3sR^S!.;5%'£%:--A;0-8it;r;W4vK.WK^ t:-";;3O<'-,;>:::5?i«- ;"*;-.-V ct«8*69||«K««S^:'»i*>^x'ScKp:;*j;!tag- -; ;V,i(f- SJ^--:^'*'--:#!": f': ,:':fw::i::-,^^'-f-yi^^-:J :;vVJ^"j. .;.: iSs«ij"-Vc-1-'1-_.. Recycled/Recyclable Printed wHhSoy/Canola Ink on paper that contains at least 50% recycled fiber ------- ------- Determinants of Effectiveness for Environmental Certification and Labeling Programs prepared for: Julie Winters Lynch Pollution Prevention Division Office of Pollution Prevention and Toxics U.S. Bivironmental Protection Agency 401 M Street, SW (7409) Washington, DC 20460 prepared by: Abt Associates Inc. April 1, 1994 EPA Contract No. 68-02-0175 ------- ------- ACKNOWLEDGEMENTS This report was prepared by Elissa Malcohn, Bentham Paulos, Andrew Stoeckle and Herbert Han-Pu Wang of Abt Associates Inc. (U.S. Environmental Protection Agency Contract No. 68-D2-0175) under the direction of Julie Lynch, EPA Work Assignment Manager. We gratefully acknowledge the thoughtful comments made on earlier drafts of this report by the following reviewers: Eldert Bontekoe Linda Brown Jim Craig Susan Hadden Janet E. Hughes Jeff Kempter David J. Kling Richard Kashmanian Jim Lund Evan Pilchik Carol Weisner U.S. Environmental Protection Agency Office of Mobile Sources Certification Division Vice President, Communications Scientific Certification Systems U.S. Environmental Protection Agency Office of Pesticides, Prevention and Toxics Pollution Prevention Division University of Texas at Austin Lyndon B. Johnson School of Public Affairs Executive Assistant Green Seal U.S. Environmental Protection Agency Office of Pesticide Programs . Registration Division U.S. Environmental Protection Agency Office of Pesticides, Prevention and Toxics Pollution Prevention Division U.S. Environmental Protection Agency Office of Policy, Planning and Evaluation Regulatory Innovations Staff U.S. Environmental Protection Agency Office of Science and Technology Policy and Communications Staff Environmental Specialist Good Housekeeping Bureau of Chemistry and Environmental Studies U.S. Environmental Protection Agency Office of Solid Waste Municipal and Industrial Solid Waste Division ------- ------- TABLE OF CONTENTS EXECUTIVE SUMMARY .... . ,. . .'v .... . . . . . . .... . . .... . . . . . ..'.-.. i 1. INTRODUCTION . . . . ... . ;'.'. 1 2. THE EFFECTIVENESS OF ENVIRONMENTAL LABELING PROGRAMS ... 5 2.1 Measuring the Effectiveness of Environmental Labeling Programs ..... 5 2.1.1 Changes in Consumer Awareness and Acceptance ...... 6 2.1.2 Changes in Consumer Behavior ................... 6 2.1.3 Changes in Manufacturer Behavior ......... . . ..... 7 2.1.4 Changes in Environmental Impacts 7 . '» 2.1.5 Difficulties in Quantifying Effectiveness 8 2.2 Overview of Active Environment^ Labeling Programs . . . . . 8 2.2.1 Positive Environmental Labeling Programs: Seals-of- Approval and Single Attribute Certification Programs . . . . 11 2.2.2 Neutral Environmental Labeling Programs: Report Cards and Information Disclosure Labels ................ 14 2.2.3 Negative Environmental Labeling Programs .......... 15 2.2.4 Factors Influencing ECP Effectiveness 15 References ...... 18 3. EXISTING RESEARCH ON THE EFFECTIVENESS OF ENVIRONMENTAL LABELS '.'. . . . .... ... ... . .;'.' 19 3.1 Studies and Information on the Effectiveness of Positive Labels ... . . . . . .20 3.2 Studies and Information on the Effectiveness of Neutral Labels ....... 24 3.3 Studies and Information on the Effectiveness of Negative Labels 28 3.4 Conclusions . .... ... ........ ... . . . . . . . . . . . . 31 References ..... ................:........ ... 32 4. OVERVIEW OF NON-ENVIRONMENTAL LABELING INITIATrVES ..... 37 4.1 Public and Private Labeling .......... .-,. ......... . ......; 37 .4.1.1 Government Labeling Activity .................. 37 4.1.2 Non-governmental Labeling Activity ....... . . ...... 40 4.2 Overview of Active Non-Environmental Labeling Programs . ... . . . . .41 4.2.1 Positive Labeling I>rograms .. ................... 41 4.2.2 Information Disclosure Labeling Programs 44 4.2.3 Warning/Hazard Labeling Programs .... . .......... 46 4.2.4 Factors .Influencing Non-Government Labeling Effectiveness . . ..". ................... 47 ------- ------- TABLE OF CONTENTS, cont. 5. SUMMARY OF RESEARCH ON PARALLEL LABELING PROGRAMS .... 53 5.1" Effectiveness Studies of Positive Labeling Programs 53 5.2 Effectiveness Studies of Information Disclosure Labeling Programs . . . . . 61 5.3, Effectiveness Studies of Hazard/Warning, Labeling Programs ......... 65 5.4 ^Conclusions About Research on Labeling Effectiveness ............ 69 References 71 6. ECP RESPONSE TO EFFECTIVENESS INQUIRIES . . . .... . 77 6.1 Question 1: What are your program's explicit (written) goals? Are there any goals that are not written out that the program or its staff feel are important for a new program to consider? .................... 79 6.2 : Question 2: What has your program learned about measuring program effectiveness? 79 i 63 Question 3: What lessons can the U.S. learn from the experiences of foreign environmental certification programs? . . 81 References 83 7. ANCILLARY INFORMATION RELEVANT TO ECP SUCCESS .......... 85 7.1 Consumer Awareness of Environmental Issues ., 85 7.2 Consumer Attitudes toward Environmental Information 87 7.3 Consumer Behavior Change . . ... . . . . . . 87 7.4 Manufacturer Behavior Change .......;....... . . ......... . 88 7.5 Conclusion .............. . . .............. ^ > '.-.'.. 90 References 91 8. FINDINGS ........... .-, . . . , , .................. 93 8.1 Introduction . . .93 8.2 Determinants of ECP Success ,. .... . . - ..... ... 96 ------- ------- EXECUTIVE SUMMARY Product labeling initiatives are based on the premise that product information represented by or contained oh the label is otherwise not readily available (or apparent) and is of value in consumer purchase decisions. For example, warning labels highlight product safety and toxic exposure hazards and advise consumers on ways to minimize risks. Likewise, a number of environmental certification programs (ECPs) identify products' environmental burdens and/or set standards for products' environmental attributes. This study reviews existing research on both environmental and nonenvironmental labeling programs to 1) evaluate the potential effectiveness of U.S. ECPs and 2) identify the factors critical to the success of labeling programs. The results may help guide future environmental labeling efforts to change consumer and manufacturer attitudes and behaviors, thus reducing environmental burdens. \ In the mid-1970s, several information disclosure requirements, tangentially environmental in nature, were initiated in the U.S. These programs quantified a.single attribute, such as an appliance's annual electric use (and cost) or a vehicle's fuel economy, but provided no judgment or interpretation. More recently, a number of foreign ECPs and two domestic ECPs, Green Seal and Scientific Certification System's Environmental Report Card, have begun operation. These. programs aim to affect consumer attitudes and behavior by 1) informing consumers about the environmental attributes of products they are considering purchasing, and 2) assisting consumers to identify environmentally preferable products. Environmental attributes are therefore incorporated into consumers' purchase decisions along with conventional product attributes such as price, quality, and convenience. Manufacturers may also seek out an ECP's certification for its ability to stimulate consumer demand or improve employee oir stockholder relations. Environmental labeling programs attempt to offer a cost-effective means of using market forces to mitigate the environmental impacts, by both manufacturers and consumers, by shifting market shares among products toward those that are environmentally preferable and by providing incentives for (beneficial) product reformulation. This report analyzes factors related to the effectiveness of environmental labeling in the U.S., to ascertain whether additional information about the environmental burdens of a product's manufacture, use, and disposal can effectively shift consumer choices and cause manufacturers to change manufacturing processes and product formulations. This report uses the existing research and literature pn several types of product labeling to estimate the possible effectiveness of voluntary third-party labeling, or ECPs, in the U.S. Because effectiveness research related to ECPs in the U.S. is scarce, this report reviews available research for domestic environmental labeling programs (both governmental and private), selected non- environmental labeling initiatives in the U.S that parallel ECPs, arid foreign ECPs. This research 1) provides information relevant to the potential effectiveness of U.S. ECPs, and 2) identifies critical factors and conditions that enhance an ECP's effectiveness in changing attitudes and behaviors, thus reducing environmental burdens. ------- The specific metrics used to measure environmental label effectiveness include: 1) consumer awareness of labels, 2) consumer acceptance of labels (credibility and understanding), 3) changes in consumer behavior, 4) changes in manufacturer behavior, and 5) improvement of end goals, such as environmental quality. For environmental labeling, the first four elements can be seen as steps that eventually lead to the fifth element, namely the reduction of environmental impacts associated with consumer products. The research is summarized according to the five metrics outlined above, however, most important is the ability of labeling initiatives to affect some end goal, such as improving environmental quality. From Chapter 8, the major findings taken from the published research include: Consumer Awareness The general public's awareness of the underlying issues is an important determinant of success for a labeling program Awareness of a specific labeling program is the result of successful promotion. t High levels of consumer awareness of the underlying environmental issues do not necessarily translate to significant changes in consumer behavior, although they are correlated. Consumer Acceptance (program credibiUty/consumer comprehension) Successful acceptance of a product certification program depends on 1) public understanding of relevant issues, 2) public understanding of the connection between relevant issues and product choices, 3) an accurate and clearly understood presentation of the product attributes, and 4) an understanding of what specific actions (e.g., purchase decisions) individuals can take in response the information provided by the labeling program. A labeling program will be most readily understood when it is part of a broader public information campaign. A labeling program is more likely to be accepted if it is offered by a credible source. The seal of approval and the information disclosure formats of environmental labeling offer different advantages. Studies have shown that labels of any format have the potential to be poorly understood by consumers. 11 ------- Consumer Behavior Change Changing the behaviors of a significant portion of consumers requires an integrated campaign to increase awareness, understanding and provide incentives for individuals to make the desired changes. An American ECP will have to compete with all the other factors that consumers already use when making purchase decisions: price, quality, brand, personal experience, product promotions, etc. Manufacturer Behavior Change Companies will likely pursue environmental certification if: 1) the effort (including cost) of getting certified is not too high; 2) the company anticipates increasing sales or avoiding loss of market share to competitors; or 3) it will result in a better corporate image vis a vis customers and regulators. Environmental attributes have proven to be strategically important to individual products and manufacturers and thus have been effective in changing the behavior of manufacturers. Some labeling initiatives have been readily accepted by industry as beneficial, End Benefits . Environmental labeling programs have not measured their actual environmental benefits. There are a few estimates of reduced environmental releases (e.g., VOCs releases eliminated from paints and coatings following reformulation and shifts in market share) which were attributed to ECP efforts. .> Most of the evidence on a labeling program's effectiveness is indirect; labeling's role in meeting an ultimate goal (e.g., environmental quality improvement) is rarely studied. In addition, numerous other conditions and activities whose effects are not separable from those of labeling will also affect consumer demand for specific products. Consequently, definitive conclusions about the.potential benefits of ECPs are difficult to make. Using published studies, many environmental labeling programs appear to be enjoying a measure of success in heightening consumer awareness of labeling initiatives and increasing sales of certain types of labeled products (evidence of consumer behavior changes). For example, Canada's Environmental Choice Program found that awareness of the program among Canadians rose from 19 percent in 1990 to 51 percent in 1993. A Canadian envelope company also reported that sales of its recycled paper envelopes rose from 10 percent of its total sales to 30 percent after receiving the Canadian Ecologo. /..'. 111 ------- The highest level of interest in ECPs comes from survey results indicating that perhaps 80 percent of consumers in the United States "would be inclined to rely upon an environmental label... if the label were awarded by an independent group whose competence and integrity were beyond question." This percentage can be taken as the upper bound estimate of the percentage of consumers a U.S. labeling program could hope to reach. Given survey biases, an expected gap between reported intent and actual behaviors, and the lack of industry support (to date) for ECPs, a more probable estimate of maximum consumer participation is lower, reflecting both consumers' interest and their willingness to change their purchasing decisions. In a September 1993 survey, 55 percent of consumers reported the recent purchase of products, somewhat often or very often, specifically because of an associated environmental benefit; only 19 percent (a lower bound estimate of consumer participation) said that they never did so. Two unknowns affecting ECPs' success not addressed by these estimates are the frequency with which consumers will alter their purchase decisions and what types of purchase decisions they are willing to change. While not the focus of this report, concerted efforts at the national level to promote the use of ECPs is likely to have effects incidental to the effects of the label itself, such as increased manufacturer response due to heightened public perception of the environmental consequences of all products. One estimate of maximum consumer awareness and labeling program response for non- environmental labeling initiatives is'found in a study of the Food and Drug Administration's (FDA's) nutrition label. Using in-store surveys following several months of nutrition shelf- labeling and in-store promotion, FDA's cost-benefit analysis of the nutrition label determined that 76 percent of consumers were aware of the relevant health issue (diet and heart disease) and estimated that 45 percent of consumers would read, understand and react to (i.e., take the label information into account in their purchase decisions) the information on the label. Determinants of ECP Success What are some of the key determinants of successful labeling initiatives that are applicable to ECPs? Education - A labeling program's effectiveness can be increased by linking it to a public education campaign; a public education campaign alone is rarely effective. For example, consumers exposed to EnergyGuide educational materials in addition to the Label were more likely to select energy-efficient appliances than consumers exposed to the EnergyGuide Label alone. Apart from affecting consumer receptivity to ECPs, education may also help consumers to become more environmentally-conscious and to reinforce environmental considerations in other decisions and actions at home and in the community (e.g., recycling, energy conservation, etc.). IV ------- Program Affiliation - Governmental sponsorship and involvement with labeling programs, which is common among the existing ECPs, can improve the program's econo'mic stability, legal protection, and credibility in the eyes of manufacturers and consumers. On the other hand, a non-governmental program run by a respected consumer or environmental organization may be .more immune to the political pressure that can affect governmental decision-making, and may benefit from greater credibility in the eyes of consumers and watchdog groups. One survey found that 37 percent of the people who considered themselves the "primary food shoppers" of their household believed that "environmental groups" were the best source of unbiased information about the environment, compared to the 8 percent who named the government and the 5 percent who named product manufacturers. ' .''*.< ' ", Manufacturer Self Interest - Due to product liability concerns, companies are motivated to join labeling programs to avoid financial and public relations risks as well as to increase sales. The Good Housekeeping Seal, for example, has been successful in guaranteeing to consumers that all products bearing the seal will work as advertised. This enhances the reputation of both the advertiser and the magazine. Germany's Blue Angel program is credited with creating incentives for manufacturers to reformulate certain products prior to any evidence of consumer demand: low-VOC paints and high recycled fiber content paper products. Consumer Self Interest - Ultimately, labeling programs are effective only inasmuch as the issues they represent are important to individual consumers. Widespread coverage by the news media of the underlying issues and school curricula are two examples of other initiatives that compliment labeling initiatives arid can mcrease both consumer acceptance of a labeling program and their willingness to change purchasing decisions. Affiliation with Other Initiatives - A successful approach for some certification programs is to affiliate their program with another program or information disclosure initiative. Private nutrition certification programs, for example, often use FDA .dietary guidelines and information provided by the mandated nutrition label. In the case of ECPs, links to large scale institutional procurement guidelines and standards may be of significant benefit. ------- ------- 1. INTRODUCTION Neoclassical economic theory assumes that perfect information is required for the efficient operation of economic markets. That is, to make economically rational decisions, consumers must have access to all information, relevant to their decision-making.1 In reality, several types of imperfections are related to the information individual consumers receive. The most significant of these are that individuals 1) may not have sufficient information with which to make decisions, 2) may not know the limitations of the information they receive, or 3) do not have the knowledge needed to evaluate the information. In the case of selecting environmentally preferable products, consumers face several substantial obstacles. Unlike price, quality, and convenience, many environmental attributes, such as the relative environmental burden of the manufacturing processes, are difficult if not impossible for an individual to assess. In addition, even if direct measures are available, such as pounds of carbon dioxide emitted during production, few consumers would be able to interpret such metrics as related to their own health or, more generally, to public health and the environment. Environmental certification programs offer one market-oriented approach to addressing each of the three types of information deficits noted above.2 In theory, such labeling programs affect consumer behavior as follows: 1) An independent third party firstdevelops criteria for environmentally preferable products by category, and then evaluates products to determine their absolute and relative (to other products within the same product category) environmental burdens during manufacture, use, and disposal. 2) This complex information is presented in simplified form on a product label. 3) Consumers can then incorporate the environmental attributes as presented on the label with conventional attributes, such as price, quality, and convenience, to evaluate the products. To the extent that consumer demand for products with fewer environmental burdens exists, the, market share of these products will increase, all else being equal. 4) In response, companies manufacturing competing, but less environmentally preferable, products may reformulate their products as a competitive strategy. Manufacturers may also, for icasons unrelated to consumer demand (such as employee or stockholder relations), seek out an environmental label to distinguish themselves within the marketplace. 1 This discussion is limited to individual consumers. Other conditions and assumptions apply to corporate and other decision-makers who participate in and influence markets. 2 For the purposes of this paper, "environmental labeling" will refer to the broader practice of labeling products based on environmental considerations, including hazard/warning (negative) labels, certified marketing claims appearing on a product or shelf label, and neutral information disclosure labels. "Environmental Certification Programs (ECPs)' will refer to positive and neutral, third party, voluntary programs. ------- Theoretically, both the market shifts among products and the (beneficial) reformulation of existing products would then reduce the environmental burdens of current consumption levels and patterns. The effectiveness of labeling initiatives depends upon several factors not directly related to the format, content, or procedures of product labeling. Consumers' reception of environmental messages and information relates directly to their understanding of relevant environmental issues; their exposure to reinforcing educational and publicity efforts will affect their reception of environmental messages and information. Research from studies of warning labels emphasizes the importance of consumers' existing perception of risk, or hazard associated with a particular product. (Pollack-Nelson, 1991) A study of Germany's Blue Angel program shows that voluntary third-party environmental certification programs (ECPs) have had some success in shifting the market share of products associated with more readily recognized environmental problems. One case in point is the Blue Angel program's experience in certifying consumer aerosol products without CFCs, following the U.S. ban of such formulations in 1978 and heightened German consumer awareness of the ozone depleting potential of CFCs. (Federal Minister for the Environment, 1990) In addition, labeling. initiatives, almost without exception, include a significant educational and promotional effort. This ranges from providing supplemental materials upon request and at the point of purchase to nationwide publicity campaigns and the creation of environmental curricula for use in schools. Because publicity and educational efforts are integral to most labeling initiatives, their incremental effects are rarely studied. Where reported in the literature, we identify the amount and type of coincidental promotion and education that occurred along with the effectiveness study results. This report analyzes the possible effectiveness of environmental labeling in the U.S., to ascertain whether additional information about the environmental burdens of a product's manufacture, use, and disposal can shift consumer choices and cause manufacturers to change manufacturing processes and product formulations effectively. This report uses the existing research and literature on several types of product labeling to estimate the possible effectiveness of voluntary third-party labeling, or ECPs, in the U.S.3 Because effectiveness research related to ECPs in the U.S. is scarce, this report reviews available research for domestic environmental labeling programs (both governmental and private), selected non-environmental labeling initiatives in the U.S that parallel ECPs, and foreign ECPs. From this research we hope to 1) provide information relevant to the potential effectiveness of U.S. ECPs, and 2) identify critical factors and conditions that enhance an ECP's effectiveness in changing attitudes and behaviors, thus reducing environmental burdens. li , .',.,:, References 3 The ECPs reviewed include both positive programs Cm which the relative superiority of particular products, based on one or more criteria, is promoted) and neutral programs (in which information on environmental burdens la provided but no standards are established). ------- Federal Minister for the Environment, Nature Conservation, and Nuclear Safety, et ai., 1990. Documentation - International Conference on Environmental Labelling: State of Affairs and Future Perspectives'for Environment Related Product Labelling, July 5-6, in the Reichstag, Berlin. , . . - ' ' ' " ->-"'- . . Pollack-Nelson, Carol, 1991. Estimated Effectiveness of Warning Labels, U.S. Consumer Product Safety Commission, Division of Human Factors, March. ------- ------- 2. THE EFFECTIVENESS OF ENVIRONMENTAL LABELING PROGRAMS 2.1 Measuring the Effectiveness of Environmental Labeling Programs While environmental labeling programs aim to educate consumers and change their, purchasing behavior, their ultimate goal is to reduce environmental impacts from the manufacture, use, and disposal of consumer products and services. Labeling programs generally attempt to meet this goal by changing consumer purchasing behavior and attitudes and encouraging manufacturers to develop products and manufacturing processes that are less harmful to the environment. While labeling programs (especially ECPs) are undoubtedly growing in popularity worldwide, their influence on consumer and manufacturer behavior and on environmental quality has not been well studied. Effectiveness of environmental labeling can be separated into three related concepts: concrete 'effectiveness the extent to which a program actually reduces environmental impacts or improves environmental quality; behavioral effectiveness the degree to which consumer and manufacturer activities (e.g., market shift) are influenced by a labeling program; and potential effectiveness those aspects of labeling that affect consumer awareness and attitudes, which are often (but not necessarily) related to changes in actual behavior. (Malouff and Schutte et aL, 1992) While concrete and behavioral effectiveness are the most accurate ways to assess the success of a labeling program, they are also the most difficult to measure. Therefore, most of the research on labeling programs (environmental and non-environmental) conducted to date has addressed potential effectiveness, or the change in awareness and attitudes of consumers exposed to label information. The specific metrics used to measure environmental label effectiveness include: 1) consumer awareness of labels, 2) consumer acceptance of labels (credibility and understanding), 3) changes in consumer behavior, 4) changes in manufacturer behavior, and 5) improvement of environmental quality. The first four elements can be seen as steps that eventually lead to the fifth element: the reduction of environmental impacts associated with consumer products. In other words, increased consumer awareness of an environmental label is necessary for increased .consumer acceptance of and demand for products carrying the label. With increased acceptance of an environmental label, consumer behavior changes may take the form of increased demand for products with ECPs, or decreased demand for products carrying negative warning labels. This in turn would effect a market shift toward products that are presumably less damaging to the environment than other similar products -in their classes. In theory, a market shift of this sort will reduce the total environmental impacts of consumer products. It should be noted that the first four elements do not necessarily have to occur in the sequence described above in order to bring about environmental change. As discussed below, ------- labeling programs may prompt manufacturers to reduce their environmental impacts even when there may not be significant initial consumer awareness or interest. In addition, the role of local, state and federal governments as major purchasers and policy makers, and retailers' role in determining product availability and promotion can affect the success of environmental labeling in the marketplace significantly. While these marketplace initiatives might also be exploited by environmental labeling programs to reach some of their programs' goals, they are outside the scope of this report which focuses specifically on environmental labeling. Specific research on the five metrics used to measure environmental labeling effectiveness is discussed in more detail in Chapter 3. 2.1.1 Changes in Consumer Awareness and Acceptance Consumer awareness and acceptance is measured in the study of label effectiveness for two reasons. First, the assumption is that if consumers can recognize labels and the messages they convey, this information will lead to changes in their behavior and, ultimately, to improvements in environmental quality. Second, awareness is fairly easy to measure through consumer surveys, as compared to trying to determine a cause for shifts in market share or assessing the reduction of environmental, impacts directly. Studies performed on consumer perception of manufacturers' environmental marketing claims (not labels) suggest that a demand for and an awareness of environmental product information exist. According to a 1991 Angus Reid Group survey, consumers would have the greatest confidence in a national-level system of standards for environmental claims, and a labeling program would increase the credibility of environmental marketing. (U.S. EPA, 1993a) These studies also find, however, that this high level of interest in environmental information is not necessarily reflected fully in actual purchasing decisions that consumers make. The number of purchasing decisions hi and of itself may not be the best yardstick to use. Howard Beales of the FTC Bureau of Economics notes that "the proportion of consumers who actually use the information...is not necessarily a good proxy for the value of the information. Markets are likely to respond to the demands of a relatively small number of informed consumers in ways that benefit all consumers." (Beales, undated) As an example, Mr. Beales noted that although only a small fraction of consumers actually read nutritional labels, many companies unproved the nutritional quality of their products to capture that section of the market that actually uses nutritional information. 2.1.2 Changes in Consumer Behavior To date, very few studies have been performed on changes in product sales (i.e., consumer behavior) caused by the presence of environmental labels. As an example, research on changes in consumer behavior due to the EnergyGuide label suggests that even with a high level of consumer awareness, the labels often have only a small effect on actual sales of energy efficient appliances. An analysis conducted for the Bonneville Power Administration (BPA) on consumer response to the EnergyGuide label concluded that while the Energy Guide may help raise awareness of energy efficiency issues, it does not affect consumer purchasing decisions ------- significantly. (U.S. EPA, 1989) Studies of labeling-induced consumer behavior change often relate that the effects of a label can:be confused with other influences, such as promotional campaigns and pricing. 2.1.3 Changes in Manufacturer Behavior When approached from a consumer-driven market perspective, changes in manufacturer behavior and decisions arise when consumers demand them. Consumers' concern about the environment could be perceived by manufacturers as demand for products that are less environmentally damaging and (equally important) products labeled as such. It can be argued that if a manufacturer modifies its product or production processes to either avoid a warning label or to qualify for ECP certification (thereby preventing loss of market share to its^ competitors), then the labeling program has been successful in mitigating the manufacturer's environmental impacts. , Another argument suggests that changes in manufacturer behavior may be achieved through a labeling program regardless of actual consumer demand for labeled products., According to this view, companies may subject their product(s) to an ECP's evaluation (and endorsement) expecting to enhance their public, stockholder, and employee relations, rather than expecting a direct increase in its marketplace performance. If consumers then purchase the company's labeled products, not out of environmental concern but rather because of product availability and other attributes, then a consumer behavior shift toward less environmentally- damaging goods could occur without much change in awareness or acceptance of the label. 2.1.4 Changes in Environmental Impacts As mentioned earlier, changes in environmental impacts, while the most important indicators of label effectiveness, are also very hard to measure for three reasons. First, measures of the relevant pollutant releases, burdens, and impacts are often difficult and expensive. Second, there is no widely accepted method of making tradeoffs among burden categories (e.g., water releases and energy consumption), which is necessary for those ECPs that set product standards. Third, it is unlikely that the precise cause(s) of a change in environmental quality can be identified. Take the issue of air pollution as an example. An ECP could release standards that promote the reduction of air emissions. However, reducing pollutant emissions in a manufacturing process could theoretically require a significant increase in energy use, with resulting environmental impacts of its own. Tracking and monitoring the enormous number of potential impacts due to product manufacture requires a full life cycle assessment (LCA), a methodology that in practice is still inconsistently applied. In addition to problems with measuring the physical inputs and outputs directly, LCAs have also come under criticism for failing to address issues that may be uncomfortable to industry. These issues include the impact of raw material extraction on biodiversity, the rights of indigenous peoples, and resource sustainability. (Wheeler, 1993) In other words, extremely important environmental issues are being potentially overlooked hi the development of standards by which labeling programs judge products. ------- In addition, environmental quality gains attributable to an environmental labeling program are often indistinguishable from those attributable to other forces such as regulations and restrictions, technological innovation, public information campaigns, and influence from non- governmental organizations (NGOs). As a result, there have been no significant studies in this o area. 2.1.5 Difficulties in Quantifying Effectiveness Changes in awareness, acceptance, and even actual behavior do not necessarily guarantee a "decrease in environmental impacts. All surveys deal with consumer awareness and acceptance (potential effectiveness), but provide only indirect evidence of the concrete effectiveness of labeling programs. Behavior change and changes in environmental impacts are much harder to quantify, and to date there have been only a small handful of studies that address behavior changes, and no studies that address changes in environmental impacts. 2.2 Overview of Active Environmental Labeling Programs The past several years have seen a marked increase in the public's awareness of and concern for a range of environmental issues both in the United States and abroad. One way in which the public, as consumers, seeks to lessen the environmental impacts of daily activities is by purchasing and using products perceived to be less environmentally harmful. Marketers have responded to this consumer demand by labeling products and packaging with environmental attributes (e.g., "package made from 35 percent post-consumer material") advertising such environmental attributes, introducing new products, and redesigning existing products. The U.S. marketplace also faces the introduction of several third-party environmental certification programs, as well as continued development of such programs by most of its major trading partners. Government and private parties alike have called this trend an opportunity to both decrease the environmental impacts of American public consumption patterns, and increase consumer education and sustain interest in environmental issues. A brief overview of currently active environmental labeling programs follows. Third-party consumer product labeling can serve three functions in the marketplace: 1) it can provide independent evaluation and endorsement of a product, 2) it can act as a consumer protection tool, and 3) it can be a means of achieving specific policy goals (environmental and otherwise). As a provider of independent product endorsement, a labeling program can offer companies a selling point that is more credible than the manufacturers' own claims. As a consumer protection tool, labeling can provide product information that is not readily apparent or easily discerned, or is not a positive selling point, and is less likely to be supplied by the marketer. For example, Vermont's Hazardous Household Products Shelf Labeling Program requires that products containing certain toxic or hazardous ingredients be labeled as such. As a policy 'instrument, labeling can influence marketplace behavior, guiding consumers and manufacturers to act in ways that further public policy goals. A variety of approaches to product labeling have been developed, prompted by concerns about health and safety, hidden, operational costs and, more recently, product environmental impacts. 8 ------- A \993 EPA study entitled Status Report on the Use of Environmental Labels Worldwide identified five types of third-party environmental labeling programs currently in existence, as well as the fundamental characteristics that distinguish the different programs. First, all such labeling programs are conducted by organizations independent from marketers, and are considered 'third-party' programs, as opposed to manufacturers making their own 'first-party' claims Second, participation in these programs can be voluntary or mandatory. Third, labeling programs can be positive, neutral, or negative; that is, they can promote positive attributes of particular products, require disclosure ofinformation that is neither inherently-good nor bad, or require (negative) warnings about the hazards of products or their ingredients. The table below illustrates the five types of environmental labeling programs identified by this classification system, and the properties they have. ; , Program Type Seal-of-Approval Single Attribute Certification Report Card Information Disclosure Hazard Warnings 1 Positive-. x X ===== Neutral X X Negative X Voluntary X X X Mandatory X X Seal-of-approval programs identify products or services as being less harmful to the environment than similar products or services with the same function. Single attribute certification programs typically validate an environmental claim made by the manufacturer, or certify that a product has a certain environmental attribute. Report cards offer consumers information about a product and/or a company's environmental performance in multiple burden categories (e.g., energy consumption, water pollution). In this way, consumers can weigh for themselves what they think the most important environmental impacts are. Information disclosure labels, like report cards, are also neutral, disclosing facts about a product that would not otherwise be disclosed by the manufacturer. Unlike report cards, they are usually required by law. Hazard/warming labels, or negative labels (similar to health advisory labels found on cigarette packaging), are mandatory warnings concerning the product's adverse environmental or health impacts. - Seal-of-approval, single attribute certification, and report card type labeling programs, by virtue of their voluntary nature, have been grouped together as environmental certification programs (ECPs). Most ECPs share three main objectives: 1) prevent misleading environmental advertising by providing an objective, expert assessment of the relative environmental impacts of products; 2) raise consumer awareness and encourage them to include environmental considerations in their purchasing' decisions by providing accurate information On the environmental consequences of products; and 3) provide manufacturers with market-based incentives to develop new products and processes with fewer environmental impacts. ------- ECPs are becoming an increasingly common marketplace approach to pursuing environmental policy goals. Such programs are active in more than 21 countries, some of which are major trading partners and competitors (e.g., Canada, Germany, Japan). Several ECPs are now active or may soon become active in the U.S. In the context of an increasingly global marketplace, U.S. manufacturers may need to meet the award criteria of foreign ECPs in order to compete effectively overseas; thus, foreign ECPs could be "exported" to the U.S. market. Governmental sponsorship and involvement with an ECP (as occurs with most foreign programs) can improve the program's economic stability, legal protection, and credibility in the eyes of manufacturers and consumers. On the other hand, a non-governmental program run by a respected consumer or environmental organization may be more immune to the political pressure that can affect governmental decision-making, and may enjoy more credibility from the perspective of skeptical consumers. Most of the existing or planned government-supported programs, including those instituted by Germany, Canada, the Nordic Council, the European Community, France, Japan, the Netherlands, New Zealand, and Austria, are seal-pf-approval programs. Green Seal, a private seal-of-approval program in the U.S., also falls into this category. In general, the programs judge products based on several award criteria using some abbreviated form of LCA. If the product passes, the marketer is allowed to use the program's logo in promoting and advertising the product. Other labeling programs, such as one operated by Scientific Certification Systems (SCS), certify single attributes of products, such as recycled fiber content of paper products. SCS also offers the Environmental Report Card, a broader information disclosure label showing pollution releases and resource use for products and companies. Information disclosure labels mandated by the U.S. government include the Energy Guide program for electrical appliances and EPA's Fuel Economy Information Program for cars and trucks. The U.S. EPA, California, and Vermont have mandatory negative labeling programs for hazardous and toxic materials. 10 ------- 2.2.1 Positive EnvironmentaLLabeMng Programs: Seals-of-Approval and Single Attribute Certification Programs Seals-of- Approval ,Seal-of-approval programs award the use of a logo' to products judged to be less environmentally harmful than comparable products, based on a specified award criteria. They attempt to provide a standard for environmental leadership in a given product category hinged on the concept of continuous improvement. First, product categories are defined based on similar use or other relevant characteristics. Award criteria are then developed for a product category. All products within a product category are compared against the same set of award criteria. The most important differences among the seal-of-approval programs, currently in existence centers around how these product categories and evaluation award criteria are set. Awarding a seal requires the consideration of many factors, including environmental policy goals, consumer awareness of environmental issues, and economic effects on industry. Table 2-2 summarizes eleven seal-of-approval ECPs currently in operation: / TABLE 2-2. Countries/Regions in which a oroeram is active Germany Canada Japan Nordic Council (Norway, Sweden, Finland, Iceland) European Community (EC nations) us , - , . France '".;.' International International India Singapore Korea . Program Blue Angel Environmental Choice EcoMark White Swan Ecolabel . Green Seal ...--' NF-Environnement Flipper Seal-of- Approval SCS Forest Conservation Program Ecomark Green Label - Ecomark '.'- Type , gov't gov't gov't gov't gov't private gov't private . private gov't gov't gov't Founded 1979 1989 1989 ' 1991 1993 - - nnf* ' - 1993 1993 1991 1993 1991 ' 1992 1992 Other countries planning programs include Austria, New Zealand, and the Netherlands. Plans for seal-of-approval schemes have been dropped in Ireland and the United Kingdom in order to participate in the European Community scheme. During 1992, California EPA assembled a task force to begin consideration of a positive seal-of-approval; the State of New Jersey has also studied the issue; In general, seal-of-approval programs tend to have similar administrative structures. In a typical program, the government's environmental agency is involved to some extent, ranging from actually administering the program to simply providing advice or funding. The bulk of the responsibility rests in a central decision-making board composed of environmental groups, academics and scientists, business and trade representatives, consumer groups, and/or government representatives. Such board members usually serve for fixed terms (two to five years). Technical expertise is provided by the government, standards-setting prganizations, consultants, expert panels, and/or task forces established for specific product categories. 11 ------- Virtually all seal-of-approval programs follow the same overall certification process as defined above, with some minor variations. With Japan's EcoMark as a notable exception, most of these programs set award criteria in pre-defined product categories using a form of life cycle study that examines a product's potentially significant environmental burdens. Award criteria for that product group are set to reduce those impacts considered to be the most important or relevant. Once the award criteria have been finalized and published, manufacturers are invited to submit products for testing and then, if accepted, apply for a license to use the logo. The United Nations Environmental Programme (UNEP) held a "Global Environmental Labeling" seminar in September 1991, where experts defined the following basic features common to seal-of-approval ECPs: determination of award criteria based on life-cycle review of a product category; voluntary participation of potential licensees; run by a not-for-profit organization, including governments, without commercial interests; recommendations for product categories and environmental award criteria; determined by an independent, broadly-based board; a legally protected symbol or logo; open access to potential licensees from all countries; endorsement from government;4 award criteria levels established to encourage the development of products and services that are significantly less damaging to the environment; and periodic review and, if necessary, update of both environmental award criteria and categories, taking into account technological and marketplace developments (UNEP, 1991). The International Chamber of Commerce (ICC) has proposed several requirements for ECPs from the perspective of the business community. In particular, they emphasize that there should be no more than one ECP in each market to avoid consumer confusion, and that the key reasons for granting the environmental award should be printed on the product label itself. ICC also suggested that there should be a certain amount of harmonization among national programs, and that business should have a voice in the ECP process. (ICC, 1991) Most seal-of-approval programs also consider the incorporation of national environmental policy goals into the program, appropriate and reasonable definitions of product categories, 4 This point had majority, but not universal, consensus. 12 ------- inclusion of industrial and commercial products and services in the program, and the need to put environmental award criteria into context, recognizing important product attribute tradeoffs (e.g., reduced packaging versus packaging needed for consumer safety, as with many food products). A seal-of-approval labeling program differs from those that certify manufacturers' claims because it is based on a broader assessment of a product's life cycle. In spite of this, a seal-of- approyal program will often make awards based primarily on only one attribute, which is deemed the most important, the most practical, or the easiest to improve. .Germany's Blue Angel often makes awards based on a single criterion that is considered to be the most important environmental attribute of the product. A seal-of-approval is also different from a information disclosure program, such as the Food and Drug Administration (FDA) nutrition label, because it makes value judgments as to what is good and bad for the environment. Unlike,SCS's Report Card, a seal-of-approval often identifies the most important environmental impacts from among the many impacts associated with a product. If such a seal is controlled by a federal government, as is true for most foreign programs, it is used as a policy instrument where the implicit value judgments are provided by the national environmental policy. A major exception is the United States' Green Seal, a private non-profit program not associated with the U.S. government. Overall, the variations among programs are the result of different philosophies, different environmental policies, and different expectations of what is feasible and cost-effective. For the most part, countries pursuing ECPs have converged on the seal-of-approval label model as being sufficiently comprehensive and, above all, practical. Environmentalists, among others, have called for a more complete analysis of products, taking into account not only the full product life cycle but also the inherent trade-offs among environmental impacts. The degree to which seal of approval programs adopt such product evaluations will be possible only if the body of knowledge about life cycle assessment increases and consensus about its appropriate use is reached. Single Attribute Certification Programs Single attribute certification programs certify that claims made for products meet a specified definition. Such programs define specific terms and accept applications from marketers for the use of those terms. If the programs verify that the product attributes meet their definitions, they award the use of a logo to the marketer. These programs do not testify to the overall environmental impact or benefit of a product. The two environmental single attribute programs currently in operation are Environmental Choice Australia and Scientific Certification Systems' Single Claim Certification, a private program in the U.S. Another example of a single attribute certification program is the Bonneville Power Administration's (BPA) Blue Ribbon Award Campaign (sometimes called the Blue Clue) for the promotion of energy-efficient refrigerators and freezers. In operation from 1986 to 1991, Bonneville's program awarded a large, blue magnetic ribbon to those refrigerators in the top 15 percent of their size and function class. Efficiency measures were based on the same data used by the FTC for the Energy Guide, but used a standard DOE method to calculate the energy efficiency rating that considered Other factors in addition to annual operating costs. ' .- ' - . " - - ' . ' ; 13 . . ' ''-.' '.- ------- 2.2.2 Neutral Environmental Labeling Programs: Report Cards and Information Disclosure Labels Report Cards . The report card approach to labeling involves categorizing and quantifying various impacts that a product has on the environment. Values for each impact category (e.g., kilograms of carbon dioxide released during manufacturing) are listed on the label and displayed in a bar graph. At this time, only Scientific Certification Systems is using this method of labeling, although the Council on Economic Priorities publishes a book ranking companies on environmental as well as various social criteria. (U.S. EPA, 1993b) As of December 1992, Scientific Certification Systems had issued report cards to eighteen products. A major advantage of the report card approach is that it provides manufacturers and consumers with a large amount of information. Criticisms of the report card fall into two basic categories: concern over the difficulty of obtaining information, and the difficulty in displaying information clearly and simply. One advantage of the report card approach is that it can be designed so that it neither advocates nor condemns a product, but only highlights measurable differences in burden measures among products. To some extent, this reduces the possibility of consumers inferring product superiority across all burden categories. Information Disclosure Labels Like report cards, information disclosure labels simply report facts that can be used by consumers hi making a purchasing decision. Information disclosure labeling programs are usually initiated by government to fill a perceived need for better consumer information. Since the facts disclosed are not always positive selling features and may not otherwise be reported by marketers, these programs are almost always mandatory. Perhaps the best known information disclosure label is the Food and Drug Administration's (FDA) nutrition label. Amended under the Nutrition Labeling and Education Act of 1990, the new food label is required to appear on all processed food sold in the United States, with voluntary labeling on all unprocessed fruits and vegetables. (FDA, 1992) i'' ,' ''*-'' ' The government has required two other information disclosure labels that can be considered environmental in focus. One is the automobile Fuel Economy Information Program, which requires a label on all new cars and trucks sold. Begun as a voluntary program in 1973 by the Environmental Protection Agency, it soon became mandatory for auto makers to report the mileage rating of new vehicles. (FEA, 1976) Another information disclosure label is the Energy Guide program, which requires a label disclosing the cost of energy consumption of certain household appliances. Mandated by the Energy Policy and Conservation Act of 1976, the program is run by the Department of Energy and the Federal Trade Commission. The appliances covered include refrigerators, freezers, water heaters, clothes washers, dishwashers, and room air conditioners. These appliances tend to have a wider range of energy efficiencies than other appliances; consumers are thus more in need of a disclosure label to help them make purchasing decisions. 14 ------- 2.2.3 Negative Environmental Labeling Programs Hazard/warning labels are mandatory negative labels that appear on products that contain harmful ingredients, or otherwise pose potential hazards to health or environment. Well known hazard/warning labels include the Surgeon General's warnings on cigarettes arid the skull and crossbones label on poisons. Warning labels are,also being applied to products to point out environmental hazards presented by the products. Labeling programs warning of toxic ingredients are currently being implemented by the States of California and Vermont, as well as EPA. ' , ' ' ' *',--' * In 1986, the State of California enacted a voter initiative called the Safe Drinking Water and Toxic Enforcement Act. This Act, commonly known as Proposition 65, creates a labeling program for products containing one or more listed chemicals determined to be carcinogenic and/or teratpgenic, and prohibits the discharge of these chemicals to drinking water supplies. -The law also provides an unusual enforcement mechanism, offering a bounty to any individual or group who can prove a violation of the law. In six:years of operation, more than 500 chemicals have been listed, with warnings appearing on a wide variety of consumer goods. The State of Vermont passed a state law in 1990 requiring all retailers stocking household products containing hazardous ingredients to so identify the products with shelf labels. The program's goal is to prompt consumers to avoid purchasing such products, thereby sending a signal to manufacturers to produce less hazardous alternatives. The state also gives certain products deemed less toxic or nontoxic an "exempt" label, so that retailers can offer officially- sanctioned alternatives to the labeled products. After nine months of implementation, 58 percent of retail stores in Vermont had installed shelf labels. Along with the shelf label, there is a consumer education program that creates posters and brochures and is planning a media campaign. The state has a companion program for pesticides and commercial fertilizers. The U.S. EPA, under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), requires warning labels on pesticides. Under the Toxic Substances Control Act (TSCA), the Agency may require warning labels on products containing specific hazardous substances, although only four product categories have been so regulated in the 17 years since TSCA became law. Under the Clean Air Act Amendments of 1990, EPA recently began a labeling requirement for products made with or containing ozone depleting substances (such as chlorofluorocarbons, orCFCs). "-.-- Proponents of warning labels claim that manufacturers would remove the offending chemicals rather than suffer the market setbacks (e.g., adverse publicity and loss of market share) that a hazard/warning label might cause. They argue that this approach provides a stronger incentive to reformulate products (to avoid hazardous ingredients) than would a voluntary environmental certification program. 2.2.4 Factors Influencing ECP Effectiveness. What are the characteristics associated with a labeling program's success? Any concerted effort to launch an environmental labeling initiative in the United States should certainly take ------- into consideration the successes and difficulties that other labeling programs have encountered. Important issues that influence effectiveness include the type of information a label would promote (seal-of-approval, claim certification, or neutral information disclosure), the nature and extent of any associated education campaign, the parties who are responsible for the label, and concerns regarding product assessment methodologies. Label Type - The type of label is important in that it has a bearing on whether the label simply presents information on environmental attributes, leaving all judgments to the consumer or whether (the ECP's) environmental policy priorities are translated into information contained on the label. Most of the established environmental certification programs around the world are seal-of-approval type labels. The report card style label, however, offers an alternative to seals, and stresses information disclosure over judgement of product superiority. While seals-of- approval are easy for consumers to use and understand, there have been questions raised regarding stringency of criteria (or lack thereof), consistency in expert judgements, and possible oversimplification of complex environmental issues. On the other hand, report card labels (of which SCS's Environmental Report Card is currently the only example) attempt to address these problems by providing detailed information on products' environmental burdens, allowing the consumer to make his/her own decisions. Report cards, however, have encountered criticism as well, mostly regarding data quality issues and the ability of consumers to interpret the report card and decide for themselves which environmental issues are the most important. Education - The effectiveness of a labeling program can be increased when it is linked with a public education campaign. Well-educated consumers are more likely to make better purchasing decisions, and will better understand the issues underlying the label. The EnergyGuide Label showed that consumers exposed to educational materials in addition to the EnergyGuide Label tended to purchase energy efficient appliances more often than consumers exposed to the Label alone. (U.S. EPA, 1989) Education may also help consumers to become more environmentally-conscious and to reinforce environmental considerations in other decisions and actions at home and in the community (e.g., recycling, energy conservation, etc.). A long- term, nationwide labeling initiative/education campaign could have positive effects on the environment that reach far beyond the reduction of environmental impacts of consumer products. Program Affiliation - Governmental sponsorship and involvement with labeling programs, which is common among the existing ECPs, can improve the program's financial stability, legal protection, and credibility in the eyes of manufacturers and consumers. On the other hand, a non-governmental program run by a respected consumer or environmental organization may be more immune to the political pressure that can affect governmental decision-making, and may enjoy more credibility from the perspective of skeptical consumers. Ultimately, government involvement in an ECP depends in part on the government's ability to act as an advocate in the marketplace and the role existing nongovernmental groups play in consumer protection and environmental policy. One survey found that 37 percent of the people who considered themselves the "primary food shoppers" of their household believed that "environmental groups" were the best source of unbiased information about the environment, as compared to the 8 percent who believed the government was and the 5 percent who believed that product manufacturers were. (Environmental Research Associates, 1990) 16 ------- The assessment of an environmental labeling program's effectiveness must eventually, include ah appraisal of its ability to further environmental policy goals. Assessments of environmental benefits could be made by extrapolating differences hi environmental burdens for particular (representative) products within a category to total product sales for the product category. This type of benefits estimate has been done on occasion for the Blue Angel program in projecting VOC reductions attributable to labeling low-VOC paints and coatings but is not part of a regular self-assessment of any ECP. From a public policy perspective, ECP effectiveness assessments must also address a program's cost-effectiveness. Given that a labeling initiative achieves particular goals established by the ECP, whether they be an increase in environmental awareness among consumers, a shift in market share for certain products, or actual reductions in environmental burdens or impacts, the question should be asked as to whether labeling is the lowest cost option to realize these goals. For example, could stricter regulations on automobile fuel economy improve energy efficiency more quickly, more cheaply, or more equitably than a fuel economy labeling program? It may be that for some cases, a combination of regulations and labeling is the best solution. In others, such as the EnergyGuide case, a mixture of labeling and educational efforts may prove to be the most effective way to influence consumers into making environmentally preferable purchasing decisions. 17 ------- References Scales, Howard, Bureau of Economics, Federal Trade Commission, undated. "Benefits and Costs of Label Information Programs," chapter from unknown book. Environmental Research Associates, 1990. The Environmental Report, Volume 1, Fall, Princeton, NJ. Food and Drug Administration (FDA), 1992. "The New Food Label," Nutrition Today, Jan./Feb.,p. 37-39. International Chamber of Commerce, 1991, Environmental Labelling Schemes (ELS), ICC position paper, Paris, June. Malouff, John, and Nicola Schutte et al., 1992. "Preventing Smoking: Evaluating the Potential Effectiveness of Cigarette Warnings." The Journal of Psychology, 126(4) pp 371-383. United Nations Environment Programme, Industry and Environment Office, 1991. Global Environmental Labelling: Invitational Expen Seminar, Lesvos, Greece, 24-25 September 1991, Working Group on Policies, Strategies and Instruments of the UNEP/ffiO Cleaner Production Programme. U.S. EPA, 1989. Environmental Labeling in the United States: Background Research, issues, and Recommendations - Draft Report. Prepared by Applied Decision Analysis, Inc., December 5. U.S. EPA, 1993a. Evaluation of Environmental Marketing Terms in the United States, prepared by Abt Associates, Inc., February, EPA 741-R-92-003. U.S. EPA, 1993b. Status Report on the Use of Environmental Labels Worldwide, prepared by Abt Associates, Inc., September, EPA.742-R-9-93-001. U.S. Federal Energy Administration, 1976. Impact of the FEA/EPA Fuel Economy Information Program. Prepared by Abt Associates Inc., June. 18 ------- 3. EXISTING RESEARCH ON THE EFFECTIVENESS OF ENVIRONMENTAL LABELS As discussed in Section 2.1, the five metrics that can be used to establish a label's effectiveness are: 1) consumer awareness of the label, 2) consumer acceptance of the label (credibility and understanding), *3) changes in consumer behavior, 4) changes in manufacturer behavior, and-5) decrease in environmental impacts. Decreasing environmental impacts is both the ultimate goal of all environmental labeling programs and the truest measure of their effectiveness. One impediment to properly evaluating environmental improvements is that numerous causes can be linked both to changes in environmental quality and to changes in consumer purchases. These, other causes include governmental regulations and public education campaigns, and make the source of change difficult if not impossible to isolate. Likewise, the effect of labels on consumer.purchase choices and/or manufacturer behavior (actions that should lead to environmental improvements) is not easily distinguished from a myriad of other market forces, such as product promotions (e.g., advertising) or price. Because of these difficulties, - research on the market performance of labeled products or environmental effects resulting from environmental labeling initiatives is not readily available. While research on market shifts and environmental improvements associated with environmental labeling is rare, information is available on more indirect measures of effectiveness. The existing data on environmental label effectiveness fall into two categories: (1) surveys and focus groups, and (2) anecdotal evidence. Both sources provide information that may help to assess the effectiveness of widespread environmental labeling in the U.S. Surveys and focus groups pose questions to consumers {and occasionally manufacturers) about baseline understanding of environmental issues, label recognition and meaning, their reported past behaviors (e.g., "Which of the following products have you purchased in the past week?"), and their anticipated reaction to labels, which may include changes in purchasing behavior (e.g., "Which of these products would you buy?" "Would you be willing to pay extra for a certified product?"). Thus, surveys and focus groups can provide important background information on how labels are perceived and understood by consumers. However, because of the possibility of strategic responses and biases inherent in surveys and focus groups (in which "correct answers" are apparent to the respondents), their results typically offer an upper bound , estimate of labeling effectiveness. Interestingly, queries of certification program effectiveness made to manufacturers may contain bias in the opposite direction. For example, it is not in the best interest of a manufacturer to reveal that environmental certification was or would be responsible for a shift in market share, since competitors could then apply for certification and eliminate the market advantage. Anecdotal evidence is useful because it offers detailed glimpses at how labeling programs actually affect real-life consumers and manufacturers on a case-by-case basis. Examples of a labeling program in action can provide insight into the workings of a label that mere survey statistics cannot. Problems arise, however, when extrapolating from anecdotal evidence to a larger population. 19 ------- The following discussion of labeling effectiveness is divided into three sections: effectiveness of positive labels (e.g., seals of approval), neutral labels (e.g., information disclosure labels such as the Energy Guide for major appliances), and negative labels (e.g., hazard and warning labels). Each section is organized by the five metrics described above. In later sections of this report, this discussion will be supplemented by extrapolating results from studies performed on parallel types of (non-environmental) labels to environmental labels. 3.1 Studies and Information on the Effectiveness of Positive Labels Positive voluntary environmental labeling programs, or environmental certification programs (ECPs), generally encompass seals-of-approval and single attribute certification programs. Most of the existing government-supported programs outside the United States are seal-of-approval programs. Green Seal, a private seal-of-approval program in the United States, also falls into this category. Other labeling programs, such as those operated by Scientific Certification Systems and Environmental Choice Australia, certify single product attributes (e.g., recycled content).5 A limited amount of information exists in the form of survey results and anecdotal evidence, addressed below. Consumer Awareness . . Consumer awareness surveys conducted by several of the more well-established certification programs suggest that consumers increasingly recognize the various programs. A 1988 survey reported that 80 percent of German consumers were at least familiar with the Blue Angel program, the oldest governmental ECP. Research by The Environmental Monitor found that 51 percent of Canadians in 1993 could identify the (Canadian) Environmental Choice Program EcoLogo, up from 19 percent in 1990. As a final example, in Japan (where environmental awareness among the population is generally considered to be lower than in Germany, Canada, and the United States), a public opinion survey taken in July 1990 by the Prime Minister's Office found that 22 percent of those polled were aware of the Japanese Eco Mark logo. (Hartwell and Bergkamp, 1992; International Environmental Monitor, 1993; Research International, 1993; Hashizume, 1992a) While many programs have tracked consumer awareness, it does not follow that consumers who are aware of a label's existence necessarily understand the meaning of that label or base their purchasing decisions on the information contained on such labels. For example, Environmental Choice Australia reported that despite its advertising and educational efforts which stress that EGA "only verifies the environmental claims of a product, consumers have still taken the use of the logo to mean that the product has been endorsed by EGA." (Doyle, 1993) In general, ECPs do not emphasize environmental education as part of their efforts; part of their consumer appeal is that some trustworthy agent has already performed the necessary sThe SCS Environmental Report Card, while a. voluntary ECP, is discussed as an information disclosure program. ' If EGA-labeled products are even marginally more environmentally desirable than their unlabeled competitors, then a market shift toward less environmentally damaging products will have occurred despite consumer mistinderstanding of the label's meaning; 20 ------- analysis. The consumer can buy a certified product without an inordinate amount of thought. An environmentally-educated consumer population is more likely to effect environmental change outside of environmental marketing, through recycling, composting, or energy conservation, for example. In addition, as the discussion of neutral environmental labels below illustrates, a consumer who misconstrues a neutral information label to mean an endorsement might accidentally actually buy a product with no environmental advantages at all. Consumer Acceptance Consumer acceptance of positive environmental labels as credible and reliable sources of information has also been assessed to a limited extent through surveys arid focus groups. These data suggest that consumers are willing to accept a label if they can be convinced of its impartiality and credibility. In the fall of 1990, Environmental Research Associates conducted a survey that asked questions about environmental marketing and labeling. They found that 37 percent of the people who considered themselves the "primary food shoppers" of their household believed that "environmental groups" were the best source of unbiased information about the environment, compared to the 8 percent who believed the government was and the 5 percent who believed that product manufacturers were. (Environmental Research Associates, 1990) Another survey conducted by the Angus Reid Group in 1991 found that the majority of those polled said "that they would be at least 'somewhat' confident in either a nationaMevel (60 percent) or state-level (environmental labeling) system (55 percent), whereas fully six in ten (62 percent) would be skeptical of a private sector... system. "'(Angus Reid, 1991) In another 1990 poll, Research and Forecasts found that 80 percent of respondents "would be inclined to rely upon an environmental label...if the label were awarded by an independent group whose competence and integrity were beyond question." (Hayes, 1991) Green Seal reported that in their preliminary market research, four out of five consumers said they would choose a product with the Green Seal logo over a product without it, quality and price being equal. (Advertising Age, 1991) Consumer Behavior Change Given that measuring the environmental effects of a labeling program directly is nearly impossible, consumer behavior change is often the best practical gauge of effectiveness. Evidence that an ECP improves the marketplace performance (market share) of a certified product has been offered as proof of success by some labeling programs. However, most such evidence is anecdotal, does not control for other factors that may affect a product's marketplace performance (e.g., economic climate), or tracks changes only over a very short time period. Some of the evidence that ECPs may influence consumer behavior is summarized below. For example: 7The Angus Reid Group survey did not include environmental certification programs run by non-governmental organizations. Presumably a "private sector" system would be one run by marketers. , '' ' ' ' '* , -' - 21 ' "-'.-"-.''. ' ------- A Canadian envelope company reported that recycled paper envelopes accounted for approximately 10 percent of its sales before it became the first envelope company to receive the EcoLogo in late 1990. Two years later, its EcoLogo envelopes constituted more than 40 percent of its business. According to their marketing analyst, "the companies that buy our envelopes like to know that if we don't follow the EcoLogo guidelines we could lose the license." (Environment Canada, 1992) A report on environmental labeling noted that "sales in Germany of paint labeled as containing below 10 per cent solvents have grown to the extent that they now account for about 25 per cent of the non-trade sector of the market." (House of Commons, 1991) Korea's Eco-Mark program reports that sales of recycled paper increased by 30 percent after the program was introduced. It did not, however, find evidence of the label's effect on sales in any other product category. (Choi, 1993) According to the 1993 Environmental Monitor survey, 32 percent of all Canadians recalled purchasing ("definitely" or "probably") products bearing the EcoLogo. This was an increase over 1992 results, when 21 percent (half of the 42 percent who were familiar with the Environmental Choice program) recalled purchasing EcoLogo-certified products. (International Environmental Monitor, 1992 and 1993) It should be noted that this survey question did not explicitly ask whether the EcoLogo significantly affected purchase behavior, or if other factors such as price or quality were involved in their decisions. In addition, surveys done for the Canadian Environmental Choice Program have shown that of the 35 percent of Canadians who "regularly purchase ... environmentally-friendly products," only 44 percent reported ever having bought an EcoLogo certified product. Manufacturer Behavior Change A label's effectiveness can also be measured as a function of its ability to change manufacturer behavior to meet program criteria. Regardless of the reasons that a manufacturer has (e.g., to avoid losing market share to its labeled competitors, or to improve stockholder and employee relations), an ECP that induces the manufacturer to meet the criteria of its label has been successful in reducing environmental burdens inasmuch as there are significant differences between products that do and do not meet the award criteria. This scenario occurred when Germany's Blue Angel released certification criteria for recycled paper in the late 1970s. At first, the German paper industry collectively boycotted the program. However, after Scott Paper Co., an American paper company, applied for and received the Blue Angel for its imported paper, opposition broke down and the number of German paper companies applying for the Blue Angel rose dramatically. Since then, sales of recycled paper have steadily increased. (OECD, 1991) Environmental Choice Australia has also encountered strong industry resistance. But rather than taking issue with one product category, industry organizations in Australia have taken the view that "the role of government should be confined to that of education in regard to environmental advertising." According to Environmental Choice Australia, these groups have been "very vocal" in then* belief that industry should be "self-regulating." (Doyle, 1993) 22 ------- , - Manufacturers who feel that there is a market niche that they can fill with their "green" products may see a certification as a valuable aid in capturing that segment of the consumer population that buys "green" products regularly. A 1993 Perm and Schoen survey found that 55 percent of Americans purchased products "very often" or "somewhat often" in the last three months "specifically because of some benefit offered to the environment." (COPE, 1993) The 1993 Environmental Monitor survey reported that awareness of Canada's EcoLogo is highest among those who "regularly purchase many green products," estimated at 35 percent of all Canadians. While 51 percent of the Canadian public was aware of the EcoLogo, 65 percent of "green consumers" were aware of it. (International Environmental Monitor, 1993) According to an OECD report on environmental labeling, there is a high level of interest in Germany among certain manufacturers in the Blue Angel program. Manufacturers are proposing increasingly large numbers of product categories to the program (about 200 categories per year as of 1991), and applying for awards in existing categories enthusiastically. (OECD, 1991) A 1992 survey of licensees conducted for Canada's Environmental Choice program found that "71 percent of the respondents 'agreed' or 'strongly agreed' that the Canadian EcoLogo was a good business investment." In addition, 80 percent of respondents claimed to have used the EcoLogo in their advertising." (Green MarketAlert, 1993) . It is interesting to note that in Germany and Japan, certain manufacturing sectors are more active in applying for the awards. On the other hand, some industries seem to ignore the program altogether. As of 1991, over half of the 3,200 products certified by the German Blue Angel up to that time were contained within just four product categories. Similarly, over half of the 661 labels issued by Japan's EcoMark fell within just three product categories. (OECD, 1991) A potential unanticipated side effect: of a product qualifying for environmental certification is its negative influence on the sales of uncertified goods in the same manufacturer's product line. If, for instance, a manufacturer is awarded a label for its line of recycled paper products, its (unlabeled) products made of non-recycled materials may appear inferior to consumers, who might avoid purchasing such unlabeled products. This was the hypothesis suggested to explain why out of the German manufacturers surveyed by Environmental Data Services, Inc. (ENDS), not all applied for the Blue Angel even if some of their products were eligible. (OECD, 1991) ; 23 ------- Changes in Environmental Impacts The extent to which a positive label decreases environmental impacts is in some sense the ultimate measure of its effectiveness. This dimension is difficult to measure, and for the most part, there is only anecdotal evidence available. The difficulty in evaluating the connection between labeling efforts and environmental impacts was summarized by the 1991 House of Commons Environment Committee Report on Eco-Labelling, which stated that they could not find "any objective, quantifiable evidence, one way or the other, as to the impact of ecolabelling on the environment." (Wheeler, 1993) The German government, however, said it was able to tighten emissions standards for oil and gas heating appliances by more than 30 percent in just a few years, a success that it attributes to the Blue Angel program. It also reported that because of Blue Angel's award criteria, sales of paints, lacquers, and varnishes shifted towards low-VOC formulations, with an associated reduction of 40,000 tons less organic solvents released to air. (Federal Minister for the Environment, 1990) 3.2 Studies and Information on the Effectiveness of Neutral Labels '«'..'' i , Effectiveness studies of neutral information disclosure labels exist for the SCS Environmental Report Card, Federal Fuel Economy Information Program, and the Energy Guide appliance energy efficiency label. Although neither the Fuel Economy Label nor the Energy Guide are strictly environmental labels per se, energy efficiency is an important environmental issue to many consumers who may see these labels as sources of environmental information. Available research on these labels is outlined below: The FTC initiated a review of the Energy Guide program in 1988, but repeated delays have prevented its completion. The report is expected to be finished by mid-1994. In 1988, data on Energy Guide awareness were collected by the Bonneville Power Administration in the course of an effectiveness study of their Blue Ribbon energy efficiency campaign, which promoted energy-efficient refrigerators and freezers by awarding a large, blue magnetic ribbon to refrigerators in the top 15 percent of their size and function class. Data from older studies of the Energy Guide are also available and discussed below, but these studies concerned themselves with a now outdated version of the Energy Guide label. « A 1976 study commissioned by the Department of Energy (then the Federal Energy Administration) examined the effectiveness of the Fuel Economy Label for new cars, but changes in the label and lessened concern about energy issues among the population have made the findings of this report also somewhat outdated. A limited amount of current data is available for the SCS Environmental Report Card (ERG) in the form of focus group studies conducted for SCS in 1993. Since the ERG had not been widely released at the time, the study dealt largely with the ERC's ability to convey information to consumers accurately, rather than its effect on consumer purchases or environmental burdens. (Gerstman + Meyers, 1993) 24 ------- Consumer Awareness - Energy Guide - The Bonnevilie Power Administration (BPA) study on the Blue Ribbon program conducted in 1988 also collected information on the federal Energy Guide label. In a survey conducted three months after the beginning of the study, 72 percent of 1,639 consumers in the market for a refrigerator-freezer reported awareness of the Energy Guide. A second survey question about the color of the label, however, revealed that only half of those consumers who claimed awareness of the Energy Guide could correctly identify that the color of the label was yellow. The fact, that only 33 percent of the total pool of respondents reported being 1) aware of the label and 2) could recall the correct background color suggests that responses to prompted or guided recall questions may be significantly biased. (BPA, 1988) As an interesting aside, the BPA study also found that overall, 77 percent of salespersons at appliance stores understood the labels well enough to explain them "intelligently." However, only 13 percent of all dealers said that they used the Energy Guide in their refrigerator sales pitches. Through "mystery shopping" (whereby researchers posed as consumers in the market for refrigerators), researchers concluded that even 13 percent was overstated, and that only 2 percent of salespeople actually "initiated discussions of the label." This is significant because the BPA considered dealers the "primary target audience for the [Blue Ribbon] program implementation efforts." (BPA, 1988) Dealer interest is likely to be important for the success of labeling programs of this type because salespeople, major providers of information to consumers in the showroom, are arguably in the best position to encourage energy efficiency. Fuel Economy Label - Several surveys were conducted at various stages of the Federal Fuel Economy Information Program to assess consumer awareness and use of the Gas Mileage Guide and the Fuel Economy Labels. The FEA survey found that 72 percent of new car buyers surveyed in 1976 were aware of the Fuel Economy Information Program, and 53 percent actually remembered seeing the Fuel Economy Label on the vehicle they purchased. However, there was only a 7 percent awareness of the Gas Mileage Guide, a booklet published by EPA and DOE that lists fuel economy estimates for new model automobiles. A DOE survey conducted in 1981 found that awareness of the Fuel Economy Information Program had increased, with consumers displaying a 30 percent awareness of the Gas Mileage Guide booklet, and with 80 percent of respondents remembering seeing the Fuel Economy Label on their new . car. - " -,-.. / . : . . .;".-. ''.'' Consumer Acceptance Energy Guide - According to a report by Anderson and Claxton (1982), attitude studies have been conducted in Great Britain and Canada as well as in the U.S. to determine consumers' views on the usefulness of energy labels. A study in Great Britain found that 91 percent of consumers surveyed favored energy labeling. Eighty-one percent of refrigerator buyers in Western Canada believed that consumers would find energy labels useful. (U.S. EPA, 1989) Fuel Economy Label - Although consumer awareness of the Fuel Economy Label is high (see discussion in section 2.3.2.1, above), consumers have historically been skeptical about the credibility of the information presented. The primary criticism of the program was that the procedure used to assess fuel economy in automobiles did not reflect actual driving conditions "' . ''.-' 25 ' . ''-.'.."'-.. ------- and often overestimated fuel economy. EPA made corrections to this procedure in 1985, partly in response to such criticism. (U.S. EPA, 1993a) A DOE survey conducted in 1981 found that lack of, confidence in the information reported on the label was the main reason why consumers did not use them. SCS Environmental Report Card - In the Gerstman + Meyers report on the SCS Environmental Report Card (ERC) focus group studies, they relate that "on the whole, respondents perceive [the ERC] as legitimate and trustworthy...[in part] due to the 'scientific/engineering' presentation." (Gerstman + Meyers, 1993) The report also suggests that consumers may erroneously perceive the ERC as endorsing a product, as opposed to simple information disclosure (see also the discussion on consumer awareness of positive labels in footnote #6 for another example of this phenomenon). The report states, for instance, that "respondents react positively to the green coloring of the [ERC], which implies an environmentally friendly product." Respondents in the Gerstman + Meyers study also said that they would perceive positively "a company that agrees to have the Report Card on its products - 'It says they have nothing to hide.'" (Gerstman + Meyers, 1993) Although information disclosure labels such as SCS's ERC are not supposed to imply that a product is better or worse than its competitors, the consumer can jnisinterpret an information label as being equivalent to a seal-of-approval and purchase a product that is actually more environmentally harmful than its unlabeled counterparts. Part of this problem may be due to the fact that while the Fuel Economy Information Program and the Appliance Energy Guide are mandatory programs, SCS's ERC is completely voluntary and would likely appear only on a limited number of products within any given category. Consumer Behavior Change Energy Guide - In 1976, the Department of Energy (then the Federal Energy Administration) studied the feasibility and likely effects of an early version of the Energy Guide labeling and education program. To study the potential .effectiveness of the labeling program, they interviewed about 100 consumers who were shopping for refrigerator-freezers. They separated the interviewees into three groups and provided three levels of information: no information relevant to their purchase (the control group); an "Energy Guide" label (not the same one that was eventually adopted); or an "Energy Guide" label in addition to an educational pamphlet and 15 minute audio-visual presentation. The researchers tracked the purchases that the subjects eventually made. They found that the group supplied with the most information (the third' level) purchased significantly more energy-efficient refrigerator-freezers than the other subjects. Moreover, the second level of information - the Energy Guide label only - did not produce a significant effect hi consumers when compared to the subjects who were given no information. The conclusion drawn from this research was that the energy labels alone were insufficient to cause behavioral changes and that information and education programs were necessary as well. (U.S. EPA, 1989) 26 ------- A later study completed for DOE in 1980 attempted to forecast the effects of the Energy Guide labeling and education program. The study concluded that the program would have only a slight influence on purchases of dishwashers, electric furnaces, and clothes washers; a moderate influence on purchases of refrigerators, refrigerator-freezers, freezers, air conditioners, gas furnaces] and water heaters; and a major influence on purchases of oil furnaces. (U.S. EPA, 1989) '. '' ; . v . "..',. ' . While the results of these studies vary; the most typical conclusion was that of a study performed for the Bonneville Power Administration. (BPA, 1985) It concluded that the Energy Guide labels may help raise consumer awareness of energy efficiency issues, but they do not necessarily change consumer purchase behavior. Respondents also reported that the labels were difficult to read and interpret, problems borne out by other studies. (California Energy Commission, 1988) FTC is currently, conducting a review of the content and format of the labels, which is expected to be completed by mid-1994, (GAO, 1993) Fuel Economy Label - Consumer purchase of fuel efficient cars depends on a number of factors exclusive of a vehicle's attributes and their awareness and acceptance of the Fuel Economy Label, such as the overall economic climate and the price of gasoline. While fuel efficiency of the average new automobile improved from 15.8 miles per gallon (mpg) in 1975 to 27.8 mpg in 1991, the rate of improvement varied over the time period. The largest: gains were made between 1975 and 1981, in the wake of the 1973 oil shock and subsequent passing of the Energy Policy and Conservation Act (EPCA), which required that manufacturers selling cars in the U.S. raise the corporate average fuel economy (CAFE) of their new car fleet to 27.5 mpg from 1985 and thereafter. With decreasing real prices of gasoline since 1981, efforts to improve fuel economy are running against consumer demand. In the years 1988-1991, average fleet fuel economy has actually decreased slightly, due to demand for larger and more powerful autos. (National Research Council, 1992; Office of Technology Assessment, 1991) The 1976 FEA study found that the new car buyers who were aware of the Fuel Economy Label got an average of 17.2 mpg compared to those unaware of the label, who got only 14.5 mpg. (FEA, 1976) The fact that fuel prices were relatively high in 1976 very likely played a significant part in consumers' interest in fuel efficiency. Label-aware car buyers .were guided by the label to purchase more fuel efficient vehicles. On the other hand, the nation's passenger car fuel economy average in 1991 was lower than in 1987. Since our discussion above suggests that consumer awareness of the Fuel Economy Label is ever increasing, it seems that the label simply has less of an effect when consumers are less interested in fuel economy in the first place. Thus the label's effectiveness was strongly affected by the underlying receptivity of targeted consumers to the label's (cost-savings as weU as environmental) messages. SCS Environmental Report Card - Respondents in the focus group study for the SCS Environmental Report Card told the researchers that they would be willing to use the Report Card as a decision making tool for small household goods. The researchers report, however, that consumers would be less likely to use them when purchasing larger items such as household appliances and cars, where factors such as safety take precedence over environmental criteria. (Gerstman + Meyers, 1993) In addition, differences between consumers' statements of intent 27 ------- about future behavior and actual behavior, where other research has revealed a gap, are not addressed. Manufacturer Behavior Change Energy Guide - Average energy efficiency for home appliances has increased since the introduction of the Energy Guide. These improvements are due largely, however, to increasingly strict state and federal regulations on energy efficiency. For example, DOE- mandated regulations for 1994 appliance models include a 43 percent reduction of total energy use by dishwashers, 37 percent reduction for washing machines, and a 25 percent reduction for refrigerator/freezers, with a likely additional reduction of up to 50 percent by 1998. (Robinson, 1993) The Golden Carrot program, which offered a $30 million reward (raised by participating utility companies) to the appliance manufacturer that produced the most energy efficient, CFC- free, refrigerator/freezer, is another example of a recently created incentive for energy efficiency. The program also offers rebates to customers who purchase these "super-efficient" refrigerator/freezers. (Coriano, 1992). It seems unlikely , therefore, that the Energy Guide label has played a large role hi recent changes in energy efficiency. Shifts in energy efficiency prior to the late 1980s are more likely to be attributable to the Energy Guide. Fuel Economy Label - The demand for fuel efficient automobiles depends greatly upon the economic climate and the price of gasoline. It follows, therefore, that the influence of the fuel economy label can only be as great as the influence of the idea of fuel economy itself. While average fuel efficiency for new model cars increased steadily over the period of 1976 through 1988, the trend in the past few years actually shows a decrease hi average fuel economy. (Keebler, 1991) Both domestic and foreign manufacturers are positioning themselves to capitalize on shifts hi consumers' priorities; consumer demand for high performance now exceeds that for fuel efficiency. While the cause may not be certain, fuel efficiency is certainly more of a concern in current vehicle design than it was prior to the start of the labeling program. It can be argued that since the label does not influence consumers in times of low gas prices, it likewise has little effect on the actions of manufacturers. Changes in Environmental Impacts Fuel Economy Label - The 1976 FEA study reported that the FEA/EPA Fuel Economy Information Program was exerting a positive influence on fuel consumption reduction. The reduction hi fuel consumption attributed to the program by the "report for 1976 model cars was estimated to be approximately 893 million gallons. The combustion byproducts of these hydrocarbons would similarly be avoided. The report, however, does discuss the difficulty hi calculating savings attributed to the program, and cautions against making absolute statements of causality. (FEA, 1976) 3.3 Studies and Information on the Effectiveness of Negative Labels The effectiveness of warning labels (including environmental warning labels) at transmitting information to consumers has been described as "moderate at best." Research suggests that a significant portion of consumers tend to ignore warning labels, and the consumers who do read labels often misinterpret then* meanings. Other studies suggest that "few warning labels lead to appropriate responses by consumers'* and "people act to mitigate a risk only if they 28 . ' ' ------- think the risk is high enough to merit concern." (Hadden, 1991) The literature on the subject indicates that most consumers lack the resources or ability necessary to "process the total amount of information which might potentially be available for making any particular choice." (Bettman, 1979) '-; vf Existing negative environmental labeling programs include California's Safe Drinking Water and Toxic Enforcement Act of 1986, or Proposition 65; Vermont's Household Hazardous Product (HHP) Shelf-Labeling Program; EPA's Ozone Depleting Substance (ODS) Label; and product labeling under the Toxic Substances Control Act (TSCA). ; The ODS Label is unique among these due to its limited lifespan. It will have been in effect for less than three years before the mandatory phaseout of Class I (severely ozone- depleting) substances in January of 1996. "With the acceleration of the phaseout [of Class I substances by the U:S.]... requiring products to be labeled is unlikely to significantly add to manufacturers' incentive to switch to alternative substances." (U.S. EPA, 1993b) Therefore, due to its short lifespan and limited importance, substantial research on the effectiveness of the ODS Label is not likely to occur. Aside from some survey data on Vermont's program, information on the effectiveness of these labels is sparse and largely anecdotal. Evidence of the environmental impacts of these negative labels is practically nonexistent at this time. Consumer Awareness A consumer awareness study conducted by Vermont's shelf-labeling program indicates that 39.2 percent of the respondents were "somewhat familiar" or "positively familiar" with the in-store education program. Almost 30 percent of the respondents reported that they had seen the program's in-store signs and stickers, and 62.5 percent of these respondents (18.6 percent of all respondents) also recognized that household hazardous products were stocked in that area of the store. (Yamaki, 1992) Consumer Behavior Change .. A study of California consumers and their reactions to Proposition 65 warning signs, which are posted in "virtually every commercial establishment," indicates that the "very ubiquity" of the warnings and the "familiarity of the products to which they refer" has resulted hi "indifference" to the warnings. (Kurlya, 1988 hi Hadden, 1991) Overuse of labeling may therefore actually result hi a reduction of effectiveness for that label. The yellow Proposition 65 stickers placed on dinnerware informing consumers of lead content provide an interesting example of this "indifference" phenomenon. Manufacturers out of compliance with California's lead regulations were required as of June 1, 1993 to inform consumers of the lead content in then; produces and to reduce the lead levels hi their dinnerware by 50 percent over the next five years. California state standards for lead in dinnerware allow a maximum of 0.226 micrograms of lead per milliliter, approximately 13 times more strict than the U.S. FDA limit of 3 micrograms per milliliter. Although the new regulation was unpopular with manufacturers, due to the high cost of lowering the lead levels hi their products, it had little or no effect on consumers. Interviews with retailers a month after promulgation indicated that 29 - '. >" ' " ' ------- the stickers had virtually no impact on dinnerware sales, and that the ubiquity of Proposition 65 warnings had made consumers "numb to such cautions." One retailer said he did not think that consumers even noticed the new warnings. (HFD, 1993) In a retailer study conducted by the State of Vermont concerning its then just- implemented Household Hazardous Product (HHP) Program, 77 percent of the respondents felt that the program had "little or no impact on the consumer." This high percentage may be related to the observation that 75 percent of the stores that had implemented the program "had not labeled the shelves properly," and 68 percent of the stores "did not post the signing in a visible location." This study indicates that factors such as retailer compliance may have a significant effect on whether or not a label (and especially a shelf label) functions properly. The summary report for the study stated that the HHP Program was confident that the majority of retailers would eventually implement the program "with a little coaxing." The researchers expressed some skepticism, however, regarding the impact of the program on consumers, adding that they would have to make improvements in this area. (Vermont, 1992) Manufacturer Behavior Change California's Proposition 65 seems to have been more successful in bringing about reductions in the use of toxics by manufacturers. Enforcement of Proposition 65 has reportedly caused the reduction of ethylene oxide emissions in Los Angeles, the reduction of lead in the products of ten tableware manufacturers, the elimination of lead-foil caps, and the reformulation of typewriter correction fluid. Although a Cal-EPA questionnaire indicated that Proposition 65 is a factor in the minds of manufacturers, it is difficult to isolate the effects of Proposition 65 from those of other laws imposing toxics use liability. (BNA California Environment Daily, 1993;Strock, 1992) Changes in Environmental Impacts No information quantifying the ability of environmental warning labels to change environmental impacts beyond the anecdotal reports of product reformulation or manufacture redesign has been identified. 30 ------- 3.4 Conclusions The following conclusions are based on the studies summarized in this chapter and identify characteristics that play significant roles in determining a labeling program's effectiveness. Given the existing (mostly indirect) evidence, many environmental labeling programs appear to be enjoying a limited measure of success in achieving their stated goals, such as increasing consumer awareness of labeling initiatives and increasing sales of certain types of certified products. However, difficulties presented by the overall lack of data on ECP effectiveness (evidence of actual consumer behavior changes or environmental quality improvements caused by labels is especially rare) make generalized conclusions about effectiveness of environmental certification programs uncertain at best. The most optimistic survey results indicate that perhaps 80 percent of consumers in tfie United States "would be inclined to rely upon an environmental label, .if the label were awarded by an independent group whose competence and integrity were beyond question." (Hayes, 1991) This can be taken as a reasonable estimate of the upper bound of the number of people a U.S. certification program could hope to reach. More important to the possible success of certification programs is the interest and willingness of consumers to change their purchasing decisions, In a September 1993 survey, 55 percent of consumers reported that they had recently purchased products specifically because of some associated environmental benefit somewhat often or very often; only 19 percent said that they never did so. (COPE, 1993) 31 ------- References Angus Reid Group, Golin/Harris Communications, Environomics, 1991. Environment U.S.A. \ Applied Decision Analysis, Inc., 1992. Memo to Eun-Sook Goidel, U.S. EPA, from Julie Langel, Adam Borison, Mike Freimer, February 6. Bettman, 1979. Cited in Magat and Viscusi, 1992. Bonneville Power Administration, 1985. Report on Market Research and Program Recommendations: Bonneville Power Administration Regionwide Promotion of Energy- Efficient Appliances, prepared by Brian Gard William Lesh, Inc., November. Cited in U.S. EPA, 1989. Bonneville Power Administration, Office of Conservation, 1988. The Evaluation of Phase H of the BPA Appliance Energy Efficiency Promotion Campaign: Promotion of Energy Efficient Refrigerators and Freezers, March 1988. BNA California Environment Daily, 1993. "Proposition 65: Settlement Requires Dish-Makers to Provide Warnings and Reduce Lead." February 9, 1993. Business and the Environment, 1993. "Why Green Marketing Must Be Part of a Corporate Environmental Management System," May 1993, p. 3. California Energy Commission, 1988. Conservation Report, publication 400-88-004, October. Cited in U.S. EPA, 1989. Choi Ryang-il, Korean Ministry of the Environment, 1993. Personal communication with Julie Winters Lynch, U.S. EPA. October 11, 1993 Coriano, Jerry, 1992. "Stumbling Blocks to Energy Efficiency and CFC Phase-out," (includes related article on Golden Carrot program), Appliance Manufacturer, v40(4), April. Doyle, Kevin, Environmental Choice Australia, 1992. Personal communication with Abt Associates Inc., September. Earthtrust, 1992. Flipper Seal-of-Approval Information Kit. Environment Canada, 1992. "In the Market for a Better World" - Special Advertising Supplement to the May 11, 1992 Issue of MacLean's Magazine. Environmental Research Associates, 1990. The Environmental Report, Volume 1, Fall, Princeton, NJ. Federal Minister for the Environment, Nature Conservation and Nuclear Safety, et al., 1990. Documentation - International Conference on Environmental Labelling: State of Affairs ' ' ' ''' :32 ' ' ' ' ' ------- and Future Perspectives for Environment Related Product Labelling, July 5-6, in the Reichstag, Berlin, , s , Fisher, Christy, 1991. "Tending Wal-Mart's Green Policy," Advertising Age, January, 29. General Accounting Office, 1993. Energy Conservation: Appliance Standards and Labeling Programs Can Be Improved, RCED-93-102, March. Gerstman + Meyers, 1993, Scientific Certification Systems Environmental Report Card Consumer Research Evaluation Report, Ja Green MarketAlert, 1993. "Licensees Like the EcoLogo." September 1993 4(9) p 10. Hadden, Susan G., 1991. "Regulating Product Risks Through Consumer Information," Journal of Social Issues, 47(1) pp 93-105. Hartwell, Ray V.', and Lucas Bergkamp, 1992. "Eco-labelling in Europe: New Market-related Environmental Risks?" BNA International Environment Dotfy, October 20. Hashizume, Shigeyuki, Japan Environmental Association, 1992a. Environmental Labeling in Japan: The Eco Mark, January. ' Hashizume, Shigeyuki, Japan Environmental Association, 1992b. Personal communication with Abt Associates Inc., May 12. Hayes, Denis, 1991. "Harnessing Market Forces to Protect the Earth," Issues in Science and Technology, Winter 1990-91. .1 " f . ' ~ ' HFD - The Weekly Home Furnishings Newspaper, 1993. "Yellow Labels Don't Affect Sales; Cal. Law Mandating Lead-level Warning Stickers Doesn't Frighten Most Dinnerware Customers," July 5, 67(27), p. 50. Hilliard, Joe, Environmental Choice Program, 1992. Personal communication with Abt Associates Inc., May 18. House of Commons, Environment Committee, 1991. Eighth Report: Eco-labelUng, Volume I, September. International Environmental Monitor, Ltd., 1993. Keebler, Jack, 1991. "No Gains Seen for '92 Mileage," Automotive News, October 7. Kurlya, 1988. Cited in Hadden, 1991. Magat, Wesley A., and W. Kip Viscusi, 1992. International Approaches to Regulation, The MTT Press, Cambridge MA. "-''- . '.' ' ' 33 - . ' ------- National Research Council, Committee on Fuel Economy of Automobiles and Light Trucks, 1992. Automotive Fuel Economy: How Far Should We Go? Washington: National Academy Press. .''.. Council on Packaging in the Environment (COPE), 1993. Memorandum from Perm and Schoen Associates, Inc., io Julie Winters Lynch, U.S. EPA, re: COPE Survey Data, October 18. Poremski, H.J., P. Rudolph, K. Lemme and E. Six, Federal Environmental Agency, 1991. Detergents in Western Europe: Environmental Labelling, prepared for the Coirnmission of the European Communities, General Directorate XI, Berlin, October. Research International, 1993. Press Release: "Environmental Problems Promote More Anxiety for Americans Than For People Living in Other Countries," June 2. . ^ .,' ' Robinson, Gail M., 1993. "Appliance Makers Meet Tomorrow's Standards Today: tougher Regulations Result in More Sophisticated, Efficient Designs," Design News, April 5. Organization Economic Cooperation and Development, Technology and Environment, Programme, 1991. Environmental Labelling in OECD Countries, prepared by James Salzman, Paris. Scientific Certification Systems (SCS), 1992. Informational material. Strock, James M., 1992. "Proposition 65 at Five: Speech by James. M. Strock to the California Council for Environmental and Economic Balance, March 3, 1992." U.S. Congress, Office of Technology Assessment, 1991. Improving Automobile Fuel Economy: New Standards, New Approaches, OTA-E-504, October 1991. U.S. EPA, 1989. Environmental Labeling in the United States: Background Research, Issues, and Recommendations - Draft Report. Prepared by Applied Decision Analysis, Inc., December 5. U.S. EPA, 1992. Environmental Labeling Workshop Summary - Draft, October 30. U.S. EPA, 1993a. Evaluation of Environmental Marketing Terms in the United States, prepared by Abt Associates, Inc., February, EPA 741-R-92-003. U.S. EPA, 1993b. Federal Register, "Protection of Stratospheric Ozone; Labeling: Final Rule," Regarding warning labels on products made with or containing ozone depleting substances, 58 FR 8136, February 11. U.S. Federal Energy Administration, 1976. Impact of the PEA/EPA Fuel Economy Information Program. Prepared by Abt Associates Inc., June. 34 ------- Vermont, State of, 1.992. "200+ StoreHHP Program Overview,'Issues and Concerns" (survey summary). . ; . Wheeler, David, 1993. "Eco-labels or Eco-aUbis?" Chemistry andjndustry, 5 April 1993. Yamaki, Sayaka, 1992. Critical Analysis of the Vermont Household Hazardous Product Shelf- Labeling Program (Act 282) on Consumer Awareness: A Survey Evaluation, March 1992, as summarized in memorandum to Interested Parties from Judy Bowden, Recycling Special Projects Coordinator, Agency of Natural Resources, State of Vermont. 35 ------- ------- 4. OVERVIEW OF NON-ENVIRONMENTAL LABELING INITIATIVES Regulating consumer goods to achieve environmental protection goals is a relatively recent phenomenon in the history of product regulation. The first product labeling initiatives in the United States were launched in the "Progressive Era" around the turn of the 20th century. The Progressive Era followed in the wake of the Industrial Revolution, and was a reaction to the unbridled capitalism and dehumanizing industrialism of the age. Advocates of labeling wished to bring the light of information to bear on shady trade practices, dangerous work conditions, and questionable product ingredients. By providing consumers with more and better information to guide purchasing decisions, product labeling can make it easier for marketers to obtain detailed feedback to guide product improvements. This "informational approach to regulation" has flourished as a means of protecting consumer rights while at the same time allowing competition among sellers to continue with a minimum of interference. This chapter provides an overview of product labeling activity in areas other than environmental protection, which is covered in the previous chapter. A sampling of public and private approaches to product labeling are discussed, divided into positive, neutral and negative approaches, covering third-party certification programs, information disclosure labels and hazard/warning labels, respectively. Following the overview is a discussion of studies of the effectiveness of the various labeling programs. Emphasis is placed on positive certification programs. , 4.1 Public and Private Labeling "The federal government has used labels for three different ... purposes: perfecting competition among sellers, increasing the power of buyers, and reducing risks to health and safety " (Hadden, 1986) State and local governments have also offered labeling approaches to address issues not sufficiently covered (in their view) by Federal activity. Non-mandatory labels sponsored by private groups have had a long and effective history of achieving product improvement and consumer protection goals. .4.1.1 Government Labeling Activity Government regulations of consumer goods packaging and labeling are numerous and diverse Starting at the turn of the century, laws have been promulgated requiring warning and information disclosure labels on a wide variety of products. A few of these laws are discussed here. The Pure Food and Drag Act of 1906 was "the first labeling law of national scope." (Hadden, 1986) Although it did not require labeling of ingredients, it did require that food and drug labels "not be false or misleading in any particular.11 the Federal Pesticide Act of 1910 regulated labeling of insecticides and fungicides, requiring disclosure of active ingredients. 37 ------- The Federal Caustic Poison Act of 1927 required the warning "Poison," the common name of the substance, and the place of manufacture to be included on the label of products containing twelve specified caustic poisons. The Food, Drug and Cosmetic Act of 1938 required the review of new drugs, and the listing of food ingredients, artificial colors and flavors. It also allowed for the banning of substances that could not be adequately labeled. Amendments in 1958 included the Delaney Clause, which prohibits the addition to food of carcinogenic substances. The Drug Amendments of 1962 required premarket approval of drugs for both safety and effectiveness. (Cooper, 1990) The law also "states that health claims in advertising, and not just labeling, can as a legal matter turn a food into an unapproved, and hence illegal, new drug." (Silverglade, 1991) The Federal Insecticide, Fungicide and Rodenticide Act of 1947, or FIFRA, expanded upon the 1910 Pesticide Act by requiring premarket testing and registration of pesticides. It also required that the registration number, ingredients, common name of the substance, and the place of manufacture be included on the product label, and any toxicity warnings and appropriate antidotes be listed. The Federal Hazardous Substances Labeling Act (FHSLA) of 1960 succeeded the Caustic Poison Act and applied to any substances defined as "toxic, corrosive, strong sensitizers, irritating, flammable, combustible, or that generate pressure," excluding pesticides, food, fuel and tobacco. (Hadden, 1986) It set standards for determining the dangerous properties of a substance. It also allowed for substances that could not be labeled to prevent risk to be banned. In response to the Surgeon General's 1964 Report on Smoking and Health, Congress established the cigarette warning label in 1965, amending it by the Public Health Cigarette Smoking Act of 1970. The original wording of the warning was "Caution: Cigarette Smoking May Be Hazardous to Your Health." This was changed to "Warning: The Surgeon General Has Determined that Cigarette Smoking is Dangerous to Your Health." The law also banned cigarette commercials from radio and television. In 1985, Congress again amended the warnings to provide a system of four rotating warnings which more specifically describe the health hazards of smoking. The Fair Packaging and Labeling Act (FPLA) of 1966 was "the primary Federal law requiring mandatory labeling provisions for all packaged consumer commodities." (U.S. DoC, 1984) The FDA enforces the Act for food, drugs, cosmetics and therapeutic devices, while the FTC covers all other commodities. The FPLA required that product labels display the name and address of the manufacturer or distributor, the "usual name" of the product, and to use standard units of measure, and encouraged manufacturers to use uniform quantities. The Occupational Safety and Health Act of 1970 created the Occupational Safety and Health Administration and required labels and warnings on potentially dangerous equipment and hazardous substances. The Act created the Material Safety Data Sheet 38 ------- (MSDS) as a method of disclosing the substance, the risk, means to avoid the risk, and treatment in case of exposure. A series of laws in the 1960s and 1970s were enacted to address the safely of children from hazardous products. The Child Protection Act (1966) and the Child Protection and Toy Safety Act (1969) permitted the banning of substances deemed hazardous by the Federal Hazardous Substances Labeling Act and expanded the definition to include certain toys. In 1970, the Poison Prevention Packaging Act required warnings and child- proof packaging on any household goods that posed a risk of poisoning to children. The Consumer Product Safety Act of 1972 created the Consumer Product Safety Commission (CPSC) to enforce these laws and to set safety standards, require labels, or ban dangerous consumer goods. v> ' r~ . . " ' ' - '-..- , . The Nutrition Labeling and Education Act (NLEA) of 1990 amended the Food, Drug and Cosmetic Act of 1938, revising nutrition labeling regulations implemented by the FDA arid the USDA. The law provides enforceable definitions for health claims like "light" and "low fat," standardizes serving sizes, and, most of all, changes and makes mandatory the nutrition chart that has appeared on food packaging since 1974. ' , The Alcoholic Beverage Labeling Act of 1988 requires warning labels on all alcoholic beverages stating: "GOVERNMENT WARNING: (1). According to the Surgeon General women should not drink alcoholic beverages during pregnancy because of the risk of birth defects. (2) Consumption of alcoholic beverages impairs your ability to dnve a car or operate machinery, and may cause health problems." Different types of labeling are mandated or recommended by at least nine federal and fifty state government agencies, with requirements ranging from simple disclosure to use and warning "booklets of seventy or more pages." (Hadden, 1986) The Federal Trade Commission (FTC) enforces laws regulating false and misleading advertising. FTC shares responsibility for food, drugs, and cosmetics with the Food and Drug Administration (FDA), covering the consumer protection aspect of marketing while FDA covers the contents of products. FTC oversees implementation of cigarette health warnings. The Food and Drug Administration, a branch of the Department of Health and Human Services, is primarily responsible for regulating food, drugs, and cosmetics. The scope of FDA's regulatory activity includes setting standards and labeling requirements, promoting good health, and enforcing laws against misleading labeling and "adulteration" of products. FDA's main labeling activity is the food nutrition label. The Department of Agriculture (USDA) has jurisdiction over meat and poultry product labeling; This involves quality inspections and pre-approval of product labels, to ensure food safety and truth-in-labeling. USDA provides the "USDA Choice" stamp to inspected products. 39 ------- The Department of Commerce requires disclosure of certain basic facts on product labels (such as product name, address of manufacturer, etc.), standardizes units of measure, promotes uniform package size, and attempts to limit "undue proliferation" of package size. The Environmental Protection Agency (EPA) is responsible for hazard warnings of toxic substances and pesticides, a warning label for products containing ozone depleting substances, and, with the Department of Transportation, the Fuel Economy guide for new cars and trucks. In addition, EPA runs the Energy Star program, a voluntary program that encourages computer manufacturers to make energy-efficient personal computers and offers them the use an EPA logo for identifying and promoting energy-efficient models. The Department of Energy works with the FTC on the Energy Guide, an energy rating system for appliances. The Department of Transportation works with EPA on the Fuel Economy guide, and also regulates labeling and transportation of hazardous substances. The Consumer Product Safety Commission (CPSC) regulates product safety through product bans, safety standards, and warning label requirements. The Occupational Safety and Health Administration (OSHA) regulates workplace hazards. This includes warning labels for dangerous materials and equipment, and material safety data sheets for hazardous chemicals and materials. A number of individual states have labeling requirements as well, Connecticut, for example, was the first state to require a warning label on small toys, a standard since adopted by the Federal government. Minnesota recently enacted a requirement that any products containing materials that meet the federal definition of "hazardous" must be labeled. Perhaps the most notable among state labeling requirements is California's Proposition 65, for products containing carcinogenic or teratogenic substances (see Chapter 2). Ohio voters recently turned down a referendum to start a warning program similar to California's. 4.1.2 Non-governmental Labeling Activity There are also many non-governmental labeling programs in operation, providing hazard warnings, information disclosure or product certification. While participation in some programs is voluntary, others are required of their members by trade groups or by certain government jurisdictions. The City of Los Angeles, for example, requires electrical equipment to be certified for safety by a third party. (Schubert, 1993) Some labels have become de facto mandatory labels, where entrance to a market is difficult without the label. The Underwriters' Laboratory (UL) label for electrical product safety has become nearly ubiquitous for such product categories as space heaters, where "because of liability concerns, among other reasons, few manufacturers of electrical goods will market them without UL's seal." (Meier, 1991) 40 ------- Often, voluntary labeling standards are established by trade associations, frequently with the cooperation of one or more Federal government agencies. This approach enables industry . experts to be involved in the process while at the same time "reduc[ing] the probability that trade associations would fight against socially desirable legislation." (Hadden, 1986) In fact, the Consumer Product Safety Commission (CPSC) is required by law to first consider voluntary product safety standards submitted by industry; "only if these do not solve the problem adequately may mandatory regulations be invoked." Lawn mower manufacturers, for example, composed voluntary standards for safety, including warning" labels that were rejected by the CPSC. Consumers' Union, a consumer advocacy group well known for publishing Consumer Reports magazine, then composed standards; in the end, CPSC released modified regulations that required both a warning label and a certification label testifying that the mower met U.S. government safety standards. (Hadden, 1986) 4.2 Overview of Active Non-Environmental Labeling Programs 4.2.1 Positive Labeling Programs Like environmental certification programs (ECPs), a positive labeling program rewards positive product features, providing manufacturers with a market-based incentive to create products with certain social benefits (often reduced risk to consumers). Operated by a neutral third party, such programs set criteria, accept voluntary applications from interested marketers and manufacturers, and award some sort of logo for use in advertising and on product packaging. The oldest extant positive label in the U.S. is the safety seal of Underwriters' Laboratories. - ' * Underwriters'Laboratories Underwriters' Laboratories (UL) is a non-profit organization founded in 1894 to test electrical products for safety, originally for fire insurance companies in the midwest. While UL has only slightly expanded its original function, its size has increased to 3,900 employees. It now certifies products from more than 40,000 manufacturers every year to be "reasonably free from fire> electric shock and related safety hazards." (UL, 1992) - Good Housekeeping Seal Since its first issue in 1885, Good Housekeeping magazine has offered, in varying forms (now the Good Housekeeping Seal), a limited warranty for advertised products: if the product proves defective, then the magazine will refund the price of the product. The Good Housekeeping Institute editorial staff reviews all advertising and renders an editorial judgment regarding the acceptability of the products and advertisements. Those advertisers whose products are found to be acceptable may elect to use the Good Housekeeping Seal, the company and the Institute sign a one-year Seal Licensing Agreement. The Licensing agreement stipulates conditions regarding use of the Seal. The advertiser must also agree to publish a minimum magazine advertising schedule (at a cost of $80,000 per year). In 1993, 181 brands carried the Seal; 67 of these had carried the Good Housekeeping Seal for the past five years or longer. 41 ------- American Heart Association's HeartGuide In 1989 and 1990, the American Heart Association attempted to introduce a seal of approval for products deemed to be less likely to cause heart disease; that is, products low in cholesterol, sodium, and total and saturated fat. The AHA was motivated to start the HeartGuide by what AHA President Myron Weisfeldt saw as 15 years of governmental inaction On health claims. "Americans are confused by labels and the morass of food advertising claims on which the industry spends $4.5 billion annually. They have sent us a loud and clear message that they want help in cutting through the clutter of misinformation." (Goldsmith, 1989) To participate in the HeartGuide program, manufacturers were to submit their products for testing in AHA approved laboratories. If a product met AHA's standards, the manufacturer would pay a fee of between $15,000 and $45,000 per brand per year, based on market share, in exchange for the use of the heart-and-check logo with a bar chart on their product's label (see Figure 3.1). The fees were to support AHA's program costs, including testing, an educational program, point-of-purchase displays, "advertorials," and the operation of a toll-free information phone line. Product Category Guideline! AnMffcttiHMrtAMOcM bMKJon2000catoriM. mdad total daily adutt intitw (maximum). Figure 3.1 The program was scheduled to be launched in February of 1990, with 114 products in four product categories (crackers, margarines and spreads, canned and frozen vegetables and oils) having been tested and approved by AHA. Opposition from some food associations, the Department of Agriculture (USDA) and especially from the Food and Drug Administration, however, caused the AHA to withdraw the program before it was launched. The HeartGuide was criticized for being too simplistic and for not conveying the appropriate role of certain foods in an overall dietary plan. The USDA wrote that it "fails to convey to consumers the 42 ------- importance "of the total diet to good health, would be misleading to consumers, is based on nutritional criteria for specific foods for which there are inadequate supporting scientific data, and attempts to label foods as 'good' :or 'bad' using inadequate nutritional criteria." (Goldsmith, 1989) ' . .' ''''- '" .. ' The AHA countered that the accompanying educational program would do much to meet these objections. The USDA also complained, however, that "consumers may believe that AHA-approved products are "safe' to eat in any quantity" and that "no educational efforts will be able to counteract the confusion the seal is likely to cause." The American Council on Science and Health also noted that "a seal-pf-approyal or lack thereof creates either an ill- founded sense of complacency or fear of food." (Goldsmith, 1989) Ultimately\ threats from FDA to impound products bearing the seal caused the AHA to end the program, refunding all fees to the manufacturers. , .'-' r - . '- The HeartGuide was perhaps the most high profile of many nutrition seals of approval that have been in operation. Seal programs have been offered by the American College of Nutrition, the American Medical Association (part of its Campaign Against Cholesterol), the American Medical Women's Association, the California Dietetic Association, HealthMark (a clinic in Denver, Colorado), Heart Corp. Institute (the Heart Healthy Seal of Approval), and the National Center for Cardiac Information. These programs certify products in various categories for different features, charging fees ranging front no fee up to more than $50,000 per year. (Shaner, 1990) ~ . American Heart Association's On Pack Program . x In 1990, Congress passed the Nutrition Labeling and Education Act, and FDA subsequently set guidelines for nutrition claims, including those covered in the HeartGuide program. AHA started a new educational program in September of 1993 called the "On Pack" program, which it hopes will be a less controversial approach to promoting healthy foods. The program intent is less to certify products than to show how they can fit into an overall healthy diet. The criteria for the program are consistent with FDA definitions of low fat, low sodium, and low cholesterol claims, and also require that a product meet the FDA definition of a "healthy" product: that it "naturally contain" a number of vitamins and minerals. (AHA, 1993b) Food makers apply to a Product Review Panel of nutritionists who, using nutrition information supplied by the companies, determine if a product may use the AHA logo: There is no fee to the marketer, and no laboratory testing. If approved, a product is allowed to carry the AHA heart-and-torch logo along with an educational message: "This product is consistent with the AHA dietary guidelines, when used as part of a total balanced diet. The AHA does not endorse any product, service or equipment. Diets low in saturated fat and cholesterol and high in fiber-containing grains, fruits and vegetables, particularly soluble fiber, may reduce risk of heart, disease. If diets are low in sodium, risk of high blood pressure may be reduced as well. Both conditions are associated with many factors." (AHA, 1993a) 43 ------- Companies may state on their own that their product is "in keeping" with the AHA's dietary guidelines, but may not carry the AHA logo without prior AHA approval. Initially, five products made by Quaker Oats will carry the AHA approval. AHA reported receiving 80 inquiries about the program within four weeks of its launch. Special Diet Alert Program and Other Nutritional Shelf Labeling From 1981 to 1986, the Food and Drug Administration (FDA) participated with Giant Food Stores, a Mid-Atlantic coast supermarket chain, in a pilot shelf labeling program in Washington, DC, and Baltimore, MD. The program was designed to promote products low in sodium cholesterol, calories and fat by means of a brand-specific shelf card accompanied by in-store educational materials, a take-home pamphlet and a short media campaign. The study surveyed shoppers and tracked changes in the market share of labeled products for two two-year periods. (Schucker, etal., 1992) Although the Special Diet Alert program was only a single pilot study, it is representative of a much broader phenomenon. As of 1987, more than 20 supermarket chains, including 9 of the 20 largest in the country, were putting nutritional information on shelf labels. According to a nationwide survey of grocery store chains .in 1988, 36 percent were "providing point-of- purchase information about nutrition." (Pennington, 1988) Most such programs label the same food attributes - calories, fat and sodium - and follow criteria established by the FDA. Some programs cover as many as 2,500 different items. Retailers say the goal of the shelf labeling "is customer service rather than measurable impact." (Steinberg, 1987) A Missouri company, Creative Data Services, markets a nutritional-shelf labeling program called "Nutri Guide" to over 1,600 stores in the U.S. Nutri Guide, started in 1978, labels 1 000 products as "fat modified, calorie controlled and/or sodium restricted" for the benefit of "those who, because of medical problems, have to eat a certain way." Grocery store chains sign a three year contract and pay fees depending on their size for the use of the program. (Steinberg, 1987) Giant Food, after the conclusion of the SDA study, launched a similar shelf labeling program called "Eat for Life" in its 105 Washington-area stores. The program was developed in conjunction with the National Cancer Institute. Eat for Life covers fiber content, in addition to sodium, calories and fat, and is aimed at all "nutrition-conscious" consumers, rather than just those who need special diets. (Steinberg, 1987) 4.2.2 Information Disclosure Labeling Programs The information disclosure process mandated by some Federal and state labeling laws is usually concerned with products or substances that pose an inherent risk to human health. Such approaches to labeling are classified in this paper as hazard or warning labels. (More recently, warning labels have been required that refer to environmental hazards rather than human health, such as EPA's Ozone Depleting Substance label.) 44 ------- A slightly less common approach requires disclosure of information not associated with an inherent.risk. A neutral information disclosure label can provide buyers with information that the marketer would not otherwise disclose. Examples of this.include EPA's automobile fuel economy guide, the DOE/FTC Energy Guide for appliances, both discussed in Chapter 3, and the recently proposed origin of manufacture label for automobiles. , This labeling approach provides information that can be tailored by individuals to meet their own specific needs. For example, the FDA's nutrition label for foods and beverages provides sodium content for people with high blood pressure, sugar content for diabetics, and fat content for dieters. The label allows consumers with a diverse range of nutrition-related ailments or concerns to use a single source of data to make purchase decisions. FDA Nutrition Labeling By far the best known information disclosure label is the Food and Drug Administration's nutrition'.label-, carried on some 200,000 brands of food. (Sinisi, 1992) The nutrition label appeared in 1975, when the FDA required that any food products fortified with nutrients or making nutritional claims must cany specific nutritional information in a specific format. (U.S. . FDA, 1991) In 1973, claims that a food was "effective in the prevention, cure, mitigation or treatment of any disease or symptom" were banned. (Cooper, 1990) s In 1987, the FDA lifted the 1973 ban on disease-related claims for food products, allowing companies to claim their products were "low sodium" of "high fiber" and to. tie those claims to specific benefits against diseases. This tempted food companies to promote products in the wake of medical reports on the health benefits of certain foods, such as oat bran as a preyentative for cancer. Insofar as these reports were occasionally contradicted by later findings, food marketing claims tended to exaggerate the study results and the food benefits. In addition to these promotions, other exaggerated marketing claims were made, which drew, complaints to the FTC, the FDA, state Attorneys General, and the National Advertising Division of the Council of Better Business Bureaus. (Cooper, 1990) ' - . - ' The controversy over health claims for foods accompanied problems with the original nutrition labeling requirements. The labels were perceived to be confusing to consumers by, for instance, not specifying a uniform serving size within a product category. (Consumer Reports, 1990) More importantly, FDA argued that the labels no longer met the nutritional demands of a well-fed (even over-fed) society. Originally, the labels emphasized specific nutrients, such as riboflavin and zinc, because people at risk of hot getting enough of these nutrients were more susceptible to diseases such as osteoporosis, rickets, and scurvy. Such malnutrition was a concern in the 1969 White House Conference on Food, Nutrition and Health report that led to formation of the nutrition labels. (U.S. EPA, 1989) But by the late 1980s, Americans were more at risk of getting too much cholesterol, fat, sodium, and calories, leading to obesity, heart disease and other adverse health outcomes, (Shaner, 1990) To address these needs, the focus of the labels was changed. - The impetus to make these changes came from the Nutrition labeling and Education Act, passed by Congress in 1990, which required new nutrition information to be in place by May . ' - -~ * " ' ' ' ' . ' - '.- 45 ',:, ' . . . ------- 1994. FDA regulations have made substantial changes in the label's format, required that all packaged food products bear the label, and defined the meaning and use of health claims. Unprocessed goods, such as fruits and vegetables, poultry and meat, are expected to comply voluntarily or will be regulated within two years. (Gosselin, 1992) Congress also specified that the labels provide a context for understanding the nutritional information presented. Rather than simply listing how much of a nutrient was in a product, the new labels show how a serving of that product fits into a "daily value" for an average person's dietary needs (see Figure 3.2). This feature was the focus of a great deal of controversy between food marketers, health advocates, the USDA and the FDA. (Gladwell, 1992; Gosselin, 1992) NUTRITION INFORMATION SERVMG SEE Aparac. 13g (1 CAKE) SERWNGS PER CONTAMER 14 CALORIES 50 PROTEM 19 CARBOHYDRATES 120 (COMPLEX CARBOHYDRATES...?! (SUGARS S( PAT. CHOLESTEROL. SODIUM POTASSIUM .-.Of ...Omt ,.301119 ,.1Smg Nutrition Pacts Serving Size Vs cup (120g) Servings Per Container about 3Va Amount Pw Swing Calottes 20 Calories from Fa 0 Total Fat Og 0% Saturated Fat Og 0% CttotestwwIOrng 0% Sodium 400mg 17% PERCENTAGE OF U.S. RECOMMENDED DAILY ALLOWANCE l% U.S. HDA1 EACH QUAKER CARAMEL CORN CAKE CONTAMS LESS THAN 2% OF THE U.S. ROA FOR THE FOLLOWING NUTRIENTS: PRO- TEIN, VITAMIN A, VITAMIN C, THIAMME, RtBOFLAVIN, NIAON, CAUMJM, DON. Total Carbohydrate 4g Dietary Fiber 1g Sugars 2g Protein less thanlg vitamin A 6% Vitamin C 4% Calcium 2% Iron 4% Percent Daily Vfties are basal on a 2.000 estate dirt. Figure 3.2 4.2.3 Warning/Hazard Labeling Programs Negative, or hazard warning, labels have become an increasingly common approach in the past decade, what some have called "the golden age of warning labels," to regulating consumer information for products. (Waldman, 1988) It has been estimated that about 65 percent of all goods and services now bear "some kind of disclosure of negative effects or potential negative effects." (Oldenburg, 1992) The increase in warning labels has been attributed to "the emergence of the right-to-know movement and [to] political support for regulations that were less obtrusive than the command-and-control regulations of the 1970s," as well as to increased threat of product liability lawsuits. (Magat and Viscusi, 1992; Waldman, 1988) 46 ------- In recent years, warning labels have been required on alcoholic beverages, champagne bottle corks, plastic bags, marbles, balloons and other small toys, and in California, on products containing substances known to cause cancer or birth defects. Invoking the "Delaney Clause" of the Federal Food, Drug and Cosmetic Act, FDA moved in 1977 to ban saccharin as a food additive. Responding to public protest of the ban, Congress passed the Saccharin Study and Labeling Act, requiring a warning label ^on products containing saccharin. (NIAAA, 1987) Probably the best known hazard warnings are for cigarettes. Since 1965, cigarette packages have been required tb carry warnings with the first being, "cigarette smoking may be hazardous to your health," and later, "the Surgeon General has determined that cigaretjte smoking is dangerous to your health." Since 1985, four different cigarette warning labels have been rotated: , "Surgeon General's Warning: Quitting Smoking Now Greatly Reduces Serious Risks to Your Health." ' , ~ "Surgeon General's Warning: Smoking Causes Lung Cancer, Heart Disease, Emphysema and May Complicate Pregnancy." . "Surgeon General's Warning: Cigarette Smoke Contains Carbon Monoxide." * "Surgeon General's Warning: Smoking by Pregnant Women May Result in Fetal Injury, Premature Birth and Low Birth Weight." 4.2.4: Factors Influencing Non-Government Labeling Effectiveness The success of a specific labeling program is defined by its own goals. Most generally, the goal of all programs is to improve the ability of the marketplace to increase the value consumers' receive from their purchases simply by providing information (which might be lacking), but measures of what is to be accomplished and how differs among programs. Some, such as nutrition shelf labeling programs, are designed to guide consumer behavior in making purchase decisions. The FDA's nutrition label is designed to increase the amount of information available so that those who want to have a balanced diet will have available the information to do so. A warning label for product safety, for example, is designed to ensure that the product will be used properly and safely. \ t The target audience varies as well. The Underwriters' Laboratories seal, for example, is aimed more at manufacturers than at consumers. It is used as a purchase specification by manufacturers and institutional buyers. Because of its ubiquity on certain categories of electrical products, it is a less critical factor for consumers. . There are, nonetheless, some common underlying features about product labeling that are associated with the success of labeling programs. A successful program must come from a credible source, must be important to consumers' self-interest and must reflect manufacturers' interests as well. In addition, some programs are successful, by affiliating with other groups or 47 ------- informational initiatives. . FinaUy, and most importantly, a successful program must reflect broader societal interests. 48 ------- Manufacturer Self Interest - Certification programs commonly rely on the incentive of increased sales (or the threat of decreased sales) to prompt company involvement with their programs. They are most successful in this regard, however, when the interest of manufacturers (i.e., increased marketplace performance) corresponds with the goals of the program (i.e., promotion of specific product attributes in the marketplace). Because of product liability concerns, companies are motivated to seek out labeling programs to avoid financial risk and to protect corporate reputation. UL certification for fire safety, for example, is especially important for certain products perceived to be fire hazardous, such as space heaters. While the Good Housekeeping Seal does not address an issue as compelling as fire hazards, it promises that advertisements in its pages are accurate and that buyers are entitled to a "replacement or refund if defective." It has been successful in guaranteeing to consumers that all products bearing the seal will work as advertised and at the same time enhancing the Deputation of both the advertiser and the magazine. . Consumer Self Interest - A program that addresses issues that have personal relevance for individuals is more likely to be successful as it builds upon consumers' existing awareness and concerns. A label required on aspirin warns that children with certain viruses may contract Reye's Syndrome, a rare but dangerous disease, if given aspirin. An educational campaign and guidance for pediatricians, combined with heavy media coverage, were effective in increasing the awareness of parents and decreasing the incidence of Reye's Syndrome. Already informed of the risks, consumers then used the warning label (which appeared after the initial media coverage) as a reminder. ' ** Ultimately, labeling programs are effective only inasmuch as the issues^ they represent are important to society. Many studies, especially of warning labels, have found it difficult to separate the effects of the label from the attenuating educational efforts, media coverage and marketing activity. One study that did separate the effects was performed on the impact of the saccharin warning label. It found media coverage of the issue to be much more effective than the warning label in affecting sales of the labeled products, causing a 17 percent decline compared to only 4 percent for the warning label. ' * Credible Source - A label sponsored or operated by a source perceived to be credible is more likely to be trusted by consumers. The issue of credibility varies depending upon the product attribute being considered by the consumer. In some cases, a private trade or professional group may be most credible; in other cases, the most credible source of information might be a government label. Studies of an American Dental Association endorsement of tooth paste, the American Heart Association's HeartGuide program, and a fictional American Medical Association endorsement, have found each of these sources to be respected (for their knowledge and expertise) and their endorsement effective. In one study, the AHA was found to be even more credible than the Surgeon General, though slightly less than the Food and Drug Administration. Affiliation with CHher Initiatives - A successful approach for some certification programs is to affiliate their program with another program or information disclosure initiative. Private nutrition certification programs, for example, often use FDA dietary guidelines and information : - - , . .. ' 49 -' . ' - ------- provided by the mandated nutrition label. Such programs offer interpretations of raw data offered by the information disclosure labels or by government agencies. The intent of such programs goes beyond educating consumers about the meaning of the information they receive toward directing their behavior in a specific way (e.g., identifying nutritionally supenor products that are part of a balanced diet can improve personal and public health). 50 ------- References American Heart Association (AHA), 1993a. "AHA Logo on Packages to Aid Shoppers in Selecting Heart Healthy Food," Press release, August 3. American1 Heart Association (AHA), 1993b. "Memorandum, re: On-Pack Food Labeling Program Media Response, August 20. . Consumer Reports, 1990. "What's Wrong .with This Label?" May, p. 326-327. Cooper, Richard M., Richard L. Frank and Michael J. O'Flaherty, 1990. "History of Health Claims Regulation," Food Drug Cosmetic Low Journal, v. 45, pp. 655-691. Gladwell, Malcolm, 1992. "Interagency Fight Puts Overhaul of Food Label Rules on Bush's Plate," Washington Post, Sunday, November 15, p. 1. Goldsmith, Marsha F., 1989. "'HeartGuide' Food-Rating Program Attracts 114 Applications as Controversy Continues," Journal of the American Medical Association, 262:24, December 22/29, p. 3390-91. , Gosselin, Peter G., 1992. "Bush Orders More Detailed Food Labeling," Boston Globe, December 3, p. 1, 16. Hadden, Susan, 1986. Read the Label:, Reducing Risk by Providing Information, Westview/AAAS: Boulder, CO. Magat, Wesley, and Kip Viscusi, 1992. .Informational Approaches to Regulation, MIT Press: Cambridge, MA and London. , , Meier, Barry, 1991. "What the U.L. Seal of Approval Signifies: a Case in Point," Afew York ' Times, March 23, Sec. 1, p. 48. National Institute on Alcohol Abuse and Alcoholism (NIAAA), 1987. Review of the Research Literature on the Effects of Health Warning Labels, prepared by Macro Systems Inc., June. Oldenburg, Don, 1992. "Words of Warning: Taking a New Look at Health Advisories," Washington Post, March 17, p. B5. Pennington, J.A.T., L.A. Wisniowski and G.B. Logan, 1988. "In-store Nutrition Information Programs," Journal of Nutrition Education, v. 20, pp 5-10. Cited in Schiicker, et al., 1992. .. ;/ :. '-.: ;,::, ". -. '" . , - - ''-..'''' Schubert, Holly, Media Relations Group, Underwriters' Laboratories, 1993. Personal Communication with Abt Associates, September. 51 ------- Schucker, Raymond, Alan Levy, Janet Tenny and Odonna Matthews, 1992. "Nutrition Shelf- Labeling and Consumer Purchase Behavior," Journal of Nutrition-Education, 24:2, March/April, pp 75-81. . Shaner, Janet, 1990. American Heart Association's HeartGuide, Harvard Business School case 'study, Nl-591-033, September 24. Silverglade, Bruce, and Sharon Lindan, 1991. "Harmonizing Food Labeling and Advertising Regulation," Food Drug Cosmetic Law Journal, v. 46, pp. 861-868. Sinisi, John, 1992. "New Rules Exact a Heavy Price as Labels Are Recast," Brandweek, December 7, p. 3. Steinberg, Janice, 1987. "Supermarkets Chains See Value in Nutritional Shelf Labeling (Special Report: Grocery Marketing)," Advertising Age, May 4, v. 58, p. S16-17. Underwriters Laboratories, 1992. "Backgrounder" and other promotional materials. US Dept of Commerce, Office of Consumer Affairs, 1984. Advertising, Packaging and Labeling Responsive Business Approaches to Consumer Needs, prepared by members ot the National Association of Consumer Agency Administrators and the Society ot Consumer Affairs Professionals in Business. U S Environmental Protection Agency, 1989. Environmental Labeling in the United States: Background Research, Issues, and Recommendations (Draft), prepared by Applied Decision Analysis, Menlo Park, CA, December 5. US Food and Drug Administration, Center for Food Safety and Applied Nutrition, 1991. Compliance Costs of Food Labeling Regulations, prepared by Research Triangle Institute under FDA Contract #223-87-2097, January. Waldman, Steven, 1988. "Do Warning Labels Work?" Newsweek, July 18, p. 40-41. 52 ------- 5. SUMMARY OF RESEARCH ON PARALLEL LABELING PROGRAMS The scarcity of available information on the effectiveness of environmental certification programs (see Chapter 3) suggested a need for extrapolation from effectiveness studies of similar types of labeling programs (i.e., third-party, positive, voluntary programs) that do not deal with environmental issues. Often, these studies of parallel programs may provide insight into similar facets of .environmental labeling programs. In the following section, an attempt is made to discuss program studies as they pertain to the five elements of labeling program effectiveness presented in Section 2.1. These elements are: /..- . . " . .' ..' * Consumer awareness , ; Consumer acceptance . Consumer behavior change . Manufacturer behavior change Benefits 5.1 Effectiveness Studies of Positive Labeling Programs A number of positive third-party certification programs were presented in Section 4.2.1. Although some of these programs may be more important, better known or have a longer history than others, not all have conducted comprehensive studies supporting their effectiveness in changing market behavior. Underwriters' Laboratories, for example, in their 99-year history have apparently never performed a survey to gauge consumer awareness of their electrical safety seal. They rely instead on the fact that they are contacted daily by a great number of manufacturers and consumers, and that their standards have been incorporated into electrical safety codes around the world. (Schubert, 1993) In contrast, FDA's Special Diet Alert .program, performed only in Washington and Baltimore and only for a few years, was studied in detail. Also, while the Good Housekeeping Seal is arguably the least consequential of long-term labeling programs, its effectiveness is among the most thoroughly documented. Studies of the Good Housekeeping Seal ? In contrast to third-party certification programs, the Good Housekeeping Seal is operated by a for-profit institution, the Good Housekeeping Magazine (approximately 5,000,000 copies), published by Hearst Corporation. Although the magazine's substantial circulation is a major incentive for companies to advertise in its pages, use of the Seal is limited to advertised products appearing in the magazine. Good Housekeeping therefore tends to keep close track of public perception of the Seal, at least more so than most other certification programs. Por over 30 years, the magazine has sponsored consumer recognition and Seal perception studies by a number of leading survey firms, including Simmons Market Research Bureau (1986), Yankelovich Clancy Shulman Monitor (annually since 1981), Beta Research (1989), and 53 ------- SAMI/Burke (1988). Additionally, at least two unsponsored studies have been performed, by Laric and Sarel (1981) and Parkinson (1975). ',,'' :-. Consumer Awareness In a 1989 study, Beta Research asked respondents to name, unaided, any stamps or seals indicating [endorsement] by an organization, magazine, institute or branch of government." The Good Housekeeping Seal was mentioned most often, by 30 percent of the respondents. Others mentioned included the USDA Choice stamp (21 percent) and the Underwriters' Laboratories Seal (11 percent). (Good Housekeeping Institute, 1993) In a 1975 survey of 200 adult women in Delaware, five national seals had prompted recognition levels of greater than 85 psrcent, with the Good Housekeeping Seal being the most recognized at 98 percent. (Parkinson, 1975) Consumer Acceptance Although the Good Housekeeping Seal has very high consumer recognition, there is evidence that consumers do not understand the exact meaning of the Seal. Laric and Sarel, surveying people who were familiar with the Seal and had read'-the magazine in the previous six months, found that even with this audience there was substantial misperception of the Seal. A majority of respondents interpreted the Limited Warranty Seal as a quality mark, that products bearing it are "better than products without it."8 Even more, however, believed that the Seal indicates the product meets federal safety standards, which the Seal has never claimed. At the same time, less than a third of respondents knew that the Seal offered a limited warranty, and that Good Housekeeping would provide a "replacement or refund if defective," as indicated on the Seal itself. Even among those who claimed to "pay more attention" to products bearing the Seal, only 37 percent knew that the Seal offered a limited warranty, while over half said it did not offer a warranty. (Laric and Sarel, 1981) The authors concluded that "the misperceptions reported here were not caused by misrepresentation of facts [on the part of Good Housekeeping]. Rather they can be attributed to years of consumer usage and reliance on the Good Housekeeping Seal symbol with no frequent reading of the detailed information in Good Housekeeping Magazine. ... Such findings should alert proponents of various quality certification programs to the potential problems that might be caused by greater reliance on symbols or other composite measures." (Laric and Sarel, 1981) Laric and Sarcl's results are consistent with those of a previous study in which seals and certification marks were given a generic positive interpretation. Rather than certifying a specific product attribute as the UL seal does for electrical safety, or providing a customer satisfaction warranty as the Good Housekeeping Seal does, seals and certifications are genetically perceived to be an endorsement of quality by consumers. In addition, consumers tend to exaggerate the extent of the perceived endorsement, assuming the seals mean the product has been tested or "government approved.11 (Parkinson, 1975) This study also measured the seal of approval credibility in comparison to that of a salesman, a friend, and an advertisement. While the friend was deemed most trustworthy, with * From 1910 to 1941 it was in feet the "Good Housekeeping Seal of Approval. 54 ------- the seal a close second, seals were considered to have the most credible expertise and impartiality. Advertisements were consistently least credible, with the salesman only slightly better. (Parkinson, 1975) Other surveys show a generally positive attitude toward the Seal. Simmons Market Research found that 64 percent of consumers "feel positively towards products carrying the Seal," while Beta Research found that 47 percent "have more confidence in products with the Good Housekeeping Seal." However, other questions in the latter study could be interpreted to support the idea that. consumers misunderstand the Seal. When asked "what the Good Housekeeping Seal means,", more respondents agreed that "products with the Seal are reliable/dependable" (65 percent) than thought "Good Housekeeping is willing to stand behind products with the Seal" (56 percent). (Good Housekeeping Institute, 1993) Consumer Behavior Change Good Housekeeping has also sponsored studies testing changes hi consumer behavior, as measured in changes in market share of products bearing the Seal, fa 1988, SAMI/Burke conducted a controlled study in 34 supermarkets in Los Angeles and Atlanta. One product hi each of 18 categories was stickered with the Good Housekeeping Seal and changes in sales were tracked. Results indicated that 12 of the brands "demonstrated sales increases in excess of the performance of their competitors," 13 "had positive shifts hi share from the base period to the test period," and 14 "showed an increase in unit volume in test stores versus control markets." Brands with a large share, 40 percent or more, showed little change while those with 10-30 percent shares behefitted most. Products showing the greatest increase were a children's cereal (24 percent increase), an adult deodorant (17 percent) and a frozen entree (15 percent). Other factors, such as in-store promotions, couponing, and price changes, "were also measured," though it is unknown how or if these effects were separated from the effects of the Seal. Parkinson's study also found that seals can be effective hi guiding consumer purchasing decisions. In a simulated shopping experiment, shoppers chose fictional products bearing third- party certifications more than hah0 the time over three identical products bearing a first-party seal, a fictitious seal and no seal.9 Because the products were fictional, however, other, perhaps more important choice factors were excluded from the study. As the author noted, "in the absence of other informational cues such as known brands, differential prices and physical dissimilarities,'the presence of a familiar seal or certification is a positive inducement toward selection of a brand." (Parkinson, 1975) Laric and Sarel also surveyed consumer behavior in their 1972 and 1980 studies. More than half of the respondents said they "look for seals before trying a product" and "pay more attention to packages or advertisements displaying the Good Housekeeping Seal." About one in four recalled "a specific purchase hi which the Seal had a significant influence." (Laric and Sarel, 1981) 9 In discussing Parkinson's study, Kamins and Marks point out that "only those brands with certification or seals recognized by 85 percent of the sample or above were chosen at a frequency greater than chance." (Kamins and Marks, 1991) /.'" : -.'' ; ' 55 .-. .' - ' ' ."-.'- ------- Manufacturer Behavior Change There is only anecdotal information about manufacturer behavior change driven good by Good Housekeeping's evaluation. If a product or advertising is judged to be unacceptable, Good Housekeeping works with the manufacturer to make whatever changes are necessary to receive the Seal. If this effort fails, however, the company's product can not be advertised in the magazine and, therefore, will not be eligible to use the Good Housekeeping Seal. Benefits The benefits of the Good Housekeeping Seal, through its limited warranty for defective products, are increased consumer trust of marketers and increased marketer accountability. Consumer attitudes, as measured by the surveys discussed above, show that the Seal may be effective in achieving the its objective. Evidence of marketer accountability can be found in the fact that of the approximately 1,000 claims made each year against the limited warranty, most are settled for the consumer, (Pilchik, 1993) Nutritional Shelf Labeling Studies As mentioned in Section 4.2.1, several thousand supermarkets operate nutritional shelf labeling programs. Studies evaluating the effectiveness of in-store programs "have shown disappointing results in demonstrating changes in purchase behavior." (Schucker, 1992) In one review of studies, five of seven programs failed to change consumer purchase behavior positively. Some possible reasons for program failure include "use of program content that is not salient (i.e., featuring micronutrients rather than health-related constituents of greater public concern such as fat), program durations that are too short, [and] experimental designs that do not adequately take into account ... factors that confound program effects," such as special promotions or seasonal demand fluctuations. (Schucker 1992) In another overview of in-store nutritional programs, five of nine studies performed between 1978 and 1986 found no change in purchase behavior. (Russo, et al., 1986) In this review, it was concluded that a "summary rating" (such as a seal of approval or certification) needs to be accompanied by a promotional campaign, and needs to be proffered by a credible and familiar source. One study that demonstrated changes in purchase behavior as a result of a positive labeling program was conducted by researchers from FDA and Giant Food, Inc. In 1981-84, "Special Diet Alert" (SDA) shelf labels were awarded to 400 products in 20 packaged food categories in 10 stores in Washington, DC, with 10 Baltimore Giant stores used as a control. In 1984-86, the study was repeated in all 20 Washington and Baltimore stores, with the number of products increased to 1,200 in 49 categories. Consumer awareness and accq^tance was measured in shopper surveys, while changes in purchasing decisions were tracked using actual sales data. A recent study, designed to estimate potential health benefits and health care cost savings from changes in FDA nutrition labeling, used the SDA results to project consumer behavior changes on the national level. Special Diet Alert Study 56 ------- Consumer Awareness In the first period of the SDA study, a survey of 100 consumers was performed in each of 20 stores involved in the SDA program. Measured before the program and two years after the program started, the survey found that 31 percent of all Washington shoppers and 50 percent of those looking for special diet products reported using the shelf labels. Strangely, in Baltimore, where the program was not introduced until later, 16 percent of all shoppers mistakenly reported using the labels prior to the start of the program in Baltimore. (Levy et al., 1985) -. ' . - .' ' . ' In the second period of the study, from 1984 to 1986, surveys were performed before the program was introduced to the Baltimore stores, and one year after. The number of respondents who claimed to look for SDA labels when they shopped remained consistent in Washington stores, rising from 41 to 44 percent, while the number of Baltimore respondents rose from 21 to 45 percent. Label reading was highest among shoppers who had "high" concern about nutrition (52 percent) and those with a "family member on a special diet" (62 percent). (Schucker, 1992) : Consumer Acceptance There was no measure of consumer comprehension or confidence in the SDA nutrition labels. The high rate of error ampng people who reported using the labels before they were available may indicate that there was some confusion about what the labels actually were. On the other hand, such erroneous responses could have been the result of the "halo effect," where respondents try to answer "correctly," in this case to appear as knowledgeable consumers. Changes in actual product sales indicate that the labels were comprehended by consumers as intended. '-.'"- ' f - ' - ' ' ' .'' Consumer Behavior Change Because the Special Diet Alert shelf label highlighted desirable products rather than providing an educational message, "behavior change is the direct goal and only plausible outcome measure for the program." (Levy et aL, 1985) A key finding in the SDA study was that "nutrition shelf labels influence the purchase behavior of supermarket shoppers toward more healthful choices in at least some product categories." The earlier part of the program saw an increase in sales (or a smaller loss of sales) for every labeled product category in Washington stores compared to the same unlabeled categories in Baltimore stores, with an overall average increase of 4 to 8 percent. The latter study, introducing labels to the same products in Baltimore, found an average sales increase of 12 percent for half of the product categories, with no effect on the rest. The second study also added 25 new product categories, and noted increased sales for 10 of them, with 11 showing no change and 4 categories showing a decline. It was hypothesized that categories showing the least effect from the SDA label were those that had already established a "diet" appeal, such as low fat milk. Consequently, those products that had not been positioned as healthful alternatives may benefit the most from a third- party shelf-label. 57 ------- Compared to other factors influencing purchasing decisions, the SDA program had a "modest" effect. The label caused a change in market share on "the same order.of magnitude as that due to price leveior trend effects during the same period," though one much smaller than store size, socio-economic status, or seasonally. (Levy et al., 1985) Manufacturer Behavior Change The 1984-86 test period of the Special Diet Alert study also measured sales changes for products with "some" flagged nutritional components (sodium, calories, cholesterol, total and saturated fat) versus those with "many." In most cases, those with many flags increased market share while those with some flags decreased. "A disquieting implication of this kind of behavior is that such labeling may have the potential to exaggerate nutritional differences between products and lead to horsepower races between competitors seeking to promote products simply on the basis of the greatest number of qualifying nutrients, without regard to the quality or health relevance of the nutrients being featured." (Schucker et al., 1992) .In other words, as manufacturers chase specific nutritional goals as defined by a labeling program, there is a danger that goals not promoted by or beyond the scope of the program may suffer. Benefits Benefits of the actual SDA program itself cannot be measured because the program was not long enough, or widespread enough, to prevent long-term fatal diseases. However, as part of its regulatory impact analysis of revisions to nutrition labeling rules mandated by the Nutrition Labeling and Education Act of 1990, FDA performed a cost-benefit analysis of its labeling requirements using two scenarios. (Zarkin, 1993) In one scenario, FDA assumes that all foods will be labeled, all consumers will be aware of and understand the changes to the nutrition label, and they will change their diets to follow the daily values for total fat, saturated fat, and cholesterol. This scenario was adjusted for known shortcomings of these assumptions: In the other scenario, the later period of the Special Diet Alert study was used to make a lower, more "real-world" estimate of consumer behavior change. This regulatory impact analysis gives a theoretical estimate of the SDA.program if it were implemented nationwide. Using FDA's Continuing Survey of Food Intakes by Individuals, FDA converted the market share changes from the Special Diet Alert study to changes in food consumption nationwide and thus to the intakes of total fat, saturated fat, and cholesterol. Total fat intake in the SDA study was estimated to decline by 1.4 percent for men and 1.1 percent for women, saturated fat declined by 1.3 and .7 percent, and cholesterol intake declined by 0.1 percent for both men and women, the authors conclude that although appearing small, such a decline could lead to "substantial public health benefits" in the long term. (Zarkin, 1993) Decreases in fat and cholesterol were then linked to cancer and coronary heart disease. Total benefits were estimated at $3.6 to $21 billion savings, nationwide over 20 years, through avoided costs of treating these diseases and the value of longer life. American Heart Association's HeartGuide program Due to controversy surrounding the program, and especially opposition from the FDA and USDA, the American Heart Association's (AHA's) HeartGuide program was withdrawn after only two months of operation. To measure the effectiveness of the program, the AHA had 58 ------- planned to analyze sales of approved products, track the_number of calls received on its toll-free information line, and conduct a consumer survey every three months. Although this never happened, a number of studies were performed before the program was introduced to gauge its potential. - "-w- - . . . -, Consumer Awareness Since the program was never officially made public, and never had products in stores, no information on consumer awareness is available. The AHA had planned advertising campaigns to promote the label and certified products using magazine advertisements, newspaper inserts and point-of-purchase displays. These promotions were expected to reach 30 million consumers per year. (Shaner, 1990) Consumer Acceptance In pre-marketing studies, AHA found a very high acceptance for the idea of a "product approval program" among food businesses, health care professionals, and the general public. In a 1987 mail survey, 87 percent of respondent^ approved of such a program, citing improved public education, simplified shopping, and benefits to public health. The following year, a telephone survey was performed on the general public to determine "the perceived.value to the public of an AHA seal of approval to help-in 'the selection of food products." Responses were more than 80 percent favorable. (AHA, 1989) In another survey, the AHA was found to be among the most credible of sources for nutrition information, ranking just below the FDA and just above the Surgeon General. (Shaner, 1990) Consumer Behavior Change As part of the 1987 and 1988 pre-marketing surveys, AHA asked about the "public's likelihood of buying an approved brand over regular brand." In 1987, 70;percent of respondents would "definitely/probably" change their buying decisions. In the later telephone survey, 91 percent were "very/somewhat likely" to buy an AHA certified product. Manufacturer Behavior Change In the years before implementing the HeartGuide program, the AHA had composed nutritional guidelines, conducted .educational campaigns, composed cookbooks,.and had on, occasion licensed healthy food products to food manufacturers. As a result of this activity, AHA received many requests from marketers for product endorsements as many as "several requests each week." (Shaner, 1990) Until the HeartGuide program, AHA's charter specifically prohibited them from giving endorsements. In the course of developing HeartGuide, the AHA consulted frequently with food manufacturers. Many companies were initially interested, especially if 1) the standards were high, understandable, stable, easily communicated, and provided a basis for product differentiation within a category; 2) fees were reasonable, especially hi the early stages; and 3) the AHA could show that the seal was effective in promoting sales. (Shaner 1990) AHA mailed an application notice to 3,000 companies, receiving 95 interested responses. When the program ------- started, 11 companies with 103 products were participating in four categories. When the program was canceled, AHA refunded all fees paid by manufacturers, a total of $5.3 million. Clearly, there was a sufficient amount of interest on the part of manufacturers to support the program, although the program was too short-lived to cause any manufacturer change. Benefits . . . , i Likewise, HeartGuide was too short-lived to be able to show any nutrition or health benefits. One goal of the program was to cover af least 21 food categories, specified by AHA researchers, in order to enable consumers to buy a complete diet based on the HeartGuide seal. If this had happened, it could have provided a unique opportunity to test the program's health benefits. Other Information on Positive Labeling Effectiveness A 1982 study surveyed college students to test various short-term strategies that companies could use to improve their credibility and reputation. The study involved a fictional brand of adhesive bandages that claimed they were "tested and approved by the American Medical Association." A correlation was found between the AMA certification and students' "purchase intentions," leading to the conclusion that certification by "a well-known independent group appears to be a worthwhile strategy." (LaBarbera 1982) The study parallels the real- world experience of Procter & Gamble's Crest toothpaste, which was certified by the American Dental Association as "an effective decay-preventive dentifrice." This endorsement, combined with heavy promotion of the certification by Procter & Gamble, enabled Crest's market share to rise from 12 to 35 percent following certification. (Montgomery and Armstrong, 1970) 60 ------- A recent study compared 12 seals of approval, including those of Good Housekeeping Magazine, Underwriters' Laboratory, and AHA's HeartGuide, to measure consumer comprehension and believability of the seals when used in advertising. The study, performed with 330 continuing education students, used the same questions as Laric and Sarel's 1981 study, mentioned above. "Seals of approval from publications that are in current use or have been in existence for less than ten years," namely, the PC Magazine certification for personal computers, the AHA HeartGuide, and the American Podiatric Medical Association, "were found to be best comprehended." (Beltramini and Stafford, 1993) Subjects were generally Ul-informed, however, about the meaning of the seals. "Between 56 and 93 percent of the time, subjects either had incorrect perceptions or openly admitted they were unaware of the what the seals represented." In, measuring the. effects'-of the seals on the believability of advertisements in which they appeared, only the UL seal showed a "statistically significant" increase in believability, although the Good Housekeeping seal showed a slight increase as well. Unlike the Laric and Sarel study, this one did not screen subjects for familiarity. While this design may aid extrapolation of the results to the general public, it also fails to establish whether low comprehension and believability effects were due to subjects being unfamiliar with the labels or misperceiving their meaning. Also, unlike the LaBarbera study mentioned above, this research used actual advertisements "depicting well-known nationally branded products." While this may have been used for "realism," there was no attempt to control for brand familiarity or preference. The small effects observed in changing perceptions toward the advertisements may therefore serve only to show how much more important brand name is than product certification. 5.2 Effectiveness Studies of InformationDisclosure Labeling Programs Because information disclosure programs are neutral, the labels do not explicitly incriminate or promote the products on which they appear. They are intended, however, to lead to changes hi behavior. In theory, by being provided with more and better information, an educated consumer will be able to make better purchasing decisions. Among information disclosure labeling programs, the most well-studied is the Food and Drug Administration's nutrition label. Because of the wealth of effectiveness information available on this label, it is the only neutral label discussed here. Studies of the FDA Nutrition Label With the possible exception of the cigarette warning label, more research has been performed on the effects of FDA nutrition labels than on any other single product labeling program hi the U.S. Multiple surveys have been performed by the FDA, the USDA, food industry associations, magazines, consumer and health groups, and academics. Recent changes to nutrition labeling requirements, one commenter noted, "yielded an important side benefit to marketers: more consumer research. We now know much more about who responds best to what kinds of claims." (Mueller, 1991) 61 ------- Consumer Awareness Of the many studies performed on the effects of the nutrition guide, most concentrate on consumer awareness of the label. A few such samples are described below. According to a survey by the Roper Organization, food packages are the main source of nutrition information for more than half of Americans, compared to 24 percent who get their information from newspapers and magazines. (Mueller, 1991) The Food Marketing Institute found in 1990 that while 72 percent of respondents check the expiration date of a product, only 36 percent always read ingredient or nutrition information. This latter percentage is larger among non-working women and pe ole age 50 or older (48 percent). (Mueller 1991) Consumers are especially likely to read the nutrition label when buying unfamiliar foods. The National Food Processors Association found in 1990 that 79 percent of Americans always or sometimes read the label when buying a product for the first time. (Mueller 1991) A Roper survey sponsored by Men's Health magazine found that 86 percent of men say they always or sometimes read food labels, compared to 92 percent of women. (Krafft 1991) . In a study of nutrition label formats performed in Salt Lake City, Utah, it was found that 80 percent of respondents had read a nutrition label in the previous six months. (Geiger etal., 1991) Perhaps the authoritative figure for consumer awareness of the nutrition label is that used by the FDA in gauging the need for revisions to the label, and the costs and benefits of that revision. A cost-benefit analysis prepared for FDA used a 1989 study that found 76 percent of consumers "to be aware of the health-diet link for heart disease." Of these aware consumers, "84 percent are estimated to look for nutrition labels," according to a 1991 study. (Zarkin, 1993) Consumer Acceptance The FDA assumptions continue by estimating that among consumers who look for the nutrition label, 92 percent "subsequently read [it], and approximately 76 percent actually understand the information on the label." The combination of these assumptions results in an estimate that 45 percent of all shoppers are aware of, read, and understand the FDA nutrition label. (Zarkin, 1993) A study performed shortly after the introduction of the FDA label found it to be popular among respondents, but poorly understood. Nine.out of ten respondents felt nutritional labeling was needed and felt "more confident in food shopping" with the presence of the label. A majority agreed that the label "will lead food manufacturers to make their products more nutritious" and will increase consumer education. Comprehension of the information provided on the label, however, was poor. Given a;sample label, respondents were asked what 62 ------- percentage of the Recommended Daily Allowance (RDA) of Vitamin D was present in that product (25 percent of RDA in a one cup serving). Although this involved simply reading the label, one in four were unable to respond correctly. When asked to compute how many servings would be required to meet the total RDA, only 34 percent "proved able to perform the simple computation that led to the correct answer." The study concluded that, without increasing the nutrition education of consumers, "nutrition labeling will be more likely to, make them feel better when shopping than to have a direct impact upon their food purchase decisions." (Daly, 1976) This result was generally confirmed in a 1977 study by Jacoby, Chestnut and Silberman which concluded that "the vast majority of consumers neither use nor comprehend nutrition information in arriving at good purchase decisions." (Jacoby, et'al., 1977) Several studies were performed to determine the optimal format for the revised nutrition label. Two, performed by FDA researchers, found a discrepancy between the format consumers say they prefer and that which they are most able to understand and use correctly. Choosing among seven formats, respondents least preferred a modified version of the old nutrition label and a format that gave the percent of daily value (which eventually became the new nutrition label format). In a test of label performance, however, the percent of daily value format was vastly superior, with the old format ranking second. XPoulke, 1992) In the earlier of thetwo studies, comparing fivelabel formats, a slightly modified version of the old nutrition label was found to be the most effective, while a proposed label using bar charts to illustrate percent of daily value was "consistently the worst format. "'(Levy et al., 1992) Previous studies of various formats had found bar charts to be "most useful" to consumers (Geiger et al., 1991; Mohr et al., 1980; Rudd, 1986), or at least more useful than the old nutrition label format. These studies compared a smaller number of options, however, and did not test preference against actual performance in format usage. Consumer Behavior Change One survey found that more than 80 percent of respondents claimed their food purchase decisions were influenced by nutrition labels in some way. Food categories affected most by nutrition labels were cereals (35 percent), canned products (26 percent), dairy products, and prepared foods (13 percent each). (Mueller, 1991) In the Utah mall-intercept survey mentioned above, respondents were also asked to rank nutrients in order of their importance in affecting purchase decisions. The five nutrients most important in guiding purchase decisions were cholesterol', sodium, saturated fat, fat, and sugar. This study supported previous research (Blmnenthal, 1989; U.S. FDA, 1979) that suggested "the primary reason consumers read a label is to avoid certain dietary components, such as calories, sodium, cholesterol, sugar and fat." (Geiger et al., 1991) Overall, "relatively little is known about how consumers change their diets in response to changes in nutrition label information." (Zarkin, 1993) The FDA study therefore used four different scenarios to estimate the benefits of changes to FDA nutrition labels. These scenarios assumed that: 1) all consumers will change their entire diet (including meat and poultry) to match the daily diet outlined in the n^w label; 2) all consumers will change their diet for those '..- 63 . .; .' -v ." ' .; '. ------- foods covered by the nutrition label (not including meat and poultry); 3) only those consumers who are aware of, read, and understand the label will change behavior; and 4) only the proportion of consumers who' actually did change their behavior in the Special Diet Alert study would change to follow the nutrition label.10 While this last scenario was based on a completed study that successfully illustrated changes in consumer attitudes and behavior, the SDA program was significantly different than the FDA's nutrition label. The nutrition label covers more attributes than the four covered by SDA, and appears on many more products. Additionally, while providing more detailed information, the nutrition label does not rate products according to the amount of nutrients with adverse health effects (such as "low fat"), as did the SDA program. In other words, since the nutrition label does not actively identify products to purchase or avoid, using the SDA program (which makes those identifications) may overstate the benefits. "The basic [SDA] program strategy is to trigger consumers' existing dispositions to buy special foods rather than to provide detailed information aimed at changing attitudes." (Levy et al., 1985) On the other hand, by being more comprehensive, more widespread, and accompanied by a more extensive educational effort, the nutrition label may have greater impact than the SDA label overall. How these conflicting effects balance out is difficult to say. Manufacturer Behavior Change . Changes in the nutrition labeling rules are expected to create incentives for companies to develop more nutritious products. Some changes have already occurred; Pillsbury, for example "is reformulating some products to improve their nutritional profile," including changing to a chili pepper lower in sodium content for a brand of canned corn. Pillsbury is also dropping a "low fat" claim for a frozen pizza, in accordance with changes in the regulation of nutritional claims. (Gibson, 1993) Despite resistance to changes in the label on the part of the food industry, some marketers see it as an opportunity. Pillsbury's director of nutrition looked forward to having the new label on their products early, noting, "It looks good if you have one on your product and you're sitting next to a competitor who doesn't." (Gibson, 1993) A recent study found that variations in nutrition label formats had less effect on purchase decisions than did changes in the levels of the nutrients reported on the labels. "From the food marketer's perspective, results suggest potential negative effects for products with unfavorable nutritional values." This implies that less nutritious products may suffer market setbacks if not reformulated. (Burton and Biswas, 1993) In preparing cost and benefit estimates of changes in the nutrition label, "FDA did not estimate either costs or benefits of product reformulation." Their estimates were based on the Special Diet Alert study, which, because of its limited scope and short duration, was assumed not to cause manufacturers to change their products. Since nutrition label changes will be much 10 The SDA study, as outlined above in Section 3.2.1, involved a positive shelf label that was awarded to products low in cholesterol, sodium, fat, and calories. . " . ' ' ' ' " ' 64 ' ' ' ------- broader in scope and more long-term, they are "expected to lead manufacturers, particularly those who are not now providing nutrition information and who can make low cost reformulations, to reformulate their products to make 'healthier' products." (U.S. FDA, 1991a) However, due to the complexity of the task, FDA did not estimate any benefits of such changes. (U.S. FDA, 1993) , " . Benefits FDA measured health benefits as part of the regulatory impact analysis of changes to the nutrition label. Using various assumptions about the degree of behavior change, as discussed above, health benefits were estimated for the next 20 years. The study estimated between 20 060 and 388,978 cases of coronary heart disease avoided, between 7,027 and 180,495 deaths avoided, and between 40,005 and 1,185,664 life years gained. (Zarkin, 1993) The regulatory impact analysis was used to justify, on the basis of identifying significant expected benefits, the creation of the mandatorynational nutritional labeling program. Early studies of the FDA nutrition label pointed out a number of "non-use benefits" of the label. It was found to increase confidence in the food industry, potentially encourage the production of more nutritious foods, and enhance consumer education. (Daly, 1976) If the label leads to product reformulation, it could have the side benefit that "even consumers who do not change their purchase behavior may eat more nutritious diets." (U.S. FDA, 1991b) 5.3 Effectiveness Studies of Hazard/Warning Labeling Programs "the effectiveness of a [warning] label is operationally defined by the number of consumers who change their behavior in response to information it contains." (Pollack-Nelson, 1991) Research from the Consumer Product Safety Commission identifies three major factors contributing to behavior change from warning labels: 1) consumer perception of the hazard, 2) familiarity with the product, and 3) the cost in time, effort and/or money to comply with the warning message. (Pollack-Nelson, 1991) 'Behavioral changes usually result if a hazard is perceived to be great, a person is unfamiliar with a product, and the cost of adopting the recommended behavior is low. The effectiveness of hazard warning labels, the most common approach to government- mandated labeling programs, has also been studied extensively. A major review of literature on the effects of product labeling, submitted to Congress at the time of deliberations over the alcohol warning label, made three major conclusions: "Health warning labels can have an impact upon the consumer if they are designed to take account of factors that influence consumer response to warning labels." Such factors include previous experience with the product, previous knowledge of risks associated with a product, and education and reading levels. Specifically, warnings must be credible, personally relevant, and exceed a threshold of risk. 65 ------- "Health warning labels can have an impact upon the consumer if the labels are designed effectively." Effective warnings are presented clearly, with simple language,.and address specific rather than general risks. A review of "Studies which have examined the impact of health warning labels [on saccharin and cigarettes] in 'real world' situations have concluded that the labels did have an impact upon consumer behavior," but noted that these examples are not necessarily representative of all health warning labels. (NIAAA, 1987) Researchers for Failure Analysis Associates, claiming to have "reviewed all the literature published in English related to consumer product warning label effectiveness," concluded that "no scientific evidence was found to support the contention that on-product warning labels measurably increase the safety of any product." (McCarthy et al., 1984) A replication of the study (a review of the same literature) led another researcher to a different conclusion: "It was not 'possible to find, when considering industrial product use, 'compelling' evidence of the ineffectiveness of warnings in the material read. At most, results were equivocal; at the least, wholly incomplete." (Moore, 1991) A CPSC report notes that "contrary to the conclusion drawn by McCarthy et al., a number of studies ... have found warning labels to effectively modify behavior to some extent." (Pollack-Nelson, 1991) . Consumer Awareness By providing information related to immediate personal health risks, warning labels tend to be more compelling than other types of labeling approaches. Awareness of warning labels could be therefore assumed to be higher. Anheuser-Busch sponsored a survey to test five proposed warning labels for alcoholic beverages. The study found that respondents were already aware of the dangers specified by the warning labels, and concluded that "education, awareness and law enforcement" would be more effective in curbing alcohol abuse. (Maines, 1992) This result is partly supported by a study that measured the awareness and knowledge of high school students in Indiana before and after the introduction of the alcohol warning label. More than 88 percent of respondents were already aware of the hazards presented on the label, before the label was introduced. This awareness of hazards did not increase after the introduction of the warning. The study also found that 41 percent of students had seen the label a year after it was introduced. Before its introduction, 26 percent falsely reported having seen it. Among those who had used alcohol in the previous month, there was a much higher recognition rate. (MacKinnon, et al., 1993) Another study found that young people (aged 18 to 29 years) were more likely to be aware of the alcohol warning label than older people, and were more aware of specific risks mentioned on the label. The survey, performed six months before and after label introduction, also suggests that it may be effective in reaching its target audiences, especially heavy alcohol consumers. (Mazis, etal., 1991) Consumer Acceptance 66 ------- One typology describing recall of warning messages states that "recall of warning label risk depends on the frequency of information communicated, whether the information is dramatic, sensational or heavily reported in the media, and the vividness and personal relevance of the information." (Bettman, et al., 1986) A warning may be ignored if it is "perceived as providing few rewards or involving little risk or danger." Also, if warnings are too complex, people may simplify the messages. . In one example of the importance of a perceived hazard (or of personal relevance) leading to increased awareness and comprehension, the Food and Drug Administration studied perceptions of an oral contraceptive warning message. Nearly all respondents claimed to have read the warning when they started.their prescription, and about half correctly recalled the most serious warning, that contraceptives may increase the risk of blood clots. (Morris, Mazis and Gordon, 1977) A study of cigarette warning labels found that warnings of specific adverse health outcomes were "significantly more believable" than guidance suggesting actions to take (i.e., quitting smoking) or warnings of the presence of harmful ingredients (i.e., carbon monoxide). (Beltramini 1988) Specific warnings included risk of lung cancer, heart disease, emphysema, fetal injury and premature birth. Another study found specific warnings to be a "counterinfluence to an ad's appeal by making it appear less attractive and less persuasive." A general warning was less effective in changing the effect of the advertisement. (Loken and Howard-Pitney, 1988) Researchers using a memory recall methodology found that warning labels, properly designed, "boost consumers' intentions to take safety precautions." A cost hi processing the information was found, however, as consumers traded off increased recall of risk information for a decrease in the recall of product usage uiformation. The study found a point of diminishing returns with the amount of risk information that could be presented on a label. "Overloading consumers with risk information obscured the underlying message of the hazard warning." (Viscusi and Magat, 1987) Consumer Behavior Change Two studies compared behavior in the presence of a warning label to behavior without the label and found, depending on the product or situation, that the warning information had a significant effect. (Wogalter et al. 1987; Otobso, 1988) In the former study, 50 to 90 percent of subjects wore a mask and gloves as advised by a warning label during a chemistry lab experiment, while only 10 percent did so without1 the warning label. In a similar study, researchers tested compliance to hazard labels during a chemistry lab experiment against the cost to the subject of taking the advised precautions. When protective gear was provided hi the same room as the experiment, 73 percent complied with the warning; when the protective gear was hi a different room, only 17 percent complied. (Wogalter, etal., 1988) In another experiment clearly illustrating the relationship of cost (personal effort) to risk, researchers put a sign on a broken glass door, instructing people to use a different exit. When the alternate exit was 200 feet away, all people ignored the sign and used the broken door (the same result as when there was no sign). When the alternate door was 50 feet away, only 5.9 ' - " '>.' '.'.''.'' 67 ' ' ------- percent followed the instructions. When the alternate was adjacent to the broken one, however, 94 percent complied with the instructions. (Wogalter et al., 1987) In situations where the action is highly familiar or simple, warning labels have been shown to be less effective. Warning labels on hammers, for example, advise the user to wear goggles to protect from eye injury. In one study, none of 100 students told to pound a nail-with a hammer remembered seeing the label afterwards. (Dorris and Purswell, 1977) The effects of warning labels on consumer behavior are commonly difficult to separate from the effects of other influential factors. A Federal Trade Commission report on the effects of the cigarette warning label concluded that "any independent influence that the warnings might have had on smoking decisions could not be disentangled from effects generated by the many other contemporaneous sources of health concern." (Murphy, 1980) Examples of "entangling" factors are media coverage of legislation and regulation, public education campaigns, and research reports like the Surgeon General's 1964 report on smoking. Another factor is that "strong warnings have normally been introduced as part of a comprehensive long term program, whose individual components cannot easily be evaluated." (Daube, 1982) A study by the Swedish National Smoking and Health Association tested consumer knowledge of the specific risks mentioned in Sweden's four rotating warning labels, before and one year after introduction of the system in 1977. Knowledge of the risks mentioned grew faster than those not mentioned on the labels, and smokers (the target group) learned more than non- smokers. The labels were accompanied by a public education program, however, so it is difficult to separate the effects of the different components. (Mazis, et al., 1991; U.S. EPA, 1989) .;.''.. One study that attempted to disentangle the effects of warning labels and media coverage of risks was a saccharin warning label study (Orwin et al., 1984) Because the bulk of the media coverage was a year apart from the introduction of the label, the study was able to discern different trends at different times. While the warning label was effective in reducing sales by almost 4 percent below predicted levels, the "media onset" was estimated to reduce sales by just over 17 percent. Manufacturer Behavior Change While sales of diet soda continued to climb, albeit more slowly, despite the saccharin warning, (Schuckeretal., 1983), a technological advance in the form of the non-sugar sweetener aspartame (known commercially as Nutrasweet), gave diet soda makers an opportunity to avoid saccharin altogether. Aspartame was approved for use by the Food and Drug Administration hi July 1983, with the first 100 percent aspartame-sweetened soda appearing hi August of that year. Due to a variety of factors including the health warnings associated with saccharin, sales of diet soda consequently rose from 20 to 30 percent of the soft drink market. (Oman, 1992) Benefits Numerous studies of the cigarette warning label have shown changes in consumer awareness, acceptance and benavior, as well as changes in sales trends and consumption. Also, there have been many studies of the health hazards of cigarette smoking, notably the Surgeon 68 ------- General's report of 1964 that inspired the original cigarette warning label. It is unknown if any studies have linked changes in consumption to actual health benefits. Medical studies have determined that aspirin, if taken by children with various viruses, can in rare instances cause Reye's Syndrome, a fatal illness. A labeling requirement for aspirin was started in 1986 to warn of this possibility, 'subsequent to and during extensive media coverage and guidance to pediatricians to warn their patients against using aspirin in certain circumstances. By 1987, incidence of Reye's Syndrome had declined to its lowest level since records were kept starting in the early 1970s. A study of the effects of these three sources of warning information concluded that most of the effects were seen in 1981-1983 as a result of "professional and lay media" coverage. However, "it is likely that the continuing education and labeling changes have probably served to maintain and reinforce the new behaviors" after press coverage diminished. (Soumerai et al., 1992), . ~.~ Evidence from other warning label studies have indicated that labels alone are often insufficient to protect against the hazards posed by a product. A warning label on an extremely flammable contact adhesive was found to be ineffective, since a considerable number of injuries continued to occur after application of the label requirement. In this case, CPSC banned the product to protect public safety. (Pollack-Nelson, 1991) In another case, the number of children harmed by medicines and toxic household cleaners "dropped dramatically" after child-resistant bottle tops were required in place of just warning labels. (Waldman, 1988) 5.4 Conclusions About Research on Labeling Effectiveness As can be seen from the preceding program descriptions, product labeling initiatives have been started for a wide variety of products with a variety of goals. The first product labeling efforts were started by private groups, such as Underwriters' Laboratories (UL) and Good Housekeeping Magazine, who became involved in the consumer-manufacturer relationship before governments. Product certifications, by providing a positive selling point for marketers competing with one another, allow private groups to put pressure on companies without the heavy hand of government-mandated labeling regulations. Government activity came first in the form of disclosure requirements and then more frequently in the form of warning labels, which were designed to protect consumers from hazardous ingredients and dangerous products. As appreciation grew for these "informational approaches to regulation," other approaches were launched. FDA's Nutrition Label, EPA's Fuel Economy Guide and FTC's Energy Guide are aH examples of neutral but mandatory information disclosure labels. A combination of a consumer right-to-know movement and an increasingly litigious society led to the current prevalence of warning labels. Although state and federal governments have increased the amount of required product labeling, private groups have continued to use voluntary certification programs to promote product improvements and innovation in specific areas. Occasionally these programs work in " ..'.- , . ' ' .'. 69 . -:.' "' . : ------- conjunction with government labeling programs; always, however, they reflect a current societal interest. 70 ------- References . ; References for Certification Programs American Heart Association (AHA), 1989. "HeartGuide: A Consumer Health Information Program, Summary of Market Research." Dagnoli, Judann, 1990. "HeartGuide Leaves Marketers Cold," Advertising Age, 61:3, January 15, p. 51. , "' -< . - Good Housekeeping Institute, 1993. Promotional materials including: "The Way We Were! The Way We Are!", Advertising Rate Card, "Good Housekeeping Seal Agreements," "Good Housekeeping Consumers' Policy," "The Beta Research Good Housekeeping Seal Awareness Study," and "The SAMI/Burke Good Housekeeping Seal Study." Laric, Michael V. and Dan Sarel, 1981. "Consumer (Mis)Perceptions and Usage of Third Party Certification Marks, 1972 and 1980: Did Public Policy Have an Impact?" Journal of Marketing, vol. 45, Summer, p. 135-142, LaBarbera, Priscilla, 1982. "Overcoming a No-Reputation Liability Through Documentation and Advertising Regulation," Journal of Marketing Research, v: 19, May, p. 223-228. Montgomery, David and J. Scott Armstrong, 1970. "Brand Trial After a Credibility Change," Journal of Advertising Research, v. 10, October, p. 26-32. Cited in LaBarbara, 1982. Parkinson, Thomas, 1975. "The Role of Seals and Certifications of Approval in Consumer Decision-Making," Journal of Consumer Affairs, vol. 9, p. 1-15, Summer. Pilchik, Evan, Good Housekeeping Institute, 1993. Personal Communication with Abt Associates, September. Schubert, Holly, Media Relations Group, Underwriters' Laboratories, 1993. Personal Communication with Abt Associates, September. - , " i -' - , % . Toufexis, Anastasia, 1990. "The Good Food-Picking Seal," Time, January 29, p. 80. References for Information Disclosure Labels Blumenthal, D., 1989. "The Heart-Diet Link: Charting a Rising Awareness," FDA Consumer, 23:8, p. 22-27. Cited in Geiger, et al., 1991. Burton, Scot, and Abbijit Biswas, 1993. "Iteliminary Assessment of Changes in Labels Required by the Nutrition Labeling and Education Act of 1990," Journal of Consumer , Affairs, 27:1, Summer, p. 127-144. , 71 ------- Daly, Patricia, 1976. "The Response of Consumers to Nutrition Labeling," Journal of Consumer Affairs, 10:2, Winter, p. 170-178. Foulke, Judith, 1992. "FDA Asks Shoppers About Food Labels," FDA Consumer, June, p. 10- .. 13. , ' ' , ^ "'' ' '.;'' " Geiger, Constance, Bonita Wyse, Michael Parent and Gaurth Hansen, 1991. "Nutrition Labels in Bar Graph Format Deemed Most Useful for Consumer Purchase Decisions Using Adaptive Conjoint Analysis," Journal of the American Dietetic Association, 91:7, p. 800- 807. Gibson, Richard, 1993. "Label Law Stirs Up Food Companies," Wall Street Journal, June 2, p. Bl, BIO, and related articles. Gorman, Christine, 1991. "The Fight Over Food Labels," Time, July 15, p. 52-56. Jacoby, Jacob, Richard Chestnut and William Silberman, 1977. "Consumer Use and Comprehension of Nutrition Information," Journal of Consumer Research, v. 4, September, p. 119-128. Cited in Burton and Biswas, 1993. Krafft, Susan, 1991. "Food Labels: Attractive to Both Sexes," American Demographics, August, p. 17-18. Levy, Alan, Sara Fein, and Raymond Schucker, Food and Drug Administration, 1992. "More Effective Nutrition Label Formats are not Necessarily Preferred," Journal of the American Dietetic Association, 92:10, October, p. 1230-1234. Levy, Alan, Sara Fein, and Raymond Schucker, Food and Drug Administration, 1991. "Nutrition Labeling Formats: Performance and Preference," Food Technology, July, 116- 121. Levy, Alan, Odonna Mathews, Marilyn Stephenson, Janet Tenney and Raymond Schucker, 1985. "The Impact of a Nutrition Information Program on Food Purchases," Journal of Public Policy and Marketing, v. 4, p. 1-13. Mohr, K.G., B.W. Wyse, and R.G. Hansen, 1980. "Aiding Consumer Nutrition Decisions: Comparison of a Graphical Nutrient Density Labeling Format with the Current Food Label System," Home Economics Research Journal, v. 8, p. 162-172. Cited in Geiger, etal., 1991. Rudd, J., 1986. "Aiding Consumer Nutrition Decisions with the Simple Graphic Label Format," Home Economics Research Journal, v. 14, p. 342-346. Cited in Geiger, et al., 1991. 72 ------- Russo, J. Edward, Richard Staelin, Catherine Nolan, Gary Russell, and Barbara Metcalf, 1986. "Nutrition Information in the Supermarket," Journal of Consumer Research,, v. 13, p. 48-70.' '.'' Sharier, Janet, 1990. American Heart Association's HeartGuide, Harvard Business School case study, Nl-591-033, September 24. , .. Schucker^ Raymond, Alan Levy, Janet Tenny and Odonna Matthews, 1992. "Nutrition Shelf- labeling and Consumer Purchase Behavior," Journal of Nutrition Education, 24:2, March/April, pp 75-81. ' ' ' ' ' Thompson, Dick, 1991. "The Man with the Plan," Time, July 15,jp. 59. Toufexis, Anastasia, 1991. "Playing Politics with Our Food," Time, July 15, p. 57-58. U.S. Food and Drug Administration, 1979. FDA 1978 Consumer Food Labeling Survey, Washington. Cited in Geiger, etal., 1991. Zarkin, Gary A., Nancy Dean, Josephine Mauskopf and Richard Williams, 1993. "Potential Health Benefits of Nutrition label Changes," American Journal of Public Health, 83:5, p. 717-724. t ' :. ; References for Warning Label Studies Andrews, J. Craig, Richard Netemeyer and Srinivas Durvasuk, 1991. "Effects of Consumption Frequency on Believability and Attitudes Toward Alcohol Warning Labels," Journal of Consumer Affairs, 25:2, p. 323-339, Winter,, Beltramini, Richard, 1988. "Perceived Believability of Warning Label Information Presented in Cigarette Advertising," Journal of Advertising, 17:1, p. 26-32. Cited in Andrews, Netemeyer and Durvasula 1991. Bettman, James, John Payne and Richard Staelin, 1986. "Cognitive Considerations in Designing Effective labels of Presenting Risk Information," Journal of Public Policy and Marketing, v. 5, p. 1-28. Cited in Andrews, Netemeyer and Durvasula 1991. Daube, Michael, 1982. "In Support of Health Warnings," World Smoking & Health, 7:2, Autumn, p. 42-46. Cited in Mazis, Morris and Swasy, 1991. Dorris, A.L. and J.L. Purswell, 1977. "Warnings and Human Behavior: Implications for the Design of Product Warnings," Journal of Product Liability, no. 1, p. 255-264. Ix>ken, Barbara and Beth Howard-Pitney, 1988. "Effectiveness of Cigarette Advertisements on Women: An Experimental Study," Journal of Applied Psychology, 73:3, p. 378-383, August. . ; .. 73 - ' " ' ;' ' . '.'- ------- MacKinnon, David, Mary Ann Pentz and Alan Stacy, 1993. "The Alcohol Warning Label and Adolescents: The First Year," American Journal of Public Health, 83:4, April, p. 585- 587. Maines, John, 1992. "Who Reads the Warning Label?" American Demographics, September, p. 13-14. . Mazis, Michael, Louis Morris and John Swasy, 1991. "An Evaluation of the Alcohol Warning Label: Initial Survey Results," Journal of Public Policy and Marketing, 10:1, Spring, p. 229-241. . McCarthy, Roger, James Finnegan, Susan Krumm-Scott and Gail McCarthy, Failure Analysis Associates, 1984. "Product Information Presentation, User Behavior and Safety," Proceedings of the Human Factors Society, 28th annual meeting, 1984. Moore, Michael Garth, 1991. "Product Warning Effectiveness: Perception Versus Reality," Professional Safety, American Society of Safety Engineers, p. 21-24, April. Morris, Mazis and Gordon 1977. Cited in Mazis, Morris and Swasy, 1991. Mueller, William, 1991. "Who Reads the Label?" American Demographics, January, p. 37-40. '... | Murphy, R. Dennis, 1980. "Consumer Responses to Cigarett health Warnings," Banbury Report 6: Product Labeling and Health Risks, Morris, Mazis and Barofsky, eds., Cold Spring Harbor (NY) Laboratory, p. 13-18. Cited in Mazis, Morris and Swazy, 1991. National Institute on Alcohol Abuse and Alcoholism (NIAAA), 1987. Review of the Research Literature on the Effects of Health Warning Labels, prepared by Macro Systems Inc., June. Oman, Bruce, 1992. "Swirling in December," Beverage World, vol. Ill, no. 1530, p. 94, December. Orwin, R.G, Raymond Schucker and Raymond Stokes, 1984. "Evaluating the Life Cycle of a Product Warning: Saccharin and Diet Soft Drinks," Evaluation Review, 8:6, p. 801-822. Cited in Mazis, Morris and Swazy, 1991, and in NIAAA, 1987. Otubso, 1988. Cited in Pollack-Nelson, 1991. Pollack-Nelson; Carol, 1991. Estimated Effectiveness of Warning Labels, U.S. Consumer Product Safety Commission, Division of Human Factors, March. Schucker, Raymond, Raymond Stokes, Michael Stewart and Douglas Henderson, 1983. "Impact of Saccharin Warning Label on Sales of Diet Soft Drinks in Supermarkets," Journal of Public Policy and Marketing, vol. 2, pp. 46-56. 74 ------- Soumerai, Stephen, Dennis Ross-Degnan, and Jessica Spira Kahn, 1992. "Effects of ,Professional and Media Warnings About the Association Between Aspirin Use in Children and Reye's Syndrome," Milbank Quarterly,70:1, p. 155-182. Viscusi, Kip and Wesley Magat, 1987. Learning about Risk: Consumer and Worker Responses to Hazard Information, Cambridge: Harvard University Press. Waldman, Steven, 1988. "Do Warning Labels Work?" Newsweek, July 18, p. 40-41. Wogalter, McKenna and Allison, 1988. Cited in Pollack-Nelson, 1991. Wogalter, Godfrey, Fontenelle, Desaulniers, Rothstein and Laughery, 1987. Cited in PoUack- Nelson, 1991. Other References Salzhauer, Amy Lynn, 1991. "Obstacles amd Opportunities for a Consumer Ecoiabel,"- Environment, 33:9, November, pp. 10-15, 33-37. .. '"" . w . ' U.S. Environmental Protection Agency, 1989. Environmental Labeling in the United States: Background Research, Issues, and Recommendations (Draft), prepared by Applied Decision Analysis, Menlo Park, CA, December 5. U.S. Food and Drug Administration, 1993. "Regulatory Impact Analysis of the Final Rules to Amend the Food Labeling Regulations," Federal Register, ,58:3, January 6, p. 2927- 2941. ' U.S. Food and Drug Administration, 199la. "Reguktory Impact Analysis of the Proposed Rules to Amend the Food Labeling Regulations," Federal Register, 56:229, November 27, p. 60856-60877. U.S. Food and Drug Administration, Center for Food Safety and Applied Nutrition, 199Ib. Estimated Health Benefits of Nutrition Label Changes, prepared by Research Triangle Institute, April. 75 ------- ------- 6. EGP RESPONSE TO -EFFECTIVENESS INQUIRIES Twelve environmental certification programs worldwide were asked to provide information on their perceived or measured effectiveness. Three questions were asked (see 6.1- 6.4). Four programs. White Swan (Sweden), Blue Angel (Germany), Eco-Mark (Korea), and the Singapore Green Labelling Scheme responded.' The reply from White Swan is quoted, while that from Blue Angel is abstracted, with minor edits, from notes on a lecture by Harald Neitzel at the China First International Environmental Labelling Exchange. The reply from Eco-Mark has been quoted from both their direct reply to the EPA inquiry and their "Eco-Mark System in Korea" summary, to which they referred EPA for the answer to Question #3. Singapore's Green Labelling Scheme responded to the first two questions only. These programs are summarized briefly below: White Swan Environmental Labelling System, Swedish Standards Institution In 1989, the Nordic Council of Ministers introduced a voluntary, positive, and environmental certification program. The first set of criteria, created for low mercury/cadmium button cell batteries, was approved in June 1991. As of April 1993, criteria for 14 product categories had been established, with another 23 under consideration. Over 200 products currently carry the White Swan logo. (UNCTAD, 1993; Nordic Council, 1993) According to the Nordic Council's November 1991 position report, "[t]he Nordic environmental label is a neutral, independent label which guarantees a certain environmental standard. Only products which satisfy strict environmental requirements on the basis of objective assessments will be allowed to display the environmental label." The Nordic program is noteworthy because of its novel administrative structure. While final decisions are made by a Coordinating Group, selection of product categories and establishment of award criteria take place at the national level. Currently,,Norway, Sweden, Finland, and Iceland are participating in the program. Denmark is holding back, pending the EC's decision on the development of an EC ecolabel. Blue Angel, Germany Germany introduced the Blue Angel labeling program in 1977, making it the first country to implement a national ecolabeling program. The program was launched by the Federal Minister and the Ministers for Environmental Protection of the Federal States. Most other ecolabeling programs in existence today are based to some extent on the Blue Angel program. 77 ------- The German government sees the ecolabel as a "soft instrument" of environmental policy, since the program cannot establish binding requirements or bans and because participation in the program is completely voluntary. In a 1988 survey of 7,500 German households, 79 percent were at least familiar with the ecolabel, and 68 percent correctly linked the ecolabel with the concept of environmental protection. Similar opinion polls have been performed on a regular basis, showing that the Blue Angel is perceived as "a reliable ecolabel." (Breier, 1993) The program grew from only 500 products certified in 33 categories in 1984 to 3,503 different products in 75 categories by mid-1993. Most of the certified products are from German manufacturers, with about 12 percent of all ecolabels awarded to non-German companies. (OECD, 1991) Korea Eco-Mark, Ministry of Environment The Korean Ministry of the Environment launched its Eco-Mark environmental certification program on June 1, 1992, announcing four recycled-content products at that time, with eight other products being added in November. At the time of this writing, 96 products within those 12 categories have been awarded the Eco-Mark. The Korean Academy of Industrial Technology (KATTECH) assisted in the development of the program, providing technical assistance for the development of draft criteria more than 50 product categories. The Korean Eco-Mark's approach to product certification is based on defining the single most important criterion for each product category. The Eco-Mark has found that the large data requirements for the life cycle approach are difficult to meet in practice. (UNCTAD, 1993) The Singapore Green Labelling Scheme, Ministry of the Environment Singapore launched its voluntary and positive Green Labelling Scheme in'May 1992 to "promote green consumerism" among Singapore's citizens. The first set of criteria, released in August 1992, included stationery paper, hygiene paper, printing paper, office automation paper, and carbon zinc batteries. Draft criteria for alkaline batteries and compact fluorescent lamps were released for public feedback in February 1993. As of March 1993, the Green Labelling Scheme received 81 applications from 49 companies for the first 5 product categories: In a recent survey of 18 companies which manufacture products carrying the Green Label, 7 report increases in sales. (Loo Hak Jan, 1993) I t '": , ' ' The Green Labelling Scheme is a criteria-based program that uses a simplified life cycle assessment. Instead of examining every impact that a product exerts on the environment froln cradle to grave, the Singapore scheme isolates and studies the "few most important parameters for each product category to determine which products qualify for the Green Label. For example, carbon-zinc batteries are approved by the program based solely on their mercury content (no more than 10 ppm Hg). 78 ------- 6.1 Question!: What are your program's explicit (written) goals? Are there any goals that are not written out that the program or its staff feel are important for a new program to consider? White Swan, Sweden . [Our] primary goal is to inform the consumers about what products are the best from an environmental point of view and also have acceptable performance. We have found out that performance is important for the credibility of the system. If this goal is met then the program also can play a role to influence the development and marketing of products and in the end contribute to a better environment. The key issue is to find criteria that are acceptable both to environmental groups and to industry. If products that meet the criteria are on the market, then, there is a good opportunity that companies will apply for the label and the labelling system will be successful. Blue Angel, Germany The environmental label shall contribute to the solution of environmental problems caused by products. Environmental quality standards of products shall be developed, improved, and succeeded. [Prerequisites of successful environmental labelling include:] »«" the environmental consciousness of the population and of social and public institutions; incentives for manufacturers to develop products with better environmental profiles; credible promotion of environmental aspects in advertising and marketing; the selection of product groups that can be linked with special environmental problems; and products which are of interest to professional purchasers. Korea Eco-Mark . [The goal of the Eco-Mark System is] to promote the development of low pollution technology associated with all enterprises, and to improve environmental awareness among consumers, Our objectives are set to pursue our project policies in the most appropriate manner. The Singapore Green Labelling Scheme The program's explicit goals are: a) To help the consumers identify products that are ifriendly to the environment. b) To raise the awareness of our consumers of the impact of the products on the environment byproviding infoonation on the products. 6.2 Question 2: What has your program learned about measuring program effectiveness? ' ' . '' 79 . ' *, . ------- White Swan, Sweden We are starting to evaluate the effectiveness of our program but we have no results yet. We have information about the recognition of the logo and the market share of our products. Our new resources will be used both to review our criteria, control the license holders and develop new criteria. I would say it is important to concentrate on a few product areas, e.g., consumers' daily products, to get the logo recognized as soon as possible. There are thousands of products in a store! Blue Angel, Germany The basic criteria for the environmental label include a limitation of the award period to three years. Therefore, a constant checking up is guaranteed. If the environmental label standard was successful on the market, and if there are no further reasonable possibilities to improve the requirements, the labelling in one product group may be terminated or may be offered as permanent consumer information in a specific product group, e.g., biodegradable chain lubricants for power saws or water saving flushing cisterns. The Blue Angel has sped up the development of the state of the art for different heaters and other equipment. Some criteria have been used by other labeling programs worldwide, e.g., copiers The market share of Blue Angel-certified paints is above 50 percent in the do-it- yourself sector, but until now only 20 percent in the handicraft sector; in 1981 the market share was 1 percent. The market share of recycled paper products is also increasing. Blue Angel standards were also successful in some product groups [of interest to] public or private sector procurement programs; e.g., low noise building machines, biodegradable chaui lubricants, or copiers. Some product groups have not fulfilled expectations, e.g., products made from recovered plastics or soil meliorates, such .as compost for peat substitution. Korea Eco-Mark We think it is necessary to monitor the effectiveness of the program. The survey was conducted by making questions to manufacturers of eco-labelled products only once January '93 to compare the changes of sales amount of products after the labels have been put on. The results showed that the sales amount of recycled paper had increased by about 30 percent after the label was put on. But other items kept steady without any changes. The activities we are doing continuously call consumer attention to the benefits of buying labelled products as part of an approach to environmental preservation and material conservation. The Singapore Green Labelling Scheme We believe that there is a need to measure ECP effectiveness, to date, we have eight, product categories; we have not carried out any survey to measure consumers' attitude, 80 ------- behavior, etc. However, we intend to carry out such surveys when there are more GreeiiLabcl products available in the market. 6.3 Question 3: What lessons can the U.S. learn from the experiences of foreign environmental certification programs? White Swan, Sweden I think that one important difference is that products developed for one country are not always available in another country. Therefore, it is important to make a survey of the products on the market before criteria are set for various products. Also, environmental problems, priorities and strategies may vary. Even if exchange of information and experience is important, environmental criteria,may vary from one country to another. Blue Angel, Germany The most important internationally harmonized declarations on principles of environmental labelling are the "Berlin Declaration on Environmental Labelling" (1990) [and] the "Lesvos Declaration" in the framework of UNEP/IEO initiative to "Promote Cleaner Production." Further development of internationally recognized principles and working methods of environmental labelling can be expected from the ISO TC 207 Sub-Committee on "Environmental Labelling" which was founded hi Toronto June 1993. This followed two years of preparation in an ISO/SAGE Subgroup chaked by Canada, Manufacturers often have problems with very-different criteria between different programs. But international harmonization can only be realized by an information exchange, respecting the country-related decision processes. .A positive competition among the schemes to develop the best criteria would contribute to environmental protection. Decisive for both is ah international environmental labelling database, which will be organized by the ISO TC 207 Subcommittee "Environmental Labelling," chaired by Australia. The impacts of environmental labelling on the exports of developing countries, and on trade in general, are researched by UNCTAD and GATT. There are studies in preparation concerning better transparency of the programmes and better participation in the environmental labelling processes. 81 ------- Korea Eco-Mark [The Eco-Mark System] will improve low pollution technology (environmentally clean technology or environmental preservative technology) by promoting Eco-Mark labelled, products. Secondly, as the enterprises themselves are practicing the quality endorsement procedures objectively on low pollution products, it may substantially help reduce the confusion that arises ainong consumers who otherwise may be misled by erroneous information. Thirdly, the quality acknowledgements of the Eco-Mark system are expected to provide consumers with environment-related information while enlightening their environmental preservation consciousness which, in turn, can lead to environmental preservation practices among consumers as they choose the environmental commodities. Fourthly, it is expected that by promoting enterprises to help develop environmental improvement technology and by firmly dwelling on consumers' environmental consciousness and consuming habits, environmental preservation objectives can actually be realized. 82 ------- References Assarson, Bq, Swedish Standards Institution, 1993. Personal Communication with Julie Lynch, U.S. EPA, September 24. Breier, Nicola, German Federal Environmental Agency, 1993. Personal Communication with Julie Lynch, U.S. EPA, May 11. Choi Ryang-il,.Korea Ministry of the Environment, 1993. Personal Communication with Julie Lynch, U.S. EPA, October 11. ;: , Korea Ministry of the Environment, 1993. Eco-Mark System in Korea. ' ... Loo Hak Jan, Singapore Green Labelling Scheme, 1993. Personal Communication with Julie Lynch, U.S. EPA, November 1. Loo Hak Jan, Singapore Green Labelling Scheme, 1993. Personal Communication with Abt Associates, May 29. - ' ' ;.>*. Neitzel, Harald, German Federal Environmental Agency, 1993. "The Development of the Blue Angel Scheme in Germany: Working Methods, Problems, Balance and Perspectives, Conclusions for Environmental Labelling," lecture at the China First Environmental Labelling Exchange, October 23-28, Beijing Mandarin Hotel. New Zealand Minister for the Environment, 1992. Media Statement/March 18. Nordic Council, 1993. Environmental Labelling in the Nordic Countries, April. Organization Economic Cooperation and Development, Technology and Environment Programme, 1991. Environmental Labelling in OECD Countries, Paris. Swedish Standards Institution, 1990 and 1993. "Status of the Nordic Criteria Development - September 1993," and "General Criteria - October 1990," Environmental Labelling in Sweden. United Nations Council on Trade and Development (UNCTAD), International Trade Division, Trade and Environment Section, 1993. Eco-labelling and International Trade: Preliminary Information from Seven Systems (Draft), Geneva, Switzerland, May 19. 83 ------- ------- 7. ANCILLARY INFORMATION RELEVANT TO ECP SUCCESS The information presented in this chapter provides other indications of the baseline attitudes of consumers and manufacturers toward environmental problems and the proclivity of these groups to change their attitudes and behaviors. 7.1 Consumer Awareness of Environmental Issues To simplify presentation of the data and for market research purposes, consumer studies often categorize survey respondents according to the way they answer questions about environmental issues. Recent research supports correlations between wealth, education, and different levels of environmental awareness and activity. The table below summarizes consumer segment definitions from various studies. According to some surveys, however, the correlation between demographics and environmental awareness does not extend to consumer purchasing behavior. Nonetheless, 4 out of the 5 surveys characterized approximately 20-percent of the population as being "highly concerned" about the environment, and all of the surveys characterized between 4 and 30 percent as "not concerned." Market surveys performed by retailers such as Seventh Generation support these ratios. They reveal that a small percentage of the U.S. market consists of a group of committed consumers who actively seek out less environmentally damaging products, while most consumers buy green products only when the price and the quality are roughly equivalent to those of conventional products. (Seventh Generation and Earth Care, 1992) 85 ------- Table 7.1 Consumer Market Segmentation Environmental Consumer Segmentation Survey Organization Environmental Research Associates Green MarketAlert JWT Greenwatch Kaagan Research Associates The Roper Organization Degree of Awareness and Activity Highest Very Concerned (59%)* Visionary Greens: committed greens (5- 15%) Greener-than-Greens: make many sacrifices for the environment (24%) Young White Collar: most environmentally conscious, affinity for environmental groups, at odds with corporate America (22%) True-Blue Greens and Greenback Greens: earn more, have more education, politically liberal, and tend to be female (22%) Strong Somewhat Concerned (37%) Moderate Not Very Concerned (3%) Maybe-Greens: swing group (55-80%) Greens: concerned about the environment but make only limited sacrifices (59%) Substantial Means: strong believers in (and practitioners of) individual responsibility, more vocal on abstract and global environmental debates (15%) Sprouts: well- educated, wealthy, "swing" group (26%) Light Greens: concerned but not willing to make any personal sacrifices (15%) Older White Collar: self-satisfied with personal environmental efforts and optimistic about the future (14%); Blue Collar: lack the belief that individual effort can make a difference, believe that industry and government will pick up the slack (24%) Grousers" high school education or less, income below $25,000; rationalized indifference Not Active s Not at All Concerned (1%) Hard-Core Browns: adamant non- environmentalists (15- 30%) Ungreens: don't care about the environment (3%) : Limited Means: lacking the educational background to grasp the complexity of some environmental issues, or the incomes to make discretionary pro-environmental purchases; environmentalism not a high priority (18%) Basic Browns: most socially and economically duiadvantaged, virtual absence of ' environmental consciousness or activity (28%) * Percentage of survey sample 86 ------- 7.2 Consumer Attitudes toward Environmental Information An Advertising Age survey paints a picture of somewhat skeptical consumers who want government to regulate environmental advertising, but who still generally believe in and respond to marketing claims. Of the 1,004 adults surveyed, 52 percent paid less attention to environmental claims, citing the profusion of new claims being made as the main reason. Eighty percent felt that the state or federal government should regulate environmental marketing claims as opposed to industry self-regulation, Nevertheless, the majprity of respondents (77 percent) felt that environmental marketing claims are very or somewhat believable, 73 percent said that environmental marketing claims sometimes or very often influenced their purchasing decisions, and 60 percent said they were more likely to buy a product because of its environmental claims today than they were three years ago. (Chase and Smith, 1992) Studies also show that a) many consumers do not understand the specific environmental labeling terms they encounter, and b) consumers often do not follow through on their own assertions that they would preferentially purchase products that are less damaging to the environment. (Bailey, 1993; Cude, 1991; Gutfeld, 1991; Abt Associates, 1990) When asked if they would be willing to pay a price premium to buy products with environmental attributes, consumers typically answered yes. Far fewer responded affirmatively when asked whether they consciously have purchased (at a price premium or otherwise) environmentally preferable products. (Abt Associates, 1990) 7.3 Consumer Behavior Change Shoppers frequently express an interest in buying products that help reduce the rate of environmental degradation. In fact, people have stated in many .surveys that they are willing to pay a price premium for products with environmental attributes. There is, however, evidence of a large gap between such claims and actual purchasing behavior. This disparity may be due to a number of factors, including: the real or expected higher prices of environmentally-oriented products; the additional actions required to realize the advertised environmental benefits (e.g., someone must separate and return recyclables); the limited availability of such products; the availability (or lack thereof) of the infrastructure necessary for activities such as recycling or composting; ""''.. skepticism regarding marketers' environmental claims; real or perceived uncertainty about performance/quality or products; and brand loyalty. Pollsters Peter Hart and Robert Teeter conducted a survey of consumers for the Watt Street Journal and NBC News in the summer of 1991. A subsequent article in the Journal underscored the willingness of consumers to sacrifice for an environmental cause. In response to the poll, eight out Of ten respondents professed that protecting the environment was more ""-'' .'. . ''' 87 ': - '''., ' V.' ------- important than keeping prices down. In particular, 67 percent of those polled suggested that they would be willing to pay 15 to 20 cents more per gallon for a gasoline that causes significantly less pollution than current blends. In addition, 85 percent said they would be willing to pay more for cars that are more fuel-efficient and less polluting in the interest of protecting the environment, even if the cars were made "smaller and less safe." (Gutfeld, 1991) Nonetheless, actual consumer purchasing behavior tells a notably different story about the level of consumer commitment to environmental considerations in their purchasing decisions. While three-fourths of those surveyed in the Journal poll said that the environmental reputation of manufacturers or products was an important consideration in their buying decisions, only 46 percent of the respondents could actually say that, when purchasing a product in the previous six months, they had chosen a more expensive alternative because of environmental concerns. (Gutfeld, 1991) Similarly, a 1990 study found that slightly more than half of consumers considered the environmental attributes of a product and/or company (and could name product and its environmental attributes) when selecting a product in the past six months. The study also found that consumers dp not necessarily pay more for environmentally-oriented products than they do for conventional products; approximately 63 percent of those who bought an environmentally- oriented product said that it cost the same as or less than the conventional alternative. (Abt Associates, 1990) : In a 1993 national survey performed by Penn and Schoen for the Council on Packaging in the Environment (COPE), 55 percent of the respondents claimed that in the three months previous to the survey, they had "very often" or "somewhat often" purchased products specifically because of some benefit offered to the environment. (COPE, 1993) 7.4 Manufacturer Behavior Change Since 1989, environmental marketing has emerged as an increasingly important issue for consumers, marketers, regulators, and policy makers. Marketers have responded to consumer demand (real, anticipated or perceived) for products that are manufactured with environmental considerations in mind by increasing both environmental marketing claims and new or redesigned "green" products. (U.S. EPA, 1991) Recent environmental marketing efforts, however, use more "focused strategies" that differ from the "boastful environmental ad campaigns that characterized the late'80s." (Lawrence, 1993) In July of 1992, the Federal Trade Commission (FTC) issued voluntary guidelines on the use of environmental marketing claims. The FTC guidelines are designed to "protect consumers and to bolster their confidence hi environmental claims, and to reduce manufacturers' uncertainty" about the use of such claims, "thereby encouraging marketers to produce and promote products that are less harmful to the environment." (FTC, 1992) In a petition put before the FTC by the National Food Processors Association (NFPA), manufacturers stated that they were interested in addressing consumer environmental concerns by "improving the 88 ------- environmental attributes of their products and packaging." (NFPA, 1991) In the petition, manufacturers also say that FTC-guided claim making will lead to fair competition over environmental attributes which in turn will result in "beneficial product and packaging innovation by industry." " . -..<.. Some examples of manufacturer attitudes and activities regarding environmental marketing in several different industries are presented here. These .examples show that environmental considerations do affect manufacturers in some industries in various ways. Computers The computer industry recently has begun to respond to environmental issues with the introduction of personal computers ©quipped with energy-efficient features and manufactured with recycled and recyclable materials. Large computer companies such as IBM, Apple,,and Compaq have also signed on to EPA's Energy Star program, which awards a label to computers which draw 30 watts or less when not in use arid go to full power at the touch of a key. In April 1993, President Clinton announced that the federal government would only buy Energy Star computers starting October 1993. Government involvement notwithstanding, industry executives relate that the attention given to environmental issues by the computer industry is "market-driven," and that consumers are increasingly demanding products that address environmental concerns without sacrificing quality or cost. (Loro, 1993) Laundry Detergent Since the beginning of environmental marketing\ the companies that manufacture laundry detergent have incorporated environmental issues into their marketing campaigns. According to an article in the Economist, "no other industry has such a long history of coming up with environment-friendly selling points that are profit-friendly too." (Economist, 1993) After abandoning phosphates in their detergents (which accumulate in natural waters and induce eutrophication), detergent manufacturers developed the very popular ultra detergents which are more concentrated than conventional detergents. Concentrated detergents allow the manufacturer to reduce inactive bulk ingredients, thus creating a product that uses less packaging than conventional detergents. The ultras, which are two to three times as concentrated as conventional detergents, have according to one estimate captured 85 to 90 percent of the powdered detergent market. (Shori, 1993; Siwolop, 1993) The performance of ultras can also be explained in part by promotions of their increased Convenience and lower cost. Nielsen Marketing Research found sales of "environmental household cleaning brands" rose 8.5 percent from March 1992 to March 1993. At the same time, total household cleaner sales were down 6.2 percent. (Lawrence, 1993) . 89 ------- Recycled Paper When Germany's Blue Angel released certification criteria for recycled paper in the late 1970s, at first, the German paper industry collectively boycotted the program. However, after Scott Paper Co., an American paper company, applied for and received the Blue Angel for its imported paper, opposition broke down and the number of German paper companies applying for the Blue Angel rose dramatically. Since then, sales of recycled paper have steadily increased. (OECD, 1991) "Degradable" Plastic Garbage Bags The level of environmental claim activity has risen substantially in recent years, more than doubling between 1989 and 1992. Claims of degradability for trash and grocery bags experienced brief popularity, peaking in 1990 with a total of 17 products carrying degradability claims. In 1991, however, the number of degradable claims on bags dropped to one. This dramatic drop was due largely to legal complaints brought against the marketers of bio- and photodegradable plastic products in 1990 about whether the bags would, in fact, decompose completely. (U.S. EPA, 1992) 7.5 Conclusion Clearly American consumers have shown high levels of interest in environmental issues, To varying degrees, they make the connection between patterns of consumption, product attributes, and environmental impacts. Less information exists regarding the extent to which they act on this awareness by purchasing environmentally-oriented products. Manufacturers have also responded to environmental issues in a variety of ways: by reformulation products; by promoting particular environmental attributes of their products and/or manufacturing processes; and by seeking an evaluation and endorsement of their products from an independent group. However, the promotion of biodegradable and photodegradable plastic trash bags im the late 1980s and early 1990s is an example where manufacturers' actions; did not lead to the marketing of less harmful products or processes. Environmental certification and labeling programs are designed to overcome the imperfect nature and inadequate flow of environmental information in the marketplace. 90 ------- References Abt Associates Inc, 1990. Consumer Purchasing Behavior and the Environmental Results of an Event-Based Study, November 1990. \ > Bailey, William arid Mary Ann Eastlick, 1993. "Study Shows many Claiming to be Green Don't Buy Green," Northwest Arlansas Times, Nov. 12, p. A3. , *, - ."'''" ' '~" Chase, Dennis, and Therese Kauchak Smith, 1992. "Consumers Keen on Green but Marketers .Don't Deliver," Advertising Age, June 29, pp s-2,4. Cude, Brenda, University of Illinois, 1991. Comments Prepared for the July 1991 FTC Public Hearings on Environmental Marketing and Advertising Claims, July 11. Economist, 1993. "Soap Opera," the Economist, May 15, p. 86. Federal Trade Commission, 1992. Guides for the Use of Environmental Marketing Claims, June .28. '.'.'' . Gutfeld, Rose, 1991. "Shades of Green: Eight of 10 Americans are Environmentalists, at Least Say So," Wall Street Journal, August 2. Lawrence, Jennifer, 1993. "Green Products Sprouting Again," Advertising Age, May 10, p. 12. Loro, Laura, 1993. "Green Marketing Comes to Computers," Advertising Age, September 29, . ' ' P- 3L '.'. '' " ''..' ' . ',:' . ; '- V National Food Processors Association, 1991. Petition for Industry. Guides for Environmental Claims. Council on Packaging hi the Environment (COPE), 1993. Memorandum from Perm and Schoen Associates, Jjnc., to Julie Winters Lynch, U.S. EPA, re: COPE Survey Data, October 18. '' ' . ' . '.' . .;;'"'.' '' ; . . Seventh Generation and Earth Care, 1992. Personal Communication with Abt Associates, March. Shon, Melissa, 1993. "Ultras Keep Bubbling (Detergents '93, Industry Overview)", Chemical Marketing Reporter, January 25, v243, n4,, pSR3(4). Simmons Market Bureau Research, 1991. Cited in "Cambridge Reports' Green Consumerism Update," Green MarketAlert, December 1991, pp 5-7. 91 ------- Siwolop. Sana. 1993. "Laboring in the 'Green' Laundry Lab," New York Times, October 10, U.S. EPA, 1991. Assessing the Environmental Consumer Market.. Prepared by Abt Associates, Inc., April 1991, EPA 2IP-1003. U.S. EPA, 1992! Evaluation of Environmental Marketing Claims in the United States. Prepared by Abt Associates, Inc., February 1993, EPA 741-R-92-003. 92 ------- 8. FINDINGS 8.1 Introduction All environmental labeling programs share the goal to 'decrease the adverse effects of product consumption on the environment, personal health and/or public health. Different labeling programs use different means to achieve this goal, and these different means have implications for measuring program effectiveness. Chapters 1 and 2 listed five steps involved in how labeling programs attain their programmatic goals: consumer awareness, consumer acceptance (comprehension/understanding), consumer behavior change, manufacturer behavior change, and end benefits. While attainment of each of these steps has social benefits increased levels of awareness lead to greater public knowledge of a particular issue, for example -^ some of these steps can be bypassed without sacrificing the end goal, environmental quality improvements. For example^ if a labeling program causes manufacturers to change their products regardless of consumer awareness of the impacts of those products, the end result is reduced environmental impact. , . Environmental certification programs (ECPs) are an increasingly popular approach to environmental protection taken by foreign governments, where they have been in use for the past 15 years. While such programs have proved popular abroad, however, the unique characteristics of the American marketplace have significant implications for the operation of an ECP in the U.S. This chapter synthesizes the findings of a comprehensive literature review on environmental labeling program effectiveness, parallel non-environmental labeling programs, consumer attitudes toward environmental marketing issues, and the comments of foreign programs. . . - ' ' ' Consumer Awareness The general public's awareness of the underlying issues is an important determinant of success for a labeling program. A labeling program will effectively change behavior and cause environmental benefit when consumers can relate the environmental attributes of a product to their understanding of environmental problems. For example, Germany's Blue Angel program has set standards for 75 product categories, although fully half of the products certified fall into only four product categories. For these products, Blue Angel has successfully connected the awareness of an environmental issue among consumers, marketers and the media, with the specific impacts of specific consumer goods. Awareness of a specific labeling program is the result of successful promotion. High levels of program awareness have been created through public education, media coverage, and wide-spread presence of a logo or label on products. Successful promotion relates the program to matters of public interest, accurately defines and '* -. . '. . " - " ' - 93 '.-'.' -'. -" ''- -'" ------- reaches target audiences, garners extensive media coverage, and/or is sufficiently funded to reach large numbers of people. High levels of consumer awareness of the underlying environmental issues do not necessarily translate to significant changes in consumer behavior, although they are correlated. Educational, promotional, and outreach efforts are needed to inform and convince consumers to act. A DOE study of the Energy Guide found that consumers exposed to educational materials in addition to the Guide were more likely to select energy-efficient appliances than consumers exposed to the Energy Guide Label alone. In this case all consumers were aware of the label, but educated consumers were more likely to act on the information. Consumer Acceptance (program credibility/consumer comprehension) Successful acceptance of a product certification program depends on 1) public understanding of relevant issues, 2) public understanding of the connection between relevant issues and product choices, 3) an accurate and clearly understood presentation of the product attributes, and 4) an understanding of what specific actions (e.g., purchase decisions) individuals can take in response the information provided by the labeling program. " A labeling program will be most readily understood when it is part of a broader public information campaign. Successful outreach often includes a variety of media and formats that will reach different audiences. The campaign to warn against the danger of contracting Reye' s Syndrome from aspirin is an example of a successful campaign that benefitted from prior outreach. Technical information was disseminated to pediatricians by government health agencies, while parents were reached initially by heavy media coverage of the risk. A subsequent warning label on aspirin capitalized on existing public awareness, and thereby successfully reminded parents of particular health risks associated with aspirin use. A labeling program is more likely to be accepted if it is offered by a credible source. Several surveys show that American consumers trust environmental groups for environmental information far more than they trust government or industry. One survey indicated that a state or federal labeling program would be much more credible than one offered by marketers. The seal of approval and the information disclosure formats of environmental labeling offer different advantages. A seal offers the benefit of presenting digested information in an easy to use, simple to understand format. An information disclosure label presents a greater amount of information, enabling certain consumers to use more detailed information in their purchase decisions. 94 ------- Studies have shown that labels of any format have the potential to be poorly understood by consumers. Studies of the Good Housekeeping Seal have shown that even among people familiar with the Seal, it was misperceived as a generic product endorsement, rather than as a limited warranty. Likewise, focus group studies performed by Scientific Certification Systems; (SCS) found their information disclosure label to be misconstrued as a product endorsement by some participants. Consumer Behavior Change ' * Changing the behaviors of a significant portion of consumers requires an integrated campaign to increase awareness, understanding and provide incentives for individuals to make the desired changes. A DOE study of the EnergyGuide label for energy-efficient appliances found that labels alone were insufficient to cause behavior change and that public information and education programs are necessary as well. An American ECP will have to compete with all the other factors that consumers already use when making purchase decisions: price, quality, brand, personal experience, product promotions, etc. While other factors may have played a role, an FDA, study found that sales for certain foods increased 12 percent when shelf labels reporting nutritional information were introduced. The effect of the shelf label on consumer decisions was on par with price, but less important than seasonal or socio- economic factors. It was hypothesized that the label was successful for products when . the labeled feature was considered an important or new piece of information for that particular product. The number of people using ECPs for purchase decisions will be only a part of those who regularly buy products based on environmental considerations. Surveys done for the Canadian Environmental Choice Program have shown that of the 35 percent of Canadians who "regularly purchase ... environmentally-friendly products," only 44 percent reported ever having bought an EcoLogo certified product. Manufacturer Behavior Change Environmental considerations have proven effective in changing the behavior of manufacturers. Products such as concentrated laundry detergent, organic baby food, compact fluorescent light bulbs, and others with apparent or promoted environmental features, have shown positive sales trends. EPA's Energy Star program, hi combination with federal purchasing guidelines, has resulted in widespread development of energy- efficient personal computers and printers. Some labeling initiatives have been readily accepted by industry as beneficial. Once established and accepted by manufacturers and consumers, certain labels, such as Underwriter' Laboratories electrical safety seal, have become industry standards and are sought out by virtually every manufacturer entering the marketplace. Prior to the '.-,':'; "-.". 95 ' ' . . ; ' ' - . ------- cancellation of the American Heart Association's Heartguide label (due to FDA and USDA concerns that the seal was be overly simplistic) after two months, there was significant interest on the part of the food industry in having products bear the seal. Companies will likely pursue environmental certification if: 1) the effort (including cost) of getting certified is not too high; 2) the company anticipates increasing sales or avoiding loss of market share to competitors; or 3) it will result in a better corporate image vis a vis customers and regulators. Any competitive advantage (such as a certification) or handicap (such as a hazard warning) is important to a marketer in that it can set a company apart from its competitors. When an American paper company was the first to be certified by the Blue Angel program, a number of German companies quickly followed suit. Conversely, California's Proposition 65 has spurred manufacturers to change their product formulations to avoid carrying a label that warns of the risk of cancer arid birth defects. End Benefits Environmental labeling programs have not measured their actual environmental benefits. Instead, they typically measure changes in consumer awareness, consumer behavior (e.g., sales), and manufacturer behavior. Based on these measures, programs assume that decreases in environmental burdens and impacts are taking place when the market shifts toward environmentally preferable products. These simplifying assumptions are made in part due to the difficulty and cost of accurately measuring program effectiveness in the marketplace, where there are many confounding factors. One attempt at such a study was performed by the FDA, when they estimated the end benefits of a positive shelf labeling program for food in terms of health effects. Based on the consumer response to the shelf label, FDA predicted that on a national level expected consumer response could lead to billions of dollars in avoided health care costs. 1! . . ; ;" . , " i , ' , ',"',' , '., 8.2 Determinants of ECP Success Predictions of the success of environmental labeling programs are problematic in part because ECP funding is (necessarily) limited and participation voluntary. Many studies have found it difficult to separate the effects of the label from concomitant educational efforts, media coverage and marketing activity. Further, little direct research on ECP effectiveness has been conducted to date. Consumer survey results place the upper bound estimate of potentially responsive consumers at 80 percent. Environmental quality improvements associated with ECPs are, however, very much dependent upon the type of purchase changes consumers are willing to make (i.e., Are the certified products significantly different than those currently purchased?) and the frequency with which they make such purchases. Chapters 2 and 3 each identified several characteristics associated with successful labeling programs (environmental labeling and other labeling initiatives respectively). A review of existing labeling efforts identified a number of determinants of success that are often beyond the 96 ------- control of the program. For example, widespread coverage by the news media of the underlying issues (or.its absence) greatly affects'consumers' acceptance of a labeling program's information and affects consumers' interest in making a behavior change. Nonetheless, this review identified several important characteristics, without which an ECP is unlikely to succeed. Education - The effectiveness of a labeling program can be increased by linking it with a public education campaign. Well-educated. consumers are'more likely to make better purchasing decisions, and will better understand the issues underlying the label. The EnergyGuide Label showed that consumers exposed to educational materials in addition to the EnergyGuide Label tended to prefer energy efficient appliances, while consumers exposed to the Label alone selected more energy-efficient appliances considerably less frequently. Apart from affecting consumers' receptivity to an ECP, education may also help consumers to become mpre environmentally-conscious and to reinforce environmental considerations in other decisions and actions at home and in the community (e.g., recycling, energy conservation, etc.). A long-term, nationwide labeling initiative/education campaign of this type could have positive effects on the environment that reach far beyond the reduction of environmental impacts of consumer products. Program Affiliation - Governmental sponsorship and involvement with labeling programs, which is common among existing ECPs, can improve the program's economic stability,-legal protection, and credibility in the eyes of manufacturers and consumers. On the other hand, a non-governmental program run by a respected consumer or environmental organization may be more immune to the political pressure that can affect governmental decision-making, and may benefit from greater credibility in the eyes of consumers and , watchdog groups. Ultimately, government involvement in an ECP depends in part on the government's ability to act as an advocate in the marketplace and the role existing nongovernmental groups play in consumer protection and environmental policy. One survey - found that 37 percent of the people who considered themselves the "primary food shoppers" of their household believed that "environmental groups" were the best source of unbiased information about the environment* as compared to the 8 percent who believed the government was and the 5 percent who believed that product manufacturers were. Effectiveness studies of other programs (e.g., an American Dental Association endorsement of tooth paste, the American Heart Association's HeartGuide program, and an American Medical Association study) found that the public's respect for an endorsing group's knowledge and expertise is critical. Label Type - The type of label is important in that it has a bearing on whether the label simple presents information on environmental attributes, leaving all judgments to the consumer or whether (the ECP's) environmental policy priorities are translated into information contained on the label. Most of the established environmental certification programs around the world are seal-of-apprbval type labels. The report card style label, however, offers an alternative to seals, and stresses information disclosure over judgement of product superiority. While seals-of- approval are easy for consumers to use and understand, there have been questions raised regarding stringency of criteria (or lack thereof), consistency in expert judgements, and possible oversimplification of complex environmental issues. On the other hand, report card labels (of which SCS's Environmental Report Card is currently the only example) attempt to address'these " "' ."'.,:' 97 ; .''.'- ------- problems by providing detailed information on products' environmental burdens, allowing the consumer to make his/her own decisions. Report cards, however, have encountered criticism as well, mostly regarding data quality issues and the ability of consumers to interpret the report card and decide for themselves which environmental issues are the most important. Affiliation with Other Initiatives - A successful approach for some certification programs is to affiliate their program with another program or information disclosure initiative. Private nutrition certification programs, for example, often use FDA dietary guidelines and information provided by the mandated nutrition label. Such programs offer interpretations of raw data offered by the information disclosure labels or by government agencies. The intent of such programs goes beyond educating consumers about the meaning of the information they receive and toward directing their behavior in a specific way (e.g., identifying nutritionally superior products that are part of a balanced diet and will improve public health). In the case of ECPs, links to large scale institutional procurement guidelines and standards may be of significant benefit. Consumer Self Interest - Ultimately, labeling programs are effective only inasmuch as the issues they present to consumers are important to both individual consumers and society. Widespread coverage by the news media of the underlying issues and school curricula are two examples of other initiatives that compliment labeling initiatives and can increase both consumer acceptance of a labeling program and their willingness to change purchasing decisions. Manufacturer Self Interest - Due to product liability concerns, companies are motivated to join labeling programs to avoid financial and public relations risks as well as to increase sales. The Good Housekeeping Seal, for example, offers product buyers a "replacement or refund if defective " It has been successful in guaranteeing to consumers that all products bearing the seal will work as advertised. This enhances the reputation of both the advertiser and the magazine. Germany's Blue Angel program is credited with creating incentives for manufacturers to reformulate certain products prior to any evidence of consumer demand: low-VOC paints and high recycled fiber content paper products. 98 ------- |