How to Maximize the Performance of Ecolabels

Recently, Thomas Lyon wrote a rebuttal to one of my posts on the proliferation of ecolabels, in which he argues that ecolabel competition and non-NGO labels lead to increased environmental damage.

In my original post, I pointed out that competition and the consolidation of ecolabels will lead to less confusion and better certification programs. But Thomas brings up a point that I did not discuss in my original post: The performance of ecolabels and what type of labeling ecosystem maximizes performance.

First, it is important to define what I mean by performance. Very simply, I am referring to the total net environmental (or health or social) benefit that occurs as a result of an ecolabel in the market. Thomas points out that NGO labels tend to be more stringent and set a higher bar than industry-led or for-profit labels. However, what I don’t agree with, is that this always leads to maximized performance.

Let me give a hypothetical example. An ecolabel creates a very difficult standard that really moves the needle for companies if they can meet the requirements. Let’s say the net impact reduction is 80 (in whatever units you like) for every label that is achieved. But because the standard is so difficult to achieve and so costly for companies to change their practices to comply with the requirements, over time only five companies are able to be issued the label. This results in a net impact reduction of 400.

Then a competing label comes along and they create a standard that is not as stringent, but still has a net impact reduction of 40 for every label that is achieved. However, this standard is a bit easier and cheaper for companies to achieve, so many more companies are inspired to attempt to achieve it. Over time, 20 companies are issued the label for a net impact reduction of 800.

As you see, in the end, the total net benefit is greater when a label gains more acceptance, even when the standard isn’t as stringent. It’s a matter of taking many more small steps instead of taking a few very large steps.

I am not advocating to create watered down, easy-to-achieve standards, but it is important to create a balance of something that does lead to reduced impacts and can gain wide acceptance in the market. There are two reasons for this.

First, on the demand side, a label will only be desired if there are a reasonable number of certified products/companies to choose from. For instance, the federal government requires agencies to purchase Energy Star and EPEAT certified products, but they can only do so because there is a large selection of products to choose from. If there weren’t a large selection, large influential purchasers would not be able to mandate purchase of the ecolabel and the ecolabel loses its largest demand driver in the market.

The second reason why finding a balance of stringency in a standard is important is because it allows the ecolabel to raise the bar later. If a standard is so difficult to achieve from the beginning, it is a turn off for businesses. Whereas an easier to achieve standard might encourage businesses that otherwise would have sat on the sideline and done nothing.

Again, it becomes a philosophical question of many small steps versus fewer big steps. But when you have many companies starting to take small steps, you have many more people engaged and can continue raising the bar to ensure they reduce their sustainability footprint even more.

Will you lose the greenest companies with this approach because they feel that the ecolabel will reflect negatively on their brand and won’t be a differentiator? Sure. But the greenest companies are going to continue to be good environmental stewards anyways, so by losing them in the ecolabeling scheme, you aren’t damaging the environment any more than you would have.

However, by encouraging companies that would not otherwise improve their sustainability performance, you have the opportunity to create a larger transformational shift in an industry. It may seem counterintuitive, but rewarding these companies who took substantive action can lead to a greater environmental benefit than simply rewarding the existing top performers.

So how do we maximize the performance of ecolabels? First, we need to clearly define how performance can be measured from ecolabels, if it can be measured at all. The ISEAL Impacts Code provides a methodology to assess impacts, which is a great start, but I’m not convinced it will allow us to compare labels and say which one has better performance (nor am I sure that is the intent).

Additionally, there are some things which are incredibly difficult if not impossible to measure. With a standard that addresses human health issues, I am not sure how you would measure the number of people who otherwise would have become ill or died if they were exposed to non-certified products.

From my experience, the best way to maximize the performance of any given ecolabel is to ensure all stakeholders are involved in the development. Collaboration between NGOs, industry, government, academia, and other parties ensures all sides’ positions are heard. And the most effective standard is the one in which none of the stakeholders are thrilled with the outcome.

_{Photo CC-licensed by Ewan-M.}