30/07/2024
Until now the focus of lobbying regulation has been companies. Yet as companies’ lobbying is becoming more transparent, the regulatory focus should be shifting to service providers – such as advertisers, lawyers and lobbyists – as well as to business associations who are increasingly supporting business’ lobbying while escaping public scrutiny and sustainability-related requirements.
A growing number of companies are becoming aware that the way they engage politically – be it through lobbying, political spending or think tanks – is as important as their operations.
Companies’ political conduct is increasingly scrutinised not only by lobbying watchdogs and investigative journalists, but also by investors, active employees as well as consumers. No surprise demanding more transparency on corporate political activities and its internal governance is currently among the most popular ESG asks in shareholder meetings alongside climate change resolutions.
As a result, to maintain their license to operate, companies are expecting to internalise not only their environmental and political footprint but also their ‘political footprint’, that is the meetings and other subtler forms of influence into policymaking.
Due to mounting pressure, more companies begin making the exercise of their political influence more transparent – at least on paper. Prompted by numerous self-proclaimed standard-setters – be they ESG data providers or sustainability frameworks – companies disclose more about their political footprint than what lobbying regulations (at least where they exist) do require. A few companies, such as Unilever, are also self-assessing their alignment with the many trade associations they belong to. This is key as too often trade associations’ lobbying diverge from their members’ policy stance, thus creating a decoupling between what individual companies say and what trade associations lobby for.
Yet as more businesses are set to embrace greater transparency in their political conduct, they may be tempted to rely more not only on opaque business associations but also on Professional Service Providers (PSPs), such as law firms, public affairs consultancies, advertising agencies and other consultants – to do their lobbying.
This explains why The Good Lobby – in addition to shedding light on the de facto lobbying regulators (that is ESG data providers and sustainability frameworks) is working both on the rather mysterious work of business associations (their governance, funding, repertoire of influence) and professional services providers (notably law firms and public affairs consultancies).
Amid mounting pressure on companies, we are about to assist to an imminent shift away from direct to indirect corporate political engagement.
As neither service providers nor business associations are subject to an equivalent level of scrutiny to companies, be it through regulation or other forms of scrutiny, this shift will be highly consequential.
Hence the incipient attention towards the ‘enabling’ role played by advertisers, lawyers, and public affairs consultants in supporting companies when engaging politically.
Professional Service Providers (PSPs), such as law firms, public affairs consultancies, advertising agencies, accountants and financial services, have flown under the radar when it comes to carbon accounting, reporting and other regulatory requirements. While these entities inherently have low operational emissions, their potential influence on emissions reduction through their advisory work is considerable.
These sectors are hugely influential as they advise and provide services to all other major companies in the world. While they don’t directly produce products, they influence the design, manufacturing, placing into the market, sales and ultimately the success of client business. In particular, service-provision nearly always has at least some effect on the climate – be it through PR’s ‘information pollution’, PAs’ ‘lobbying pollution’ or law firms’ ‘legal pollution’ – and this can have a large effect. When it comes to the fossil fuel industry, it’s by now abundantly clear that the money spent on receiving advice – be it on limiting legal liabilities or pushing back against further regulatory restrictions and advertising messaging – outpaces the money spent on decarbonization. PR firms, ad agencies, and law firms work behind the scenes to protect the fossil fuel industry and slow down the clean energy transition. This was recently acknowledged by the IPPC when it found that “middle actors – professionals, experts, and regulators – play a crucial, albeit underestimated and underutilised, role in establishing low-carbon standards and practices”. In other words, despite the fossil fuel industry having knowledge of the climate crisis as early as 1959, they continue to resist any change. According to an analysis by Corporate European Observatory (CEO) and Corporate Accountability, 8 out of 20 of the sponsors of United Nations Framework Convention on Climate Change (UNFCCC) climate talks that took place in 2022 in Egypt directly support or partner with the fossil fuel industry.
Hence the mounting scrutiny on professional services providers increasingly labelled as “enablers” of critical industries, such as fossil fuel. The question is therefore how to measure and ultimately reduce ‘Serviced Emissions’ (also referred to as scope 4 or scope X) — that is emissions associated with and, in some cases, resulting from the services provided across projects and client work, particularly through working in high emitting sectors.
In the advertising sector, Purpose Disruptors have developed a tailored framework – Advertised Emissions – for advertising agencies and operators. It allows the advertising industry to measure the holistic impact of its work. Other sectors are following suit 1As originally developed by Race to Zero, https://climatechampions.unfccc.int/system/net-zero-for-
professional-service-providers/ , with ‘Advised Emissions’ for lawyers adopted by The Law Society of England & Wales and additional tailored frameworks for other sectors might be soon in the making.
The Good Lobby has embarked on a major project aimed at envisioning a framework for ‘lobbied emissions’, that is emissions associated with and, in some cases, resulting from the lobbying services provided across projects and client work, particularly through working in high emitting sectors.
As public affairs firms may proclaim their net zero aims, they may also want to provide themselves with a dedicated framework. Recently, several PAs firms have been questioned for their advice to contested clients before public authorities for allegedly committing:
– False and misleading advertising (e.g. their submissions to policy makers or public messaging portray positively clients whose track record is abysmal on green matters);
– Unfair commercial practices (e.g. their submission to policy makers or public messaging portraying positively clients whose track record is abysmal on green matters)
The same may occur to business associations’ claims and statements made publicly or to policymakers.
Moreover, some service providers have been de-certified by B Lab and therefore stripped of their certification as B Corp 2B Lab UK said it had found that Havas’ actions constituted a breach of the B Corp community’s core values as expressed in its Declaration of Interdependence, and that Havas had declined to take unspecified remedial action required to retain its certification.
Take-away
If lobbying regulation is to succeed it must shift its focus to service providers – be they advertisers, lawyers or lobbyists – as well as business associations, as their work largely escape public scrutiny and sustainability-related requirements. As such it lags behind the realities of corporate political conduct.
Written by
Prof Alberto Alemanno