One example of this problem involves labels certifying ethical treatment of livestock. Two well-respected labels governing this sector, the Animal Welfare Approved label and the Certified Humane label are extremely similar in terms of their requirements for certification. Both verify the humane treatment of farm animals from birth through slaughter and have similar standards for space, handling, and feeding. This redundancy in labeling criteria forces farmers to decide which certification to pursue; choosing the label that best communicates their accomplishments to consumers is of utmost importance. Unfortunately, it is difficult to predict which label will resonate with consumers, especially because the multiplicity of labels falsely implies that there is a difference between them. Clearly, competition among equally reliable labels can be detrimental for all parties involved.
Even when two labels certifying the same product type have differing stringency of criteria, the competition between them can still be problematic. A 2009 study analyzed the competition and environmental effects of multiplicity of eco-labels within a given market. The study found that when information is incomplete, or in other words when consumers are unaware of the environmental benefits of the two eco-labeled products, the existence of two labels leads to a rise in prices and a reduction in the environmental qualities of the goods (Youseff & Abderrazak, 2009). This is because the incentive to certify products to the highest standards becomes null when consumers do not take into account the label in their decision to buy a product. This is certainly an unfortunate effect of the abundance of labels in use today.
Next up is Challenge #2: Low Awareness and Recognition among Many Consumers. Stay tuned!
Youssef, A.B., & Abderrazak, C. (2009). Multiplicity of eco-labels, competition, and the environment. Journal of Agricultural and food Industrial Organization, 7(2).
Vermeer, D., Clemen, B., Michalko, A., Nguyen, D., Noyes, C., Akella, A., Bunting, J. (2010). An overview of ecolabels and sustainability certifications in the global marketplace. J.S. Golden, (ed.). Nicholas Institute for Environmental Policy Solutions, Duke University