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        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

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                             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

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                         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

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                       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

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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.

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       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

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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

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      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

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       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.

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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.

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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).

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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.

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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,

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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

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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.

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       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

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       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.

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       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

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       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

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       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

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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         .       .   •  '      '•'-.'     '.-

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       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

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       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

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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

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       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

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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

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 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.
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       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

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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       '       "-'.•••-"-.''.   '

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•      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

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   ,   - 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

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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)
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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   ' .     •''•-.'••.."'-..

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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

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      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

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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                                    .  '  '

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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       -  '.    >"  '  •    "           '

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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

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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

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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

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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

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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

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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

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      (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

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•     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

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       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

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       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

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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

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       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

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       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       •       •  ',:,      '  .   .  .

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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

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       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

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informational initiatives.  . FinaUy, and most importantly, a successful program  must reflect
broader societal interests.
                                              48

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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  -'   . '•    •       -

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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

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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

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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

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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

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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

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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 •.•-.   .'•  -    '     '       .•••"-.'•-

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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
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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.
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       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


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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

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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)
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       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)
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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


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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  ."  '•         .;     •'.

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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   ' '         '

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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.
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•      "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

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       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                      '    ' •

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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

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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      .   -:.'     •"'•  .              :

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conjunction with government labeling programs; always, however, they reflect a current societal
interest.
                                            70

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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

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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

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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

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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

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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

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      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

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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             .         '      *,     .

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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

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 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.
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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.
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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

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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)
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         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

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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.'

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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

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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

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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

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  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.
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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

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 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    •    •    '.-'.'    -'.   -"  ''-   •-'"

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      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

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•     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           '   '   .  .    ;     '     '•  - .

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      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


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  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

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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.
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