evolve things. 

This is all very speculative, and it’s going to be interesting to see how quickly (if at all) this legislation evolves and comes to life. 

This isn’t to say business isn’t trying. It is and we’ve worked with brands in this area for several years, but over the last two years I’d say that business is really trying to get to grips with how sustainability fits into their brand - and I’ve written a couple of pieces on how this is going for them. Safe to say that some are better at it than others. However, with climate dominating the agenda in almost every facet of political, social, and corporate life, it does feel like the screw is turning and those brands that haven’t tried to get to grips with what this means for them are in danger of being left behind. Over the next decade, the climate issue is going to ratchet up the pressure - forcing governments, businesses, and all of us to make big changes in the way we live. From a brand perspective, you simply can’t ignore it. The sooner you do the foundational work to understand how this is going to change or complement your existing brand, the sooner you galvanise the business against negative outcomes (and promote positive ones) in the long term.

Top tips for integrating sustainability into your brand.

In addition to these useful hints from the UK Green Taxonomy, we have several complementary suggestions worth highlighting if you’re thinking about how sustainability plays into your brand’s DNA…

1. Accept it’s a journey

You can’t wait until you have a fully formed story to tell. You’re in this for the long haul, so make a simple start. It’s much easier and more credible to talk about the small changes you’re making on the journey, rather than over-claim and be caught with your pants down. 

2. Review your core brand elements

Run the rule over all your core brand elements and have a think about how and where sustainability commitments can fit with what you already have. How literal do you need to be? Does the word ‘sustainable’ have to appear explicitly (which can be clunky) or can it be implied across a range of values? This is also a chance to tidy up (hint: get rid of) any generic, meaningless brand values that just create noise and distraction.

3. Remember you’re not a Sustainability company

Unless you are one. But one of the common issues we see is that organisations can lean into the sustainability cause with such enthusiasm that they begin to sound like a pureplay sustainability company, rather than a manufacturer of X or Y. It’s important to get the balance right between the complementary and supporting sustainability messaging and the primary product or service messaging. In this case, sustainability is likely to play a tie-breaker role in the customer’s mind between two similarly matched products.

4. Clarity of Language

As we saw earlier, carbon, the chemistry around it, and the plethora of emerging terms get complicated quickly. Be mindful of the terms you do use - try to use normal everyday language to connect and avoid jargon at all costs. 

5. Sustainability & innovation are best friends

It’s likely that embracing sustainability will create a forgiving platform from which to champion new products or services - or simply to talk about the positive impact you’re making on the environment or in customers’ lives. Innovation has been an ill-defined term in business for years but combining it with sustainability gives it a context and purpose. Use them both to your advantage.

6. Understand your customers’ journey

Get to grips with what your customers want from you when it comes to sustainability. Is it central to their purchase decision, or is it simply a tiebreaker? (Remembering that what consumers say and do are two different things). Once you truly understand where and how you fit, you’re able to turn the sustainability volume up or down as required.

7. Engage all your stakeholders

Chances are that every group will have a view on what and how you should be dealing with this subject matter. Our advice is to get them involved in the project early - run research groups and take soundings from them. Keep them involved throughout and demonstrate that you’ve listened. In our experience, too many brand change initiatives don’t make the impact they should because the initial consultation and engagement wasn’t broad or deep enough across the organisation.

There’s so much noise around sustainability and it’s going to get louder. I think the next ten years will have a Darwinian effect on those businesses that don’t embrace it as a core part of their brand. Brands that don’t embrace sustainability simply don’t have a sustainable brand. The legislation is pending, and consumers are more discerning than ever. Welcome to the new era of transparency around sustainability.

We recorded a podcast to dive a little deeper into this topic. Have a listen.