Eco-Labels: Environmental Issues in Business

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
The rationale for eco-labels and their benefits
The potential drawbacks of eco-labels
Conclusion
References

Introduction

Modern companies attempt to improve their environmental practices in part because consumers begin to pay more attention to the social performance of these businesses and the influence of their activities on nature or human health. Eco-labels or green stickers are certificates that inform consumers about the production standards adopted by a manufacturer and the environmental record of its products (Kaul 2005, 228). They are supposed to be provided by independent organizations that objectively assess the technologies used by corporations, their production cycle, waste management, and so forth. To some degree, they can be regarded as a means of attracting buyers’ attention to those goods that have a lower environmental impact at the stage of their production or consumption. At this point, many researchers and journalists discuss the positive and negative aspects of these eco-labels. Overall, it is possible to argue that they can certainly lead to the improvement of environmental practices in many industries; however, this goal can be achieved only if these certificates are given by independent and authoritative organizations that cannot be influenced, manipulated or coerced by businesses. If this precaution is not taken, green stickers can turn into mere marketing tools that do not really reflect the environmental performance of a company. Moreover, customers can become very skeptical about eco-friendly products. This is the main thesis that should be examined more closely.

The rationale for eco-labels and their benefits

Overall, the wide adoption of green stickers can be explained by the emergence of such a trend as ethical consumerism. This means that people become concerned not only about the price or quality of the product but also about its impact on human health and the environment. Green stickers are supposed to help people make responsible purchasing decisions. The use of eco-labels can be viewed as a stimulus that prompts companies to adopt technologies and design production processes that can reduce water pollution, deforestation, ozone depletion, and other threats to the environment. This is how the community can affect a certain industry without legal regulations. These certificates have to be given by a third party that can be a public or private institution that has no affiliation with private businesses. Researchers believe that such labels are market-based instruments that are designed to protect the environment (Kaul 2005, 228). Their application is premised on the assumption that consumers feel responsible for their purchasing decisions and that they are more likely to buy goods or services that do not create any risks for the environment (Kaul 2005, 228). In this way, many people try to reinforce their positive self-image. In the future, other companies will also have to implement eco-friendly strategies in order to retain their positions in the market. Overall, the theoretical model of eco-labeling suggests that this approach has beneficial effects.

It is possible to provide examples demonstrating that eco-labels can indeed have a positive effect on various industries. For instance, in their research article, Thomas Cooper, Meaghan Ludlow, and Tom Clift argue that the use of eco-labels has helped to transform the fishing industries in many countries (2012, p. 27). Nowadays, consumers can see a great number of seafood green stickers distinguishing those companies that are engaged in sustainable fishing practices (Cooper, Ludlow, and Clift 2012, 38). In particular, they avoid overfishing, destruction of natural habitat, or water pollution (Cooper, Ludlow, and Clift 2012, 38). This is how businesses can gain the status of a responsible producer (Cooper, Ludlow, and Clift 2012, 38). Their activities ensure that fish populations can be restored. This trend is relevant to many countries; for instance, the government of Australia attempts to design regulations that can preserve its aquaculture. Other countries also have to overcome this problem. It seems the adoption of eco-labels can greatly assist the efforts of policy-makers. More importantly, this research article demonstrates that consumers’ choices can compel fisheries to minimize their impact on aquaculture and save many species. This is one of the cases that should be considered.

Furthermore, the survey carried out by Katharina Summer and Rolf Wüstenhagen indicates that many consumers won’t pay much attention to eco-labels while purchasing home appliances (2006). For example, in their opinion, the presence of an eco-label implies that a washing machine is efficient in terms of water or energy consumption (Summer and Wüstenhagen 2006, 192). They are more likely to prefer these products because they help people cut their daily costs and reduce their consumption of energy resources (Summer and Wüstenhagen 2006, 192). To some degree, these decisions can be explained by people’s willingness to improve the sustainability of their activities (Summer and Wüstenhagen 2006, 192). Thus, one can argue that improved environmental strategies can give a competitive advantage to companies, and this tendency can have a positive influence on many industries because other businesses will have to emulate the strategies of the leader. This situation can be observed in other industries. For example, one can refer to the study done by Maria Loureiro, Jill McCluskey and Ron Mittelhammer (2002, 214) indicates that some consumers, especially women are willing to pay a premium for eco-labeled vegetables such as apples. Such purchasing decisions can eventually result in the reduced use of pesticides that can produce harmful effects on people’s health, various animals, and soil (Loureiro, McCluskey, and Mittelhammer 2002, 203). Thus, farming is another industry that has benefited from the use of green stickers. This is why people should not assume that eco-labeling does not bring any dividends to consumers and manufacturers.

Furthermore, one can mention that in Australia, the sellers of cars must post green stickers that give buyers information about the fuel consumption of the vehicle and its emissions (Tamiotti, 2009, 121). This case demonstrates that the government can oblige businesses to disclose information about their environmental performance. It seems that this requirement is quite justified because consumers have a right to know about the environmental record of vehicles. This policy can gradually reduce the influence of vehicles on nature and animals. More importantly, Australian buyers are generally more willing to purchase cars that pose a lesser threat to nature. This trend can be observed in many other countries as well. So, such choices of consumers, who may live in different regions of the world, lead to the gradual improvement of manufacturing standards and practices.

On the whole, these examples suggest that the presence of green stickers can affect the decisions of buyers and their opinions about products. They can distinguish those companies that genuinely attempt to improve their waste management practices, the use of eco-friendly technologies and materials. More importantly, this trend can force other manufacturers to raise their production standards; in fact, they will have to do it in order to remain competitive. It has to be admitted that in many cases, eco-labels do not bring the desired benefits. In some countries like the Czech Republic or Slovakia, consumers are most concerned with the price of a product or its quality, but they do not pay much attention to the environmental record of the company (Dočekalová and Straková 2011, 1248). The presence or absence of such certificates does not affect their decisions significantly. Certainly, one should not forget the purchasing decisions of a customer can be influenced by his/her income level and this factor should not be overlooked. Therefore, eco-labeling plays an important role mostly in advanced countries. Nevertheless, green stickers have the potential for changing the environmental performance of modern businesses; furthermore, they can help customers make informed choices. These are the main benefits that these tools can bring to consumers and the community.

The potential drawbacks of eco-labels

However, the excessive use of eco-labels can be criticized by many researchers and policy-makers who can argue that they only set back the environmental agenda, rather than promote it. They can be applied only as advertising tools that do not have significant value for customers or the community. This criticism has several reasons that should not be disregarded. First of all, scholars note that there are two types of eco-labels. The first group includes those certificates that are provided by third-party organizations, mostly environmental agencies (Home 2009, 176). These green stickers are usually the most reliable because these agencies are not affiliated with manufacturers. However, there are also self-declarations of retailers and manufacturers (Home 2009, 176). In many cases, these claims are not always substantiated by empirical data that should be properly documented. In addition, clients do not have the opportunity to verify the information that manufacturers provide (Home 2009, 176). This is one of the critical drawbacks that should be taken into account by buyers and legislators. Therefore, one can argue that eco-labels can turn into marketing tools that cannot be related to the environmental performance of a company, its technologies, or waste management practices.

Additionally, researchers point out that the number of eco-labels has risen dramatically in many countries. For instance, in Germany, there are approximately 1000 organizations that can give green stickers to businesses (Langer, Eisend, and Kuß, 2008, 338). A similar trend is observed in many other countries. On the one hand, this diversity ensures that a single agency cannot be the only judge of a company’s environmental performance (Youssef and Abderrazak 2009). However, one should take into account that the credulity of these organizations can be very low (Langer, Eisend, and Kuß, 2008, 338). Very often consumers do not know whether the information provided by these agencies is reliable in part because the work of these agencies is not fully transparent. The problem is that some of them can have a conflict of interests. This means that these environmental agencies can receive donations from manufacturers, and one can assume that their assessments can be very biased. So, it is possible that they will provide inaccurate or even distorted information. This is why the value of eco-labeling can be questioned.

One should also remember that green stickers can become a significant trade barrier for many small businesses. In order to adopt eco-friendly technologies or production processes, companies have to make significant investments, and these investments can be afforded by large-scale manufacturers, rather than start-up companies (Doubt 2000, 200). Very often these organizations usually do not have sufficient resources in order to reach the standards set by government or environmental agencies (Doubt 2000, 200). This risk can be particularly important when the agencies that offer eco-labels, can be manipulated by manufacturers. This issue becomes particularly important especially if one takes into account that there is very little auditing of the company’s environmental practices. Additionally, green stickers can be barriers that prevent a company from entering a foreign market (Doubt 2000, 200). The problem is that various countries may have different environmental standards, and in some cases, these standards are used to protect local consumers (Doubt 2000, 200). Nevertheless, they are supposed to protect local producers, but they are not related to the environmental agenda (Doubt 2000, 200). This is why many business administrators and economists are skeptical about the adoption of eco-labels or green stickers. They believe that these requirements do not really minimize environmental risks (Doubt 2000, 200). Thus, policy-makers should consider this risk when setting environmental standards.

Overall, these drawbacks and problems gave rise to such a concept as “greenwashing”. This term means that companies may only claim that they value environmental performance, but their real practices do not result in any improvements (Fliegelman 2012, 1007). Moreover, this word suggests that many people may not place much value on green stickers. In her research article, Jessica Fliegelman points out that these activities can undermine the initiatives of many businesses. This is one of the dangers that researchers warn people about. The problem is that consumers can become very skeptical about eco-friendly products and they can disregard even those companies that genuinely try to improve their environmental performance (Fliegelman 2012, 1007). Buyers can come to the conclusion that eco-labels or green stickers do not provide valuable information to customers (Fliegelman 2012, 1007). This is why researchers are not always optimistic about the use of eco-labels. The most important point is that the credibility of many environmental agencies cannot always be ensured or verified in any way.

Therefore, policy-makers should take into consideration that green stickers can be viewed only as deceptive commercials that do not promote the protection of the environment. This is one of the reasons why researchers support the development of “the national eco-labeling program” that can be a major authority (Fliegelman 2012, 1052). The general requirement is that these certificates are provided by independent organizations that can audit the environmental practices of a business, examine their products, and their impact on health and the environment (Fliegelman 2012, 1052). Additionally, the decisions of this organization must not be influenced by corporations. It must act as an impartial judge that can evaluate the practices of companies in an objective way. This is one of the main recommendations that researchers make. Provided that these requirements are met, eco-labels can indeed promote sustainable practices and even transform various industries that can pollute water or air. So, this evidence suggests that businesses misuse eco-labels in order to gain a competitive advantage, but these activities are hardly ethical because they mislead consumers. It is rather unlikely that they will reduce environmental damage. Nevertheless, these risks can be mitigated by policymakers and legislators. Moreover, buyers should also learn more about the credibility of different agencies that are responsible for the provision of green stickers and eco-labels. This is how people can minimize the drawbacks of eco-labeling.

Conclusion

This discussion indicates that the use of eco-labels can produce different results. Provided that the company publishes accurate and verified data about its environmental practices, the use of green stickers can be justified since consumers can take informed decisions while evaluating different products. In this way, people can support the initiatives that reduce the destruction of the environment. Furthermore, in this way, companies can differentiate their goods and attract customers. In the long term, other businesses will focus on their sustainability in order to become more competitive. So, environmental performance can be critical for the financial performance of businesses. This is the main rationale for the use of green stickers. Nevertheless, these benefits can be derived only in those cases when eco-labels are given by agencies that can audit the practices of companies and ensure that their claims about sustainability are fully supported; otherwise, the benefits of these tools will be minimal. This is the most important argument that can be advanced. If policy-makers do not take these precautions, the very idea of environmental sustainability can lose its value because clients will become very skeptical about the initiatives of businesses and their technologies. Certainly, the use of eco-labels can have some limitations, but they have the potential for changing modern industries. The main benefit is that consumers’ choices can shape the policies of producers even without the intervention of the government.

References

Cooper, Thomas, Meaghan Ludlow, and Thomas Clift. 2012. “Examining the Role of Eco-Labels in Changing the Approach to Sustainability in the Commercial Fisheries.” Greener Management International 57 (2): 27-42.

Dočekalová, Marie, and Juliana Straková. 2011. “The influence of Eco-labeling on consumer behavior in the Czech Republic and Slovakia.” Economics & Management 16 (23): 1248-1252.

Doubt, Keith. 2000. Sociology After Bosnia and Kosovo: Recovering Justice. New York: Rowman & Littlefield.

Fliegelman, Jessica E. 2010. “The Next Generation of greenwash: diminishing consumer confusion through a national eco-labeling program.” Fordham Urban Law Journal 37 (4): 1001-1056.

Horne, Ralph. 2009. “Limits to labels: The role of eco-labels in the assessment of product sustainability and routes to sustainable consumption.” International Journal of Consumer Studies 33 (2): 175-182.

Kaul, Stephen. 2005. Wastewater Management: With Special Reference to Tanneries. New York: Discovery Publishing House.

Langer, Alexandra, Martin Eisend, and Alfred Kuß. 2008.”The Impact of Eco-Labels on Consumers: Less Information, More Confusion?.” Advances In Consumer Research – European Conference Proceedings 8 (42): 338-339.

Loureiro, Maria, Jill McCluskey, and Ron Mittelhammer. 2002. “Will Consumers Pay a Premium for Eco-labeled Apples?.” Journal Of Consumer Affairs 36 (2): 203-219.

Summer, Katharina, and Rolf Wüstenhagen. 2006. “The influence of eco-labeling on consumer behavior – results of a discrete choice analysis for washing machines.” Business Strategy & The Environment 15(3): 185-199.

Tamiotti, Ludivine. 2009. Trade and Climate Change: A Report. New York: World Trade Organization.

Youssef, Adel Ben, and Chema Abderrazak. 2009. “Multiplicity of Eco-Labels, Competition, and the Environment.” Journal Of Agricultural & Food Industrial Organization 7(1): 1-22.

Click Here To Order Now!