Ecolabels: a booming business

Ecolabelling in the spotlight ahead of the 18th European Forum on Eco-innovation

Ecolabelling is a growth industry. The Ecolabel Index directory currently tracks more than 450 ecolabels spread across 197 countries. An Organisation for Economic Cooperation and Development analysis from 2013 found that the number of labels increased roughly fivefold between 1988 and 2009  .

Ecolabelling is also highly diverse. According to the OECD, labels can be “public mandatory”, “public voluntary”, promoted by non-profit groups or by industry, or hybrids, for example with joint non-profit and industry input. There are differences in what labels cover – regional, national or international – in their governance and transparency, and in the environmental issues they deal with. The main issues that ecolabels address, according to the OECD, are hazardous chemicals content, natural resource management, waste and recycling, energy efficiency, carbon footprints and biodiversity conservation.

Many ecolabels are, in effect, brands in themselves. Like branded goods, they work on the basis of trust – that the brand or label guarantees a certain minimum level of quality or meets certain minimum criteria. Like brands, some ecolabels are widely recognised – for example, Fairtrade, the Forest Stewardship Council (FSC) or the label of the Energy Star office equipment programme. The most-recognised form of ecolabelling, according to a 2011 survey of United Kingdom consumers for the UK government Department for Environment Food and Rural Affairs, was the EU energy efficiency ratings for domestic appliances such as washing machines. This had a 76% recognition level among consumers, the report found [1] . A 2009 Eurobarometer survey [pdf, 5.06MB] found a 37% EU-wide recognition rate for the flower-symbol EU Ecolabel .

The increasing number of ecolabels are a response to the pressure for greater environmental sustainability of production and consumption systems. There are different reasons for this pressure. Governments, realising that unsustainable behaviour is ultimately an economic risk, impose mandatory standards that require certification – such is the case with the EU energy efficiency label. Companies can take voluntary measures to improve the sustainability of their operations because of consumer or campaign group pressure, and often want to ensure that their efforts to become more sustainable are recognised thanks to an ecolabel. This is the rationale behind, for example, the EU Ecolabel, which mainly certifies manufactured products.

In supply chains, meanwhile, sustainability criteria are becoming increasingly important as benchmarks that companies must meet if they want to continue to be suppliers to multinational brands. Often it is easier to manage sustainability standards and certification on a sector-wide level, leading to initiatives such as the Roundtable on Sustainable Palm Oil, or Bonsucro, the Better Sugar Cane Initiative.

In principle, ecolabels offer many benefits. They can be regularly reviewed and their criteria tightened – as has happened with the EU energy efficiency ratings. Fulfilling the criteria can be beneficial for businesses by encouraging them to adopt more environmentally-sound management practices and business models, and by helping them to find efficiencies. Ecolabels are also in principle good for consumer choice by allowing consumers to choose products according to their ethical and environmental preferences.

The proliferation of ecolabels is a cause for concern however. There is a risk that too much choice simply makes choice difficult because it becomes harder to compare the different options. It might be possible for less rigorous or less credible ecolabels to escape without too much scrutiny of their claims. Because of this, ecolabelling is arguably at a critical juncture. Has the universe of ecolabels expanded so much that now a consolidation is needed to ensure that there is no compromise on quality?

The 18th European Forum on Eco-innovation, under the heading ‘Boosting competitiveness and innovation: the role of environmental labelling, management and information schemes’, will set out to tackle some of the questions about the future of ecolabels: should there be more formalised surveillance of the market for ecolabels to ensure minimum criteria are met? Should it be possible to test and enforce the claims made by ecolabels in the same way as false or misleading statements are prohibited in advertising?

The ecolabelling industry itself is aware of the risks to the reputation of all ecolabels if overall standards and the credibility of ecolabels are not maintained. The ISEAL Alliance, with members including proponents of sustainability standards, such as the Marine Stewardship Council, the Rainforest Alliance, Fairtrade and Bonsucro, has established codes of good practice and credibility principles (published in June 2013) to underpin trust in standards and certification systems. If this effort needs to be accompanied by actions by regulators is one of the open questions that the 18th European Forum on Eco-innovation will address.