July 5, 2009
Daniel L. Vermeer and Alexandra Michalko of Duke University analyze the complex set of standards surrounding green product labels and ask whether we need such standards in the first place.
Anyone who has shopped in a retail store recently knows that we live in a brave new world of green products. In nearly every product category, new environmental labels, standards, claims, and certifications are emerging. While there is clearly growing demand for green products, the proliferation of green credentials is confusing consumers and burdening companies that need to navigate these new expectations. Few people are sure what these credentials actually measure, how they relate to each other, or which ones can be trusted.
At latest count, there are roughly 300 different ecolabels for nearly every industry, ranging from construction to food to retail. Critics suggest that this “let a thousand flowers bloom” approach to green credentials may actually be counter-productive, since the confusion and redundancy detract from companies’ focus on improving performance rather than just reporting it. There is such an overflow of ratings, seals, and certifications that a cottage industry has sprung up to label the labelers. Companies like Big Room Inc. and Eko Bai make it their business to help consumers and corporate buyers, respectively, make sense of the barrage of labels. How might we simplify these systems for the sake of consumers and companies? What lessons have we learned from these efforts that could be applied to the design of better systems? And how will this space evolve in the future?
A snapshot of two certification systems reveals wide variability in the effectiveness of sustainability measurement systems:
The Forest Stewardship Council, creator of the FSC certification, is a global standard-setting organization implementing transparent, democratic governance of forest resources. The founding principles and indicators were negotiated over a three-year period to create the strongest politically-feasible standard. The FSC does not certify – instead, it accredits third party certifiers to act on its behalf. And the result? A rapidly growing certification that covers 7% of global forests and is, according to Michael Conroy (author of Branded: How the Certification Revolution is Transforming Global Corporations), “arguably superior to a negotiated UN treaty, as it is more efficient and less costly… it works through markets to provide its services, it depends on market forces to drive companies into its reach, and it builds on decades of civil society’s calls for… improved practices.”
The picture at the Fair Labor Association is not so rosy. FLA was founded in 1998 by a group of apparel and sportswear companies, universities, and NGOs concerned with worker rights. The purpose was to create a common system of voluntary labor standards, but the Association faced a number of early challenges. There were immediate internal disagreements on fundamental terms like living wages and monitoring visits. The FLA faced opposition from unions, investor groups, and students over issues of transparency, which led to organizational flight. To make matters worse, Nike implemented FLA-type standards but demonstrated little improvement in conditions, so the credibility of the standard itself was undermined. All in all, not a happy story.
One expert has said that standardizing all the current and future sustainability measurement systems is unrealistic, but he believes “there could and probably should be some overriding principles for what make a credible label, not the least of which is that standards be specific, transparent, and verifiable.” What’s needed now is a comprehensive assessment of the effectiveness of sustainability measurement systems. Before we can think about systematizing the hundreds of extant standards, we should take stock of what we’ve learned to date and identify opportunities to improve efficacy.
We agree with Amie Vaccaro at Social Venture Technology Group, who says “there is no point in reporting if it does not influence management such that actual environmental impacts are minimized, and social and human factors are valued.” After all, the value of information is the difference between the expected value of an outcome with and without perfect knowledge. Information has no value if it fails to improve your expected outcome. What this means in practice is that sustainability credentials are only as valuable as the resources they save and the consumers they sway.
Daniel L. Vermeer, Ph.D. is executive director of the Corporate Sustainability Initiative at Duke University. Alexandra Michalko is a MBA/MEM candidate 2010 at Duke University.