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Private and Public Sectors Are Fueling Use of Ecolabels, But Are Consumers Catching On?

How can you persuade people to make responsible purchasing decisions? It isn’t an easy question. Vast global industries have been built up around understanding and influencing the tangled web of decisions and motivations that take place when buying products or services.

Price and quality are common factors. But as awareness increases around the environmental challenges currently facing the world then sustainability is becoming an ever-greater motivator.

At its simplest, if you give people better information then they are in a position to make better choices. And one of the most effective ways to give people meaningful information on a product is through a labelling scheme. This is why industry groups and governments continue to push forward with ecolabelling schemes around the world, helping to drive sustainable choices and grow markets for better products. To name just a few, the Carbon Trust has been directly involved in schemes in the UK, Mexico, Brazil, Hong Kong, China, Taiwan and Malaysia — it is a growing trend.

Sustainable Procurement

There is a marked difference between how ecolabels are being used in practice by businesses and the public sector when compared with consumers. At present, schemes are proving to have a considerably bigger impact on an organisational scale – the private and public sectors tend to take more structured approaches to assessing their own environmental footprint. In some cases this is voluntary, in others it is driven by regulation or stakeholder pressure — but more and more organisations are incorporating sustainability into their procurement policies.

In the UK there are Government Buying Standards for all public authorities with minimum and best practice standards for sustainability, while increasing numbers of large businesses, such as BT and Marks & Spencer, have made sustainability standards part of their procurement policies. Because of this, companies that want to win business with certain customers now need to measure and report on the environmental impact of products and services. So it is no surprise that standardised ecolabelling schemes are increasing in popularity, as they provide a clear framework for measurement, third-party assurance on the accuracy of claims, and a ready method of communication.

This is good for business. There are in most cases direct economic and operational benefits for companies that collect sustainability data on their offerings that often go beyond improved corporate reputation — understanding carbon emissions, water, land, waste and resource use helps to identify supply chain efficiencies, cost savings and areas of risk.

But are most consumers ready — or do they indeed want — ecolabels on their products?

Consumer Engagement

In order to drive action on climate change, the Carbon Trust is proud to have led the way in product carbon footprinting — introducing the world’s first independently accredited carbon footprint labelling scheme in 2007. For the reasons stated above, this has proven popular recently on products that are mostly sold in a business-to-business context, such as GrowHow fertilizer, Formica surfaces or Marshalls paving slabs.

But we believe that it has also helped to catalyse a meaningful change in consumer opinion. To date the Carbon Trust has certified over 28,000 products, working with major consumer brands such as Tesco, PepsiCo and Alliance Boots. Today you can find the black footprint design of the Carbon Trust’s Carbon Label in the supermarket on products including Kingsmill, Quorn and Silver Spoon.

The label demonstrates a commitment to the ongoing measurement and reduction of carbon emissions associated with these mainstream products. The act of disclosure and shared decision-making that ecolabels create is helping to drive this improvement.

Changes in consumer attitudes mean that sustainability is playing a growing role as a route to increased profitability. Recent Boston Consulting Group analysis has shown that “responsible consumption” products account for 15 per cent of all sales in major US retail chains, and that sales have grown about 9 per cent annually for the past three years.

Similarly, Nielsen research from June, looking at 20 brands across nine countries, showed average annual sales growth of 2 per cent for products with sustainability claims on the packaging, increasing to 5 per cent for products that promoted sustainability actions through marketing programs.

In fact the market research is consistent across a variety of sources, across a number of years. In general a majority of consumers want to take action to protect the environment and are keen to buy goods that are less harmful to it. This is true in many different markets, though it is fair to say there are higher levels of engagement in emerging economies, such as those in South East Asia and Latin America, and especially amongst younger consumers.

Although some are willing to pay more, accept less, or go further, we know that for most consumers sustainability is still secondary to price and quality when it comes to making a decision on a product.

The good news is that a number of the world’s biggest businesses, such as Unilever, have established a track record proving that more sustainable products can be cheaper to consumers, more profitable to companies, and match or exceed the quality of their less sustainable counterparts. These are the circumstances where ecolabels are most likely to increase purchasing preference.

But it remains of critical importance for ecolabels to provide clear messages to consumers. In a survey of more than 25,000 people around Europe undertaken in 2012 only one in seven felt that they knew a lot about the environmental impacts of the products they use. The same survey underlined the importance of the independence and comparability offered by third-party schemes, as barely half of consumers trust a producer’s own claims about the environmental performance of their products.

Looking to the Future

Climate change and resource scarcity are major threats to both the economy and the environment. Encouraging consumers, businesses and governments to prefer more sustainable products, helping to financially incentivise a race-to-the-top amongst producers, is a vital element in delivering green growth. When done right then ecolabelling can help to deliver this, even if many schemes still represent a work in progress.

We expect ecolabelling schemes around the world will continue evolving, becoming globally recognised indicators. One of the key challenges will be ensuring that schemes will be fit for purpose, able to communicate robust and accurate sustainability information that can be produced without unreasonably high measurement and verification costs.

The good news is that meaningful product sustainability data is becoming easier to collect and access. Organisations such as the Irish food board, Bord Bia, and packaging giant Amcor are developing in-house tools to more easily assess their product lifecycle environmental impacts. Companies are also being directly incentivised to collect and share information: Sainsbury’s, for example, pays an environmental and welfare bonus to qualifying milk suppliers.

The strongest companies and brands over the next decade, in an increasingly transparent world, will be those that are open and honest with their customers. Making businesses, the public sector and consumers more aware of the environmental impact of products and services gives them greater control over it, helping to drive better behaviours across the board.

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