Friday, December 30, 2011

Eco labels: the more successful, the less value

 “The very traits — governance and inclusiveness — that make consensus-based standards so useful as credible mechanisms for collective action also pose challenges for businesses seeking to move quickly and to differentiate themselves in the marketplace. And like any tool, certification and labelling have limits — including limits to scale.” concludes a report from the consultancy Sustainability, 

33 years after the world’s first sustainability label (Germany’s Blue Angel) appeared, certifications and labels are now everywhere. The Ecolabel Index lists 426 certifications and labels in 25 industry sectors and 246 countries as of November 2011. Around two-thirds of these were developed in the last decade alone, and new schemes continue to arrive. And as our own research, the Organic Standard Directory shows that there are at least 124 organic standard, but probably many more, Nowadays it’s stating the obvious that consumers are confused by the sheer number of certifications and labels: according to the Natural Marketing Institute, 51% of American consumers think “there are too many green seals and certifications”; Only 42% of American consumers recognize Rainforest Alliance, 26% LEED and 19% Forest Stewardship Council, although 95% recognize Energy Star and 76% recognize USDA Certified Organic.

In the report Signed, Sealed... Delivered? Behind Certifications and Beyond Labels”, the UK based consultancy Sustainability asks “Why certify or label?” The report, based on 85 interviews with businesses, standards-setters, certifiers and other expert observers as well as desk research places the question in the context of other ways available to businesses for improving or communicating sustainability impacts across the value chain.

The interviewed businesses expressed frustrations with the soundness of criteria (“based on perception or politics, not science”, “popular only because it was the first”), the level at which requirements are set (“too low — we can’t differentiate ourselves”), the fit for the business (“requires us to change our processes for no reason”), or the failure of the standard to adapt to new knowledge or processes (“hampers innovation”).

Committing to a single standard can limit sourcing flexibility in the case of raw materials standards. Agricultural certification illustrates this challenge emphatically. “At the moment, certification is the only process we have, but at some point we’ll have to jump to a completely different mechanism,” states Jan Kees Vis, global director of sustainable agriculture at Unilever. “We’re not going to certify every farmer in the world, we can’t create a roundtable for every raw material.” Another risk for businesses is that participation in a labelling schemer ties them to the reputation and viability of the standards-setting organization. The reports predicts that the model of a standard, certification and label on one coherent system carrying most of the message will fade. Sustainability believes that in the future sustainability certifications will be moved to the back-of-pack, metaphorically and literally. 

I do agree with this analysis.  I have been working with this sector for three decades, and while I still think there are many merits in eco labels and organic labels, I think it is increasingly apparent that there are many in-built limitations in what they can deliver. As I write in Garden Earth: "The attraction of an eco label, for businesses and consumers alike is to differentiate a product from other products that are without the label. But the more successful the label is the less value it has in a competitive market."

Related blog post in Garden Earth
Don't buy organic instead of changing the world - do it as part of changing the world
Sustainable coffee is increasing, but only 35% is sold as such.
How fair is fair?
What gives value to an eco label



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