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Hacking Through the Ecolabel Jungle

In a recent post on, Josh Saunders of Good Guide envisions a future in which environmentally-minded companies and consumers use ecolabels to go green.

He notes that there is presently a confusing cacophony of competing ecolabels, but holds out hope that consolidations in the ecolabel business will soon bring clarity to the marketplace.

I sympathize with this view, and hope its rosy view of the future comes to pass. But I think we may be in for a bumpier ride than Saunders expects.

Most important, there is reason to doubt that competition in the market for ecolabels will perform well.

Most labels are sponsored by non-governmental organizations (NGOs), whose goal is to reduce the environmental footprint of products. But others are sponsored by industry trade associations or for-profit certifiers. These groups are interested in maximizing the profits of sellers, not maximizing environmental benefits.

And when the two types of labels compete, the environment can be the loser: Lax profit-driven labels can siphon off the market share of tough NGO-driven labels, with the result that environmental damages are greater than if the NGO label were the only game in town.

Things get worse if there is uncertainty about which label is really more credible than the other. In that case, the weak label can come to dominate the market, and really green companies may choose not to get labeled at all, so they don't run down their individual reputations.

If the market for labels may fail us, then government intervention is at least worth considering. Government could set a minimum threshold for ecolabel stringency, or create its own label, as the US Department of Agriculture did with the USDA Organic label. Or government could take a lighter hand, and simply rate the various labels to make it easier for consumers to find the best ones.

These ideas, and more, were explored at a conference on "Informing Green Markets" held at the University of Michigan's Erb Institute in June, 2010. Details can be found at

Among the lessons from the conference were that there is currently little credible evidence that ecolabels actually improve environmental performance, and that consumer demand may not even be the most important driver for the use of ecolabels.

Ecolabels do indeed offer real promise as a tool to shrink the environmental footprint of products. But many obstacles remain, and it is too early to tell how much we can really expect from ecolabeling. Stay tuned!

Thomas P. Lyon is the director of the Erb Institute for Global Sustainable Enterprise at the University of Michigan.

Image CC licensed by Flickr user mahalie.


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