Choosing the right eco-label for your product

The number of new eco-label programs aimed at environmentally conscious consumers has grown rapidly — with little quality control. By applying a three-part framework, managers can avoid betting on the wrong label.

The number of eco-label programs has grown from a mere dozen worldwide in the 1990s to more than 435 today in 197 countries and 25 industry sectors, according to the Ecolabel Index directory. But this growth has been accompanied by a high degree of consumer confusion and organizational skepticism. For example, consumers have admitted to difficulties recognizing the differences among the six-plus eco-labels for coffee. And in 2009, Ecover, a Belgium-based manufacturer of cleaning products, boycotted the European Union Eco-label, claiming lax standards allowed entry to subpar performers and harmed the company’s superior environmental credentials. In early 2012, the British supermarket chain Tesco PLC dropped the United Kingdom’s Carbon Trust label, citing prohibitively high costs and minimal consumer recognition.

However, there is no denying that the value of eco-products — and the recognition of certain eco-labels — is growing. For example, in the United States, retail sales of organic foods increased from $3.8 billion in 1997 to $29.2 billion in 2011. Moreover, nearly four of five U.S. households recognize the Energy Star label, which is a joint eco-label from the U.S. Environmental Protection Agency and the Department of Energy. In fact, American consumers have purchased more than one billion Energy Star-labeled products.

To read the full article on the MIT Sloan Management Review website.