Regulators take aim at ‘lobby-tising’

Greetings from New York, where a hot new consumer trend emerged this week: checking the AQI (air quality index) on your smartphone. Thankfully, my own device tells me that the AQI is improving, after delivering terrifying readings earlier this week due to wildfires in Canada. On Wednesday, New York registered the worst air quality of any major world city.

The big question now is whether the smoke shock will prod Wall Street and Washington to embrace tougher action on climate change — or be treated as a blip. Adaptation measures are already on display: there has been a scramble for home air filters, and the company FindStorageFast says that in New York in the past week “searches for ‘sell my home fast’ soared by over 26 times the average volume” on Google. That echoes behaviour seen among wealthy residents of smog-filled emerging market cities — and on America’s west coast, parts of which have been grappling with smog for a long time. (Indeed, some of my California friends reacted to the New York news this week with hints of schadenfreude — and sardonic social media memes.)

But will adaptation among the wealthy undermine political pressure for mitigation? Let us know what you think. Meanwhile, in today’s newsletter we look at the rising risk of regulatory action on green advertising claims. Have a good weekend. (Gillian Tett)

Regulators’ Shell ruling is a wake-up call for advertisers

Last summer, activists in Bristol were surprised to encounter a large poster in the south-western English city, touting the green credentials of oil group Shell.

“BRISTOL is READY for cleaner energy,” the poster proclaimed, as it informed residents that 78,000 homes in their region now used “100% renewable electricity from Shell Energy”.

For the activists of Adfree Cities, this seemed a prime example of the harmful advertising that they campaign against. It’s a “particularly well-oiled tactic”, campaigner Veronica Wignall told me, where companies “selectively promote one part of their business, and fail to mention that the vast majority of their business is in environmentally damaging areas”.

The campaigners lodged a formal complaint with the UK advertising regulator — and this week secured a damning ruling with serious implications for companies across the energy sector and beyond.

The Advertising Standards Agency ruled that the poster — and a video with inspiring scenes of Shell’s investments in wind power and electric vehicle charging — “must not appear again in the form complained of”.

The ads, it said, gave “the impression that low-carbon energy products comprised a significant proportion of the energy products Shell invested in and sold in the UK in 2022, or were likely to do so in the near future” — while the bulk of Shell’s business remained in oil and gas.

The timing of the ruling was especially awkward for Shell, which is about to wave farewell to those green electricity customers in south-west England. A day earlier, it had announced the decision to exit its home retail energy businesses in the UK, the Netherlands and Germany, citing poor returns.

Shell said it “strongly disagree[d]” with the ASA’s “short-sighted decision”, pointing to market research that showed most consumers were well aware of its primary business in oil and gas. “But what many people don’t know is we’re also investing heavily in low- and zero-carbon energy, including building one of the UK’s largest public networks of EV charge points.”

Shell invested $4.3bn in “low-carbon energy solutions” last year, out of total capital expenditure of $25bn. But two-thirds of its capex was in oil and gas. And the ads’ omission of “significant information” about Shell’s overall environmental impact, the ASA ruled, made them misleading.

The ruling was issued alongside two similar findings, against energy groups Petronas of Malaysia and Repsol of Spain (the latter for ads that appeared on the FT website). Repsol said it “respectfully disagreed” with the ASA’s ruling, and that a third of its capital expenditure would be dedicated to low-carbon businesses for the 2021-25 period. Petronas also said it disagreed with the ruling, and that it “remains committed towards its lower-carbon ambitions”.

Lawyers told me that these rulings should be scrutinised carefully by companies considering green-hued publicity campaigns.

“Every time you get a ruling like this, you get an insight into what the regulator is thinking,” said Tom Cummins, a partner at Ashurst, adding that the ASA was “further along the curve” on tackling exaggerated green claims than regulators elsewhere.

Scrutiny of alleged greenwashing is also heating up in the EU, where lawmakers voted last month to push for a ban on companies using carbon offsets to claim that their products were carbon-neutral.

Gustaf Duhs, a partner at Stevens & Bolton who previously worked at the UK’s Competition and Markets Authority, said companies should be particularly wary about using “generalised claims” to promote their green credentials. Shell’s video included the hashtag “#PoweringProgress”, which the ASA said could give a misleading impression of the company’s business.

Shell argued that it would be “unworkable” if companies were required to give an overview of their entire business in every ad they produced. The ASA risked slowing the UK’s drive towards renewable energy, it added, by hindering Shell’s efforts to build awareness of the green energy alternatives available to consumers.

But selling more green offerings was not the primary goal of ad campaigns by Shell and other oil producers, argued Solitaire Townsend, co-founder of sustainability consultancy Futerra.

She said such efforts were best viewed as “lobby-tising”: aimed not at driving demand for products, but at shifting public sentiment towards big oil and gas companies, and thereby tempering political pressure for tougher policy around them.

“They are trying to align themselves with something that the public are already very positive about, which is renewables,” Townsend said. “Shell being regarded as part of the solution has a significant financial value to them, which is why they spend so much money on advertising.” (Simon Mundy)

Smart read

If you somehow missed it yesterday, now is the time to read this explosive, disturbing FT investigation on extensive allegations of long-running sexual abuse by UK hedge fund magnate Crispin Odey.