Oil giant Shell was recently reprimanded by the Advertising Standards Agency for running a series of “misleading” advertisements about its clean energy projects. The ASA ruling makes interesting reading. It is not disputing the truth of any statements made in the advertising, such as “Shell experts are working on a wind project that could power six million homes” or “more electric car charge points [are] coming to Shell forecourts”. The reason the ASA ordered Shell to pull the ads was because the exclusive focus on Shell’s greener activities gave a misleading impression of what the company actually does.
The ASA ruled that consumers are increasingly conscious of the environmental impact of their energy choices and would seek out businesses who are moving away from fossil fuels. Shell’s advertising gives the overall impression that Shell is one of these businesses, when the reality is that almost all the company’s activities involve oil and gas. (Activist group Global Witness calculates that only about 1.5% of Shell’s capital expenditure actually goes on renewables.)
A move towards transparency
The Shell decision is just one example of a broader trend towards requiring transparency from businesses on their environmental claims. In March 2023 the EU published proposals for a new law on green claims to help customers “make better informed purchasing decisions”. This Green Claims Directive could be in place as early as this year. And it is sorely needed. According to the EU’s Environment division, 53% of green claims “give vague, misleading or unfounded information”. There are 230 sustainability labels and 100 green energy labels in the EU, with no consistency in what these labels actually mean or what qualifies you to use them.
Energy is one of the thorniest areas. In the UK, energy suppliers who want to market their energy as “green” have several options. One of these options is to purchase the REGO certificates issued to renewable generators, completely separately from the energy the REGOs were issued to certify. They can then buy their energy on the wholesale market, which means an unknown mix of dirty and clean energy, and use the REGOs to badge the energy product as “renewable”.
Although this use of REGOs is currently completely legal, the UK government has been working on a shake-up of the way energy products are sold for some time. It’s all part of an overall move towards requiring greater accountability over green claims.
Why I&C businesses should take note
The coming changes won’t just affect energy suppliers. They will also affect the businesses who use that energy, particularly industrial and commercial businesses with high consumption. Many larger businesses have a net zero goal in place, as well as reporting obligations under programmes such as the Streamlined Energy and Carbon Reporting (SECR) scheme. Unfortunately, REGO-backed tariffs could be undermining your hard work on that front.
If your supplier sells you energy labelled “100% renewable”, it seems simple enough to report your Scope 2 emissions (those from purchased energy) as zero. But we already know that greenwashed energy tariffs are causing many businesses to underestimate their Scope 2 emissions. As the rules tighten, businesses may find that they have to change their reporting to acknowledge the more complex reality of energy supply. This will almost certainly mean giving a higher (but more accurate) figure for their Scope 2 emissions than they have to date. This can be discouraging in terms of your net zero goals and also carries some reputational risk.
The best defence is to get ahead and strive for more accurate data right now. ENTRNCE has created its Matcher tool to collect half-hourly data on the mix of energy your business is actually consuming from the grid, then match it with your half-hourly consumption patterns. This gives a much more accurate sense of the proportion of renewables in the mix.
The results of using more stringent methodology like this may not be flattering. Alliander, the largest DNO in the Netherlands, switched last year to a more complex calculation method and found that the proportion of renewables it consumes is just 59%. But, crucially, the numbers will actually reflect reality. Doing this now will build a much clearer picture of your company’s decarbonisation progress and also protect the credibility of your environmental claims. For a free demo of the Matcher, get in touch.
