Demand for green products is growing fast, accompanied by explosive growth in the number of environmental labels and schemes. Should oversight come from government, business or NGOs?
More than 95 per cent of Europeans say that protecting the environment is important, and a recent global survey found that only six per cent of consumers in Germany felt that enough sustainable products were available. Consumer demand is accompanied by a proliferation of environmental labelling and information schemes (ELIS) which have been monitored by the OECD since the 1970s.
Andrew Prag, policy analyst at the OECD, says: "With more environmental labels available than ever before, how can we make sure the consumers are connected with the greenest products?"
According to a recent study consumers care about the source of the label and the quality of information it contains. Government labels are more likely to be trusted than corporate ones.
Yet public schemes, both voluntary and mandatory, account for less than 20 per cent of all schemes. This is partly due to the risk of trade disputes. By insisting on a mandatory, government-led scheme, authorities are likely to run afoul of the free trade principle of non-discrimination.
The most famous example is the ‘tuna-dolphin' case, which originated with the United States' Marine Mammal Protection Act, which imposed a ban on imports of tuna from countries that did not have a conservation program designed to protect dolphins in the tuna-fishing process. A case was brought by Mexico and others against the US. Nineteen years later, the case still rumbles on (see the latest WTO report on the case here). Open questions remain: can one country tell another what its environmental regulations should be? Do trade rules permit action to be taken against the method used to produce goods - rather than the quality of the goods themselves?
At present, there is no consensus among governments on policy responses. The worst ‘greenwashing' offenders can be prosecuted under current trade description legislation. Governments have lately become stricter in requiring substantiation of environmental marketing claims, with the result that misleading and false claims increasingly often lead to criminal or civil fines and injunctions.
Growth in the numbers of voluntary schemes is primarily (31 per cent) due to an increase in ELIS set up by non-profit organisations on food and agricultural products. A further 18 % of increase in numbers is due to new, private ELIS which cover quantitative, life-cycle based reporting of energy and carbon. Green branding is now an integral part of marketing. However, big business adopting standards can run into trade disputes as well.
In 2013, Walmart sent a letter to fish suppliers, reminding them that wild seafood needed to be certified by the Marine Stewardship Council (MSC) "or equivalent".
But no equivalent certification scheme existed, and most Alaskan salmon suppliers were using a new program called Responsible Fisheries Management, or RFM. The dispute escalated into Alaskan fishermen protesting outside of Walmart stores and a US Senate committee hearing. Eventually the matter was resolved with the help of The Sustainability Consortium, and the result was a set of eight principles that the company will use as a yardstick to evaluate alternative seafood certification programs.
Convergence on standards is evident in the forestry sector, with certification mostly carried out by the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC). However, Finnish pulp, paper and timber manufacturer UPM, which is the only paper company which is listed in the Dow Jones Sustainability Indexes, still has no less than six environmental labels - FSC and PEFC, along with German Blue Angel, Austrian EcoLabel, Nordic Ecolabel and the EU Ecolabel. In addition to product eco-labelling, the company also uses a voluntary European-wide environmental management scheme.
Sami Lundgren, Director of ecolabels and reporting at UPM, said: "The widest system I have found so far and one which works at production unit level is the European voluntary EU Eco-Management and Audit Scheme (EMAS). Although EMAS is rather bureaucratic, I think it is worth the effort to provide verified and reliable information to our neighbours and customers."
So, where next for eco-labelling? According to Antonio Mancini who monitors claims of green washing at the Italian Competition Authority: "There is a big confusion among customers due to the number of schemes and labels available. From this point of view the EU attempt to define common methodology and standards is crucial. The future direction of eco-labelling seems to be linked to an adequate development of common rules."