Looking for Value in Eco-Labels

15 Apr 2008Archived News Energetics in the News

Published: Ethical Investor Magazine - by Cheryl Bowler, Principal Consultant; Carbon Markets, Energetics Pty Ltd writes about how eco-labels are a way of advertising your products� green credentials and attract environmentally-motivated customers.

 

In contrast to “green” symbols or claim statements developed by manufacturers and service providers, “eco-labels” are awarded by an impartial third-party in relation to products that have met environmental leadership criteria.

Carbon labeling

In recent years, the trend has been to focus on labels that address single environmental impacts, in particular greenhouse gas emissions. There has been a lot of work undertaken by companies such as Tesco in the UK and Wal-Mart in the US to develop carbon labels that show the greenhouse gas impact of their products. However it has been particularly difficult to come up with a system that is cheap to implement and works for all products.

The current universally accepted and commonly understood measure of the carbon footprint of every product looks at its complete lifecycle from production, through distribution to consumption and disposal. A high level lifecycle assessment of a single product can cost upwards of $10,000.

There is also the other concern of consumers not being able to understand what carbon labels are telling them. Tesco put an aeroplane symbol on all air-freighted products in their stores as a simple indicator of high greenhouse emissions from food miles but unfortunately this was misinterpreted by many customers as a symbol of freshness.

Carbon neutral labeling

At Energetics, we have seen significant interest in the marketplace from organizations wishing to produce a carbon neutral product offering. Under the Australian Federal government Greenhouse Friendly Program there has been a significant increase in the number of accredited carbon neutral products or services.

The most well know Greenhouse Friendly services are the flights offered by Qantas (ASX: QAN), its subsidiary Jetstar and UK-based Virgin and the Seven Media Ltd’s (Channel 7) Sunrise television programme.

Some of the carbon neutral products include: Foster’s Group’s (ASX: FGL) Cascade Green beer and Lion Nathan’s (ASX: LNN) Barefoot Radler Beer, Orica Australia’s (ASX:ORI) Dulux Aquanamel and EnvirO paints; PaperlinX’s (ASX:PPX) Envi Paper Products, made by Australian Paper, Sustainable Living Fabrics and Origin Energy’s (ASX:ORG) GreenEarth Gas.

Providing differentiators?

There has been nothing quantitative published to date around the value of market differentiation, due to carbon neutrality or eco-labeling. However, the growth trend in eco-labeling, and the demand by customers for certification of eco-claims, is evident.

The cosmetics industry has been utilizing natural, organic and eco marketing claims in their products as market differentiators for many years and with the natural and organic market predicted by Euromonitor to be growing at nine per cent (Euromonitor International, 2005) we can expect to see many more eco products.

There is also no publicly available information on the take-up of flying carbon neutral in Australia. Indeed, in the same sector, it was the experience of Intrepid Travel that required customers to buy a carbon neutral product that lost them market share as the cost of their product was higher than that of their competitors.

It took careful marketing, and a significant training exercise within their work-force, to ensure that customers understood what they were buying for Intrepid Travel to regain their share of the market. Despite the potential pitfalls, many organizations are being pressured by internal and external stakeholders to show that they are going beyond compliance in managing their environmental impacts, and we expect many more eco labels to appear on products in the coming year.

Guidance on green marketing

The Australian Competition and Consumer Commission (ACCC) released a guide in February 2008 to educate businesses about their obligations regarding environmental claims under the Trade Practices Act 1974. It provides the following checklist to assist manufacturers, suppliers, advertisers and others to assess the strength of any environmental claims they make and to improve the accuracy and usefulness to consumers of their labeling, packaging and advertising.

ACCC Guide to Green Claims

  • Avoid using terms like ‘safe’ and ‘friendly’ and unqualified pictures or graphics. At best they are unhelpful and encourage skepticism; at worst they are misleading.
  • Spell out exactly what is beneficial about a product in plain language that consumers can understand.
  • Link the environmental benefit to a specific part of the product or its production process, such as extraction, transportation, manufacture, use, packaging or disposal.
  • Make sure any claims you make about your product can be substantiated. Think about how you would answer a query regarding the environmental benefits you are claiming about your product. For example, what scientific authority could you use to justify the basis of your claim?
  • Explain how a product’s characteristic is beneficial to the environment. For example, explain that a phosphate-free product is less damaging in river systems because phosphate promotes algal growth, which can clog up rivers.
  • Avoid giving the impression that your product is completely environmentally benign if it is not.
  • Use the claim only in an appropriate context or setting. For example, do not claim that a product is not tested on animals if it is a product that would never be tested on animals anyway.
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