Eco-Label Challenge #1: Abundance of Labels Creates Confusion and Mistrust

The eco-label trend has virtually exploded in recent years. Essentially, there is an eco-label for nearly every type of environmental attribute possible. Though this is beneficial in the sense that companies are guaranteed to find a label that properly fits their product’s environmental accolades, it is also a major problem. With 140 eco-labels in the United States and 426 worldwide, there is bound to be redundancy and overlap among them. Indeed, Duke University’s Corporate Sustainability Initiative reports that in a recent study, forty-three percent of labeling agencies recognized redundancy of their label in the marketplace (Vermeer et al., 2010). This is a challenge for companies, because many are forced to seek multiple certifications for the same accolade to be considered legitimate. Additionally, this is problematic for consumers, as the diversity of eco-labels within a particular product category creates confusion. When there are too many eco-labeling schemes serving the same industry sector, consumers begin to question which of these labels are actually meaningful. This abundance results in consumer distrust of such labels, since it communicates to them that there is no standard or regulation for eco-label creation and use.

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!

References:

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