Human activity is pushing the environment beyond critical planetary boundaries. Our choices now will determine the future for all generations.
Household purchases are responsible for between 40-80% of global environmental damage[1] - a daunting figure, but one that highlights a vast opportunity for positive change; by adjusting our consumption habits, we can make a significant impact. Ecolabels offer a powerful tool to guide these choices, yet the current ecolabelling landscape is overcrowded, misunderstood, and falls short of its potential. In our recent article published in the Sustainability Journal - ‘Taking a Consumer-Led Approach to Identify Key Characteristics of an Effective Ecolabelling Scheme'- we explore what a new, more effective era of ecolabels could look like.
There are many ways to change consumption behaviours, from top-down policy requirements to bottom-up or market-based approaches such as effective ecolabelling. While policy can set the framework for sustainability through setting requirements on production, there is often reluctance to do so due to economic concerns, such as the fear of losing competitive advantage[2]. This is where market-based approaches, like ecolabelling, become particularly valuable.
Ecolabelling has the untapped potential to influence consumer behaviour by providing transparent, easily understandable information that helps consumers make informed choices. If done effectively, it can drive demand for sustainable products, encouraging companies to adopt more sustainable practices voluntarily to meet consumer expectations. However, the ecolabelling landscape is difficult to navigate as a consumer. It is not yet achieving the impact needed to drive a significant increase in sustainable purchasing and create system level change.
The marketability of environmental sustainability means that there are now more than 450 ecolabels in the global market[3]. Take note next time you are the at the supermarket of how many you can see! However, most of these are only relevant to a small subset of products (e.g. “seafood”); many provide a mechanism to highlight positive attributes of a product (rather than a holistic rating of performance); others are based on complex criteria; only some are independently verified; and few provide any basis for comparison. It is no wonder that consumers report that they find ecolabels ‘confusing’ and ‘hard to understand’, and express dissatisfaction with their credibility, clarity, and information presented[4].
Consumer NZ have reported that only 1 in 10 New Zealanders say it’s ‘easy’ to assess whether a product, company or service is being truthful in relation to environmental claim[5].
Despite a global spend of USD$1.4 billion on eco-labels, most businesses are not generating the market return they are seeking to achieve through this investment.
Further, most eco-labels are a rating system rather than a design tool; they are not providing businesses the insights they need to offer products and services their customers want and the planet needs.
So, do we really need to add another ecolabel?
To put it simply, ‘yes'! Consumer NZ recently reported that 90% of people say they are mindful where they spend their money[5]. Studies on global consumer behaviour highlight that more than half of consumers report they would change purchasing habits for better environmental outcomes[6][7][8]. The potential for ecolabels to influence purchasing and consumption behaviour is immense. With an effective eco-labelling system, the demand for sustainable products and services would be converted into market pressure, creating economic incentives for solutions that align with a healthy planet.
What does an effective ecolabelling scheme look like?
In 2022, PAN partnered with Massey University’s Food Experience and Sensory Testing (FEAST) team who specialise in consumer research to apply a consumer-led approach to designing an effective ecolabel. We invited a range of participants with varying levels of environmental knowledge to complete iterative workshop sessions to help us understand what environmental factors were important to them (e.g. carbon, waste, biodiversity), what they understood from various images and terminology, and what features an eco-labelling scheme would need to enable it to cut through the existing 450 labels to generate better choices.
Their insights revealed several key elements that would make an ecolabel effective.
Consumers want all the facts! Above all, participants wanted holistic information that was independent and credible. They did not want to be dazzled with a showcase of positive accolades; they wanted a transparent portrayal of overall environmental performance, the good and the bad.
A singular label for all: With so many eco-labels on the market, participants explained that they do not have the capacity to learn what sits behind each. However, they felt that consumers would be willing to take the time to understand a system if it was relevant across a wide range of products. Moreover, they highlighted the opportunity for a singular system to serve as a "nudge," prompting more sustainable purchasing decisions over time, even for consumers with little initial environmental knowledge.
The ability to compare: Another crucial feature identified, that relates to the singular label for all, was the ability to compare the environmental performance of different products – not just considering similar products (such as two muesli bars), but to understand the relative performance of quite different products (such as their groceries and their clothing).
However, participants also highlighted that they had little interest in the environmental performance of products compared to an industry benchmark – as they were concerned that for some industries – average performance provides a poor baseline. They wanted to understand what “good” looks like.
Easy to understand: Participants emphasised the importance of a logical colour scheme, clear and concise terminology, and the inclusion of distinctive features to make it immediately apparent that the label was about the environment.
When asked to rank their environmental concerns, waste was highest, followed by carbon emissions, air pollution, and deforestation. However, there was significant variation in priorities between participants. When asked how this data should be communicated, participants confirmed that despite the simplicity of a singular score (like a star rating) they did not want results across multiple environmental indicators to be “nested” like this as they wanted the ability to see how a product scored against their personal environmental preferences. However, they favoured labels that communicated data using simple, interpretable visuals, such as bar or pie charts.
what next?
At the Planetary Accounting Network, we are already working with NZ brands putting this research into reality. We have established a new eco-labelling scheme that puts product environmental data, into scientific context in a way that is visual, easy to access, easy to understand, and easy to use, on any product. This has already been piloted with NZ brands such as Raglan Food Company, Silver Fern Farms, and Bremworth Carpets. We are now working with a wide range of businesses to scale Planetary Facts up – with a focus on food, fibre, and tourism products.
Find out more on Planetary Facts here.
If you want to learn more about this study on what makes an effective ecolabel, the full article is available to read below.
A special shout-out to my fellow authors on this journal article (Catriona Hay, Kate Meyer, Jeremy P. Hill and Joanne Hort).
References
[1] Joshi, Y., & Rahman, Z. (2015). Factors affecting green purchase behaviour and future research directions. International Strategic management review, 3(1-2), 128-143.
[2] Yokessa, M.; Marette, S. A Review of Eco-labels and their Economic Impact. Int. Rev. Environ. Resour. Econ. 2019, 13, 119–163.
[3] Ecolabel Index; Big Room Inc.: Vancouver, Canada; Available online: https://www.ecolabelindex.com/ecolabels/ (accessed on 11 August 2023).
[4] Taufique, K.; Polonsky, M.J.; Vocino, A.; Siwar, C. Measuring consumer understanding and perception of eco-labelling: Item selection and scale validation. Int. J. Consum. Stud. 2019, 43, 298–314
[5] Consumer NZ Sentiment Tracker 2023
[6] IBM Institute for Business Value Balancing sustainability and profitability, 2022
[7] McKinsey & Company Consumers care about sustainability—and back it up with their wallets, 2023
[8] EY Future Consumer Index: when talk turns into action, be set for change, 2023
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