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The Daily Sabbatical/IMD | Dec 5, 2012 | 4574 views

Sticky Situation

Eco-labels should be ignored or overlooked? After all, they’re becoming ever more integrated into organisations’ procurement requirements

T

he alignment of consumers and industry should make for a heart-warming spectacle, but it’s often the case that consensus is rooted in shared dissatisfaction. So it is with eco-labels.

More than 30 years after Germany’s Ministry of the Environment introduced the world’s firstecolabel, the Blue Angel,there are now over 400 eco-labels in use in almost 250 countries and across 25 industries. Momentum and high expectations have ceded to fragmentation, saturation and, perhaps above all, a nascent sense that something needs to change.

There is already considerable evidence to suggest shoppers have become confused by and even inured to the growing array of multi-coloured stickers that decorate their day-to-day purchases. In recent years the packaging of many items has come to resemble less a mere wrapper and more a much-travelled suitcase or an Ishihara eye-test.

Only a minority of customers, known as “dark green”, are especially cognisant of the notion of sustainability. Their “light green” counterparts are unaware or uninterested, while “mid-green” consumers suspect the issue may be important but aren’t notablydisposed to find out why. So the idea that the average buyer is willing to devote precious time to sifting through an ever-distending parade of eco-labels is , unfortunately, unrealistic.

But what has been far less appreciated is the fact that more and more businesses are feeling similarly overwhelmed. New research by IMD and EPFL reveals for the first time the extent of theirmounting frustration.

Our study surveyed more than a thousand executives around the globe about their attitudes to eco-labels. A number of in-depth interviews were also carried out. The findings indicate that the promise and best intentions of over three decades ago are giving way to increasingly urgent challenges that simply have to be addressed.

A range of major international companies, including Hewlett-Packard, Nestlé, Canon, Sara Lee and E.ON, took part in the survey, whichsought to investigate why firms choose to adopt eco-labels. Respondents identified brand-strengthening, addressing consumers’ sustainability demands and protecting against pressure-group attacks as some of the key benefits of the practice.

No surprises so far, you might think; but there were plenty of negatives to counterbalance – or even outweigh – the positives. Many of those questioned expressed substantial scepticism over eco-labels’ enduring credibility and the rigour of the criteria and certification procedures. One executive observed that the market “looks more like a new industry of ‘selling stickers’”, while another – albeit the harshest critic we encountered – condemned the entire concept as “a costly and highly bureaucratic piece of nonsense”.

The reality inevitably lies between the extremes, but there can be little doubt that some kind of action is required and, indeed, that it should be keenly encouraged. As Duncan Pollard, Nestlé’s sustainability advisor, told the study: “Fifteen years ago eco-labelling was considered to be the way forward. Now we may be seeing the first serious reappraisal of the conventional wisdom that if you wish to prove you’re sustainable you need a certification logo.”

Why has it come to this? One inescapable fact is that selecting an eco-label has become as bewildering for companies as it is for consumers. The apparently relentless trend towards fragmentation, which is made worse by a lack of consensus over qualifying criteria, is at the very heart of the emergent opposition and discontent.

Little wonder, then, that hopes are now rapidly turning towards greater standardisation and international acceptance. The desire for clarity and consumer understanding is a powerful argument for consolidation, as are the obvious advantages of removing the barriers to trade imposed by limited geographical recognition.

Integration across whole supply chains would help the necessary shift enormously. As Annik Dollacker, head of public affairs at Bayer CropScience, remarked: “In the last 15 years we’ve made progress towards more dialogue and engagement with food-chain partners. This has improved our mutual understanding of the challenges faced by each one of us and allowed us to develop tailor-made solutions together.” In other words, collaborative initiatives should promote mainstream sustainability.

Of course, as with new technologies, it would take time for a smaller number of more focused eco-labels to earn pre-eminence and secure large-scale adoption. But the bottom line – and the prevailing perception – is that right now there are just too many.

In addition, there is plainly a nagging suspicion among firms that a worrying number of eco-label providers launch with honourable intent but soon morph into organisations whose overriding desire is to survive rather than serve. This raises serious concerns about eco-labels’ effectiveness in delivering real outcomes and their potential to help achieve genuine market transformation. The danger, as numerous participants in our survey pointed out, is that afuzzy superabundance of eco-labels only obscures “the big picture”.

To this perturbing mix we can addfears over consumer pressure on low prices, time and cost concerns, investor demand for short-term performance, insufficient comprehensiveness and a paucity of comparability within and across product categories. All in all, that’s quite a list. It could be a perfect storm. It’s certainly approaching a critical mass – and a mess.

This isn’t to say eco-labels should be ignored or overlooked; after all, they’re becoming ever more integrated into organisations’ procurement requirements. In addition, they still have an eminently worthwhile role in promoting stakeholder collaboration to advance towards consensus on what ‘sustainable’ means. What cannot be denied either is that they offer a chance to consumers to directly express their preference for more sustainable products. However, it’s essential that they should remain a means and not become an end.

Ultimately, eco-labels may be replaceable, but sound strategies and management commitment most definitely aren’t. This particular quest for sustainability, at least in its present form, has itself become unsustainable. We may have started with a Blue Angel, but the halo is well and truly slipping. It’s time for a rethink.

Ralf Seifert is a Professor of Operations Management and the Director of IMD’s Mastering Technology Enterprise (MTE) programme. His primary research and teaching interests relate to operations management, supply chain strategy and technology network management. He is also active in industry analysis, international project work and new venture formation.

He carried out the research discussed here, Reviewing the Adoption of Ecolabels by Firms, with Dr.Joana Comas Marti, of the École Polytechnique Fédérale de Lausanne (EPFL).Her research focuses on supply chain approaches in corporate environmental strategies. She has worked on the assessment of the comprehensiveness of sustainability reporting and on the integration of environmental aspects within analytical tools to support business decisions such as supply network design.

[This article has been reproduced with permission from IMD, a leading business school based in Switzerland. http://www.imd.ch/challenges]

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